Who owns payroll in your organisation? Is it HR? Finance? Operations? Or perhaps, does it sit strategically in its own lane?
This pivotal question may seem administrative at first glance, but it holds far reaching implications for how your organisation operates. The placement of payroll reporting structures directly influences the team’s ability to innovate, adopt technology, adhere to compliance standards, and create cross-functional synergy. For HR and Finance professionals, understanding these dynamics is not just about improving processes; it’s about shaping the future of your organisation’s operational excellence.
The complex ties between payroll, HR and finance
Traditionally, payroll has reported into either Human Resources or Finance departments. Data shows that approximately 52% of organisations place payroll under Finance, while 37% align it with HR. For years, this structure has allowed payroll to thrive within predictable frameworks, addressing compensation, tax compliance, and employee satisfaction.
However, payroll is no longer just about payouts and spreadsheets. Today, payroll intersects with other crucial business functions such as employee engagement, operations, compliance, workforce planning, and even Artificial Intelligence (AI)—making its traditional reporting lines worth a second look.
The cross-functional challenge
One of the key pain points faced by organisations is the lack of seamless collaboration across HR, Finance, and Operations when it comes to payroll. Each function has unique priorities:
- HR focuses on employee well-being and employment regulations.
- Finance prioritises cost management and compliance with financial regulations.
- Operations seeks efficiency, scalability, and integration with broader business systems.
Without clear structures, payroll risks falling into silos, missing valuable opportunities to contribute to strategic decision making across departments. This disconnection impacts productivity and the ability to offer innovative solutions.
Payroll’s role in driving innovation
The placement of payroll isn’t simply an infrastructure issue; it’s a critical enabler of innovation. Leading organisations are using their payroll functions to push boundaries in areas such as:
- Data insights: Payroll data holds the key to workforce analytics, revealing insights into productivity trends, turnover rates, and budgetary efficiency.
- Technology adoption: AI tools that automate calculations, compliance checks, and reporting allow teams to redirect their focus toward forward-looking strategies.
- Cross departmental value: By breaking silos, payroll becomes a thread connecting HR with Finance and Operations, enabling smoother workflows and better decision-making.
What’s more, the incorporation of KPI tracking adds another layer of strategic value. Organisations using KPIs to measure payroll performance can make informed decisions that align with broader business goals, such as reducing administrative payroll errors, improving cycle times, or enhancing the employee compensation experience.
The path forward
For HR and Finance professionals, re-evaluating payroll’s structure starts with asking the right questions:
- Are payroll processes currently optimised to serve the needs of both HR and Finance functions?
- Can moving payroll under Operations or making it a shared service drive better efficiency and innovation?
- Is your organisation leveraging payroll data to its fullest potential for strategic insights?
- Are you equipped with tools that simplify compliance, enable KPI monitoring, and unlock future focused technologies like AI?
The decisions around payroll alignment boil down to maximising value, breaking silos, and preparing for the future. There’s no one-size-fits-all answer, but forward thinking organisations must be open to experimenting with reporting lines to uncover what works best for their operational strategy.
Partnering for payroll excellence
At Australian Payroll Association, we believe payroll is more than just processing transactions. It’s about empowering organisations with precision, transparency, and innovation. Our membership and training solutions area designed to assist employers have confidence in their payroll.
