Does Payroll report to HR or Finance?

Liz Armstrong's Profile

Does Payroll Report To HR Or Finance?

I'm interested in getting feedback from large employers (over 100 employees) with out-of-state employee and have somewhat complex payroll (lots of deduction and earnings codes, various incentive programs-commission & bonuses, fringe benefits, recording manual checks).  I'm trying to determine the most appropriate structure in regards to payroll employees. 

Do the employee(s) processing the payroll report to Finance/Accounting or Human Resources dept?  Who records all the payroll related journal entries?  Is it asking too much for an HR employee to be a "numbers" person?

Currently we split the function between HR and Finance.  HR handles the Master payroll changes and but Finance handles any "numbers" related input (check caluclations, bonus/commssion input).  The bulk of the payroll processing falls into Finance.  The Finance employee who works on the payroll also records all the journal entries. 

Thanks in advance for your input!



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Answers

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I have had payroll reporting to either Finance or Accounting, but never to HR - irrespective of company size (including some way over 100 emps). HR can be handy for keying in changes to employee status, pay rates, etc., but those are purely data entry items. When it comes to any and all reporting, auditing, ledger entries, etc., that is all finance or accounting. I don't know why HR would even want to touch that and I'm pretty sure the company would not want them making accounting entries.

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Agreed. Payroll reports into Finance other than the initial data inputs regarding employee status, pay rates, etc.. and I think for several reasons it makes sense, most importantly due to the amount of critical entries and reporting that is required.

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I agree with Jeff Taylor. Payroll should report to Fin/Acctg. There are too many GAAP and tax implications associated with payroll. HR is ill-equipped to ensure that Payroll is handled correctly. HR should maintain the master employee database, provide the necessary payroll and tax forms to employees and feed the information to Payroll so that employees can be set up in the Payroll system. To me, the size of the organization is irrelevant. I would never have Payroll report to HR unless you enjoy Federal and State payroll tax problems and ugly audits.

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Best... Sarah

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Member's Profile

I have seen payroll roll under HR in most large companies, under accounting in smaller companies that really don't have an HR group per se.

I don't think it makes sense to have payroll under HR given that most in the HR profession are not skilled at the quantitative side of things. I have spent many hours trying to teach finance & accounting to HR personnel.

To me it sounds like the way you have it set up might be optimal.

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In organizations that I have been with, payroll usually reported to finance/accounting or to a separate service organization, but never directly to HR. The size of these organizations range to under 100 employees to greater than 100,000. Often, I see HR input benefit changes into the payroll; however, that function can often be provided by the payroll function. For separation of control purposes, I see HR input salary changes and new employee information into the payroll system.

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With multi state taxes, deductions, and benefits for larger companies, it is usually more economic to outsource payroll. The complexity, change management, confidentiality, and potential impact of errors create to much risk for the HR/Finance department to keep in house. Outsourcing allows the segregation of duties keeping individual employee information in the HR department, and the cash/accounting in the Finance department.

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At our large corp, payroll reports to HR, but it previously reported through finance. It doesn't necessarily make sense, but not everything does at a large company.

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We have about 2500 EE's and are in about 21 states. Our structure is a little different. HR enters new hires, Pay changes, and Terms. P/R verifies them during the P/R processing. Benefits both new, changes and terms are entered by our Benefits Dept. These also are verified by Payroll when processing payroll. All of these task fall under Operations. I am a dotted line between Accounting and Operations. I am responsible for all of the tax payments and returns, GL Analysis and any JE needed. I also monitor 401K, Deferred Comp, (All) Benefits post and pre tax, Flex accounts, COBRA Subsidy and Accruals. I also interface with our Payroll Software and our Tax software. I trouble shoot issues and test upgrades that affect the above areas. I would never put Payroll under HR. In my 30 years P/R has always been under Accounting with a large portion of the cost of a business being Payroll expense who better than Accounting to oversee.
Hope this helps

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I fall on the side of payroll remaining a purely accounting function, with a clear interface with HR on 'master file' types of data.

However, please do not lose sight of the fact that the payroll person(s), must have somewhat of an HR flair and not be a straight accounting type. The issues of confidentiality and employee relations are intertwined in the processing of payroll and must be taken into consideration. I'd say generally an HR manager is well versed in dealing with employees and confidentiality, whereas, most controllers are not.

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