Payroll Is the Heart of HCM, Finance
The heart is one of the most important organs in a human body. It is the core of the circulation system that shares vital nutrients to keep the body alive and functioning. The heart is also a symbol of love, bringing people together through common bonds, relationships, and feelings. The heart is the lifeline, always moving, always active, and always in tune with the rest of the body.
In many ways, the role of payroll is much like that of the heart—circulating components from different areas, filtering these items to pull out important key ingredients, then leading a distribution of results that ultimately keeps the business running. Without the payroll process and the distribution of pay to employees, employees would leave and a business would fail. Likewise, it is vital for payroll to build strong relationships between HR and finance, bringing them together as one team to support the business through a common bond such as the human capital management (HCM) and finance systems. Because payroll is in the middle of the two systems, it requires special knowledge and a unique skillset to maintain this critical balance.
Quadrants of Payroll
Like a heart, which has four core quadrants to support, payroll has core quadrants to support and must keep them balanced at all times between HCM and finance. These include:
- Payroll employee data—such as employee records, timekeeping, absence data, Forms W-4, pay rates, deduction information, and more
- Payroll accounting—made up of cost center details, chart of accounts for labor, labor allocations, labor accruals, and journal entries details
- Payroll compliance—including payroll taxes, garnishments, and federal and state labor law requirements
- Payroll processing—producing payments and the functions involved supporting the core system, reporting, and audits
Payroll, like the heart, is constantly bringing in data all day long, making core decisions, and producing output. Payroll partners with HR to bring in information and with accounting’s help to provide output information, all of which is ultimately used to produce the financial statements. Payroll is always touching two key elements of a business—employees and financial statements. Because of this, payroll professionals must have strong people skills as well as strong accounting skills for the numbers-driven role.
When viewing the complexity of the payroll professional, it is important to know how the role overlaps with HCM and finance. Payroll and HR have common roles—ensuring that accurate employee data is obtained, managing relationships between the employee and the business, answering ongoing questions from employees and managers (via email, phone, fax, or in person), helping the business manage changing environments that touch the employee, managing compensation, and staying on top of compliance requirements.
Payroll and accounting also have common roles—supporting details that flow to the financial statements, providing in-depth reporting, managing reconciliations (that may comprise tax or banking items or account reconciliations), maintaining Sarbanes-Oxley (SOX) controls, owning analytical calculations, and responding to business questions about labor costs.
Both sides of the payroll role require strong customer service skills, an ability to build relationships, adherence to accuracy and timeliness, support for volumes of detail, and innovative thinking to aid the business. The unique skillset of payroll professionals is at the heart of these two areas. These assets also allow payroll to achieve greater visibility to streamline processes that assist the business with controlling costs. Plus, these skills enable payroll to gain a seat at the table in business discussions, elevating the payroll role.
Payroll’s Place in an Organization
Payroll has also been at the heart of many discussions regarding where it belongs within an organizational structure. Should payroll report through HR or through finance? Because of the complexity of the role and how it is aligned in the middle of these two departments, where it reports may vary by organization. This may depend on responsibility, skillset of the leaders involved in the roles, and where it fits best with that individual business. Many businesses lean toward having payroll report to finance because of the detailed focus on numbers, tax requirements, and the accounting tie to the financial statements. But as payroll’s complexity continues to evolve, companies are beginning to have interesting discussions about standalone payroll departments because of the important role payroll plays within a business and with the employees. Where payroll reports is not as important as how payroll stays connected and communicates with both sides of the equation.
Overall, payroll is not only the heart of HCM and finance but the heart that brings everyone together in a business. The heart, as the symbol of love, reminds us that payroll loves to help employees and employees love to be paid on payday.
As the Tin Man in the “Wizard of Oz” stated so perfectly, “A heart is not judged by how much you love; but by how much you are loved by others.”
Barb Muellerleile, CPP, is the Senior Director of Finance and Payroll at Panera Bread. She is also currently a member of the APA's Board of Contributing Writers for PAYTECH. Certification Board, CHAMPS Committee, Nominating and Elections Committee, and the Retail Best Practices Subcommittee of the Strategic Payroll Leadership Task Force (SPLTF).