Pay and Benefits

The relationship between payroll and HR departments has traditionally been a contentious one. Over the years the roles of both have evolved, and it is arguably now critical to the business that they work together in order to meet its needs. Some organisations have gone so far as to merge both departments in a bid to increase efficiencies.

However, there are a number of benefits and pitfalls that need to be addressed when considering integrating the two functions, and there is also the role of technology to think about. For those that make the decision to integrate, clear processes must be established and a realistic timeline must been in place for the project to be implemented, with each department being made aware of what is expected.

Pay & Benefits invited industry leaders to debate the issue of integrating the payroll and HR functions, and in turn, how this would affect businesses.
Kavitha Sivasubramaniam (KS)
Editor, Pay & Benefits magazine (chair)
Marcia Bowen (MB)
Technical Helpdesk Adviser, Payroll Alliance
Laurie Hibbs (LH)
HR Director, LexisNexis UK
Joanne Knowles (JK)
Payroll Quality Manager, Cascade HR
Heather Vitty (HV)
Client Services Director, Cascade HR
James Markham (JM)
Managing Director, SBC Systems (UK) Ltd
Jo Jennings (JJ)
Employment Services Manager, West Sussex County Council

 

KS: What has been the traditional relationship between payroll and HR?

 

JM: It has been an arm’s-length relationship. Historically the two functions have not been seen to be the same thing at all, and quite different cultures exist within them.

 

JJ: In a big organisation you might have several different HR departments, and then you’d have one central payroll office. So there’s the blame factor. Once you integrate the two services, hopefully that would disappear.

 

JK: It’s also not understanding each other’s roles and not fully appreciating what the other is doing.

 

JM: Quite often the groups of people in HR and in payroll are very different. This is because HR sees itself as quite a soft people function, whereas payroll is often seen to be concerned with numbers, accuracy, processing data and deadlines. There’s a very different mentality in payroll compared to the HR function.

 

JJ: An experience I have had is with the issue of deadlines. When you bring the two services together it’s the deadline that seems to be the problem. It’s about training people and changing them to acknowledge the fact that you work to deadlines rather than just having a tray full of work that you can do as and when.

 

KS: Do the departments sit together or separately?

 

JK: Traditionally payroll has always come from finance because it is a monetary aspect on behalf of the company. However, now more and more, with things like salary sacrifice, payroll is starting to have more of a link with HR.

 

LH: Regardless of whether HR is about welfare or strategic people delivery, payroll is about accuracy and effectiveness. What’s ramming the two together is the employee relationship. What we’re finding is that as we’re increasing services, employees think of us as the same function. If they’re separate the employee has to navigate their way through the position, whereas HR has just claimed “that’s a payroll issue” and  passed it over, which is pretty terrible from an employee service perspective. By bringing them together you should remove those barriers.

 

JM: What we’re seeing is a reward function being brought into existence organised around all of the compensation data elements. It’s rather arbitrary to have payroll separate. Benefits are frequently run out of HR, so confusingly, you’ve got reward and the relationship with those providers already in HR. These divisions between the various elements of reward are causing problems. Overall, what people management requires is that all data that affects reward is integrated into one process. That goes far upstream from payroll.

 

LH: Payroll is still almost a service delivery. What sometimes gets confused is that advisory level and where the employee seeks the advice. Payroll people by their nature are much more technically adept about the impact of reward or taxation issues. Even something like maternity, which is very complicated – when you’re in payroll you’re actually much better equipped to deal with these queries. So I’ve tried for years to mash those functions together to make a service centre concept. You can do it, but you’re not bringing similar types of individuals together and so you have to recognise the down sides of doing that.

 

MB: It’s the perception that people have of the payroll department. People see it as a number-crunching function, so it was thought that it was better placed in finance, but actually many years ago when I worked in payroll my role was always HR facing. It’s about the perception more so than anything else, as sitting in HR what I found was that the HR director realised that you can tap into that knowledge quite easily. So it’s not necessarily about number crunching because you have to do that in HR too. The image of payrollers has changed vastly, mainly because the knowledge base in payroll crosses over into so many different domains, yet the payroll department is struggling to raise its profile. This is where training courses such as the ones offered by Payroll Alliance are invaluable.

 

JJ: At West Sussex we integrated the two transactional services back in 2004 and it took about two years for people to be comfortable in that integrated payroll and HR role. It takes quite a long time to bed in the change.

 

The two services that we merged together were the payroll service and the transactional HR services. Our latest change is that we’ve had an organisational restructure so I’ve now got the transactional team in one place, so you’ve got recruitment right through to pensions. We’ve also just set up an HR customer services team, which takes us back to: where do people come to for an enquiry and we’ve done that so that people can actually go to one place. We’ve taken experienced staff from across those services and moved them onto this helpdesk. So we’ve gone live with experts at the end of the phone and it has really worked, we’ve been live for seven weeks and it’s really working well.

 

LH: That’s not true here – it’s two very separate teams. When I’ve integrated in the past, you get a whole set of strengths from the payroll team which are different to a service environment, and one of those is around customer orientation. Payroll people tend to be much more concerned with accuracy and seeking a response, and going back to the employee at the end. There’s a sense of pace and that they have to help you. Businesses and employees tend to rely on and trust payroll teams more than HR teams. If you can bring those two together and get that sense of detail then they actually make a very powerful element.

 

HV: It’s also about the direction from the top too.

 

JK: It’s getting everyone on board and getting them to work as a team.

 

JJ: It’s about providing the right training. It’s really important to make sure that you’ve got the funding to provide the training that is needed. We arranged for payroll training for everybody who came into the payroll service that didn’t have a payroll background.

 

LH: Have you picked processes of the payroll for people to do or have you trained everyone on everything?

 

JJ: We’ve tried to do the full range of payroll skills, but we have got experts who come from the payroll background who deal with overpayments. We’ve got subject matter experts who are there to advise on maternity but all of our support assistants doing the transaction work are trained right across, apart from the payroll control balancing system, because we’ve got a technical team that focus on that. Everyone is trained or buddied with someone so that they pick up everything.

 

KS: Do you agree that the relationship between the two has evolved and that they’re working together more?

 

JM: They are being forced to work together more because the biggest point of friction is around data and how it is transferred from the HR processes to payroll in a timely manner. That data often comes across in a multitude of ways and payroll ends up having to pull all of that together. Until HR recognises that they originate much of the inaccuracy in that process there’s always going to be a bit of friction.

 

LH: A driver behind integrated teams has to be employee and manager self-service. When there is only that one data flow then actually that tension ceases. It takes a while though because what HR tends to do, even if you have self-service, is to create other ways to add data into the system.

 

KS: What cultural issues exist between payroll and HR?

 

MB: It’s about communication.

 

JK: People are quite protective over their role. Suddenly if you start to integrate the HR team for whatever reason, the payroll person automatically thinks that all of their control is going to go.

 

LH: When I started in HR the payroll individuals tended to be sat alone in an office, hidden away from the business. As a result, there wasn’t a customer service ethos in that role. The world has now changed and moved on and payroll has been dragged into direct communication with the employee. That may be because HR people have said that they can’t do payroll stuff, so they send them to see payroll, or because it has become so complex in terms of employment legislation that actually they need to get involved. Consequently they’ve moved up that communication chain.

 

Payroll people have moved towards that service element, and I’m not sure that HR has moved quite that far along the other way into understanding technical payroll issues as it would be good to do. HR could solve a lot of issues without having to escalate a problem if we had a basic payroll knowledge, particularly around taxation. Things could be solved much quicker and never hit the payroll office if HR had an interest and a desire to learn about payroll. Then again, that’s not the reason that HR people went into HR, so there is a clash of culture there.

 

JK: It is now about a customer service.

 

LH: Just calling an employee a customer is completely new. It’s acknowledging that employees are a customer of our service.

 

KS: Even though they’re starting to work together now, is there a need for them to do so?

 

MB: It’s a service that you’re providing and they are your customers. HR provides a service and likewise so does payroll alongside that.

 

JM: The increasing focus on total reward is changing the distinction between payroll and all of the other reward outcomes. We need much more integration between payroll, benefits and pensions. Companies need to get cleverer about the way that they manage reward. They need to be able to control net pay as well as the various other cash and non-cash outcomes. This is all about data integration and the data capture process.

 

MB: A major obstacle that you have is the instructions surrounding different types of payments. Quite often the biggest bugbear of payroll is that they receive a request from HR to process a payment. There is sometimes little or no guidance in relation to this, yet there are so many different implications attached to making that payment that this is where the communication and educational process comes into play.

 

JM: There’s no common understanding about the rules that govern payments. I’ve seen payroll given responsibility for implementing a set of rules which are not gross to net rules at all, they are company HR policy, but with implications for payroll. 

 

Any kind of company HR policy which talks about how people get treated when certain events occur, such as moving employees, needs to involve both HR and payroll – making a particular payment because an employee is moving to Amsterdam throws up a lot of issues. If it’s for less than six months then it may be one set of rules, if it’s more than that then it may be another.

 

LH: When an HR person writes a relocation policy that’s the point when they should say – let’s get some payroll consultants in because I need to understand the tax regime, which is usually fairly complicated because you’re going across jurisdictions. So when you do get those occasional out of cycle payments, and payroll had been involved in the authoring of them, you don’t get these issues and HR doesn’t make a request which is unreasonable. In our defence quite often those requests come directly from an MD. You’re always going to get those unconsidered requests.

 

MB: It’s down to the agreement, they have promised someone something and then they present it to payroll and they say hang on, you can’t do this, so they then become the bad guys.

 

LH: You’re probably your own worst enemy as you’ll say you can’t do it but then 99 per cent of the payroll professionals that I’ve ever known will find a way to do it.

 

MB: It’s not a case of not being able to do it. It’s about not being able to do it in the way that you have stated it should be done. If you could take a step back and say to someone in payroll, this is what we would like to do, how do we approach it? In that way you will achieve a better outcome. 

 

JJ: As a payroll person we love things like that. I miss working out maternity leave by hand and doing all of the calculations. We enjoy doing them and that’s why we do the job.

 

LH: This is really interesting when you think about the direction of all of this which is actually automation and the removal of that kind of technical skill, particularly in the administration of benefits and the payroll area.

 

What does payroll become if we automate all of the systems and if we go down this SAP, payroll, and PeopleSoft route?

 

JM: Payroll expertise will turn into the solution architect for the software solutions. This expertise will provide the requirement specification that all of the software companies need, and is continually required to maintain a software system.

 

LH: That’s true but that’s a finite population. You’ve got a population now that’s capable of doing that role as you described, but there isn’t another generation to follow on.

 

JM: That’s a very good point and the payroll profession needs to address the challenge of developing people that can operate in this space. Where’s the training programme that does that? These new payroll experts don’t have to write numbers down but do have to be able to specify the requirements. This has nothing to do with writing code and software, it’s to do with whether you can write a very logically structured specification that then enables software people to build the solution required. These skills are lacking and it is a gap.

 

LH: It’s one of those roles where if you find a good payroll leader you want to hold onto them with claws of steel. It tends to be a role that is not necessarily paid as well as the other HR roles, I don’t know why, but when you do find one that you can trust then you hold on to them. Payroll recruitment is really hard.

 

JJ: You do find in local government and in payroll especially that there are people who have been there all their life. When they announce that they’re leaving or retiring, you worry because they’ve got all of that knowledge. We’ve got people in our team with payroll backgrounds who have been there since they left school.

 

KS: Why do payroll and HR need to work together? What are the benefits of them having a good working relationship?

 

HV: It’s about customer service and the journey of that customer. Not having to go to lots of different people, but one central area where you can get the answer that you require is a key part of it.

 

KS: Is providing that level of customer service the main benefit? What about improving efficiencies?

 

JK: It’s the communication and the team work and it’s about them coming together to provide a service to the customer.

 

JM: What we’re seeing in the large company market is a focus on improving three things: cost, control and compliance. The big companies are often becoming quite concerned with these three points, particularly regarding cross-border activities. So one aspect of importance in this integration of reward activities and the data that relates to that is about ensuring that all of the various bits of company policy, country policy and personal contracts are applied, ie compliance. If you’re a global organisation that is hard work; as a result the number of staff is increasing because there is so much to do.

 

With regards to the control issue, very few senior management teams know what goes on in their reward function. So they don’t really know whether their reward cost is cost appropriate. To do that they need information; reward analytics in this area are non-existent. So we’re seeing a lot of enquiries about better control.

 

The cost of reward is partly related to the staff needed to run the function. Obviously if you leverage the synergy around reward activities, then you will need fewer staff to do them. Using automation you can start to leverage those synergies.

 

LH: From my perspective as an HR director, I want engagement. I want a picture of what impacts each individual employee, whether that be reward based, learning based or recruitment based. So what I want is the ability to be able to flex my offering across that whole piece and determine what it is that has the greater impact on employee performance. What we’ve got at the moment is multiple data sources for that information. If you bring those departments together then it’s the start of getting that overall picture. Unfortunately, what happens is that the more complex the system the more people you need to feed it, so automation just creates a different demand.

 

KS: Can payroll can help HR enhance employee engagement?

 

LH: Yes, because they have so much knowledge. There’s an element that payroll understands a lot more and can be clever with reward. There has not been a push-up from payroll to think about reward in terms of benefit design.

 

JM: That comes back to the culture point where payroll sees itself as more of a compliance function, rather than an innovator.

 

HV: Do you think that it’s not just that payroll view themselves there, but other people see themselves there too? There’s a perception that payroll people sit in their own little area, and you can’t go speak to them because you might get told off.

 

LH: Payroll is the function where if something goes wrong, I as HR Director lose all credibility. I can’t talk about succession planning or anything else because I haven’t paid people correctly.

 

JK: The main reason that people come to work is to be paid, so it’s critical.

 

JJ: It’s true, nobody talks to payroll until something goes wrong – then everybody wants to talk to you.

 

HV: So the culture is not just payroll and HR, it’s actually everyone else around them as well. Also it may be people from the top saying the payroll and HR are one of the key elements of our business in order to help promote them.

 

LH: We’re deploying a new version of PeopleSoft now and it’s due to go live in six weeks. The thing I care most about is the payroll interface, but I know that the payroll team will care even more than I do. That’s because their professional credibility is on the line. That is one of the real strengths of payroll and something that HR could learn from in terms of accountability.

 

MB: Also it’s about the cost. Salaries and wages is one of your biggest overheads so that’s even more reason why payrollers need to be given a boost.

 

HV: Laurie, you said that you trusted your payroll team; so they should be looked after more than anyone else because at the end of the day if they put an extra nought in by mistake it’s costing the company a lot of money.

 

LH: Yes, you should look after them more, but my experience is that payroll teams tend to be pretty self-directing and self-managing. So because you trust them and have faith in them, which is not true of a lot of HR teams, we forget them and as they don’t make a lot of noise about it they are put to the side. So you’re right, HR takes payroll for granted and payroll doesn’t shout about it.

 

JJ: When you’re in payroll you get it right every month and no-one recognises that you’re team of the month. It’s very hard to not be recognised as a team of professionals.

 

JK: It’s about job satisfaction and the fact that you’re providing a service to every single employee, making sure that they’re getting paid accurately and on time.

 

LH: Whenever you do business continuity planning payroll is top of the list. However, that is the only time that it comes top.

 

KS: Can shared responsibility also be a pitfall, in the sense that if something goes wrong with payroll it affects your other processes?

 

JJ: It’s essential to manage the team through the change.

 

JK: Absolutely, and it’s those clear roles and responsibilities that divide what they do and who’s controlling what and taking responsibility.

 

HV: If you don’t then it comes back to finger pointing and who’s to blame when something goes wrong. If you don’t define everything from the word go then it is open to blame.

 

JJ: It’s also all about understanding and motivating the team. It’s understanding, as a manager, where your team feel they are within a process. During our recent restructure we managed them by setting a target for different areas and we asked people where they thought they were now. We then did it again three months later to find out where people thought they were in the process. When you’re integrating two teams and expecting people to take on a new role it’s really important to understand where they feel they are.

 

HV: Sometimes people go through this change and they have no idea what the point of it is. Again, it’s about communication and saying “we’re going through this because of x, y and z”.

 

JJ: We did briefings every couple of months and news updates so that everyone knew which stage of the process we were in because part of restructuring was to introduce a new customer services team bringing HR, payroll and recruitment together.

 

Self-service was a big part of the change that we went through so a lot of the team were involved with that and consequently they feel a lot more enthusiastic about the change because they’re part of it.

 

MB: The benefits in the long run far outweigh the interim rocky road. You’ll end up with saved time because of reduced duplication, which is the biggest issue between payroll and HR, as you are streamlining processes by using an integrated system. The other side of restructuring is that you’ve got the worry for staff that they’re going to lose their jobs. However, it’s a fantastic opportunity for managers to share the knowledge and retrain staff. This is where we see changes in the calibre of delegates  attending basic payroll training courses which they find beneficial for them to take back to the workplace.

 

It’s useful to get people from a HR background on payroll courses so that they can understand the processes. You’re effectively pooling your resources and that’s got to be a good thing.

 

JM: The pitfalls that I’ve seen where payroll is reporting to HR are around quality and control. You might have an HR person who is not really interested in payroll supervision and they have no idea what is required. To avoid this integration may always require the promotion of the payroll person.

 

KS: Are there any other pitfalls?

 

JK: Some of our customers, from the payroll point of view, feel overshadowed by HR. Again, it’s because payroll doesn’t come forward or shout out. We’ve even had incidents where payroll people are not even aware of integration, they have just been told that there’s a new system and they get on with it. HR is usually the more dominant department so maybe the answer is to come at it with a different approach.

 

LH: I would never bring them together in the sense of having complete integration between the HR and payroll teams because I believe that there is a different competence set that exists within payroll. HR people can learn to do some top-level payroll processing and deal with some high-level queries, and conversely payroll could learn some basic HR processes. However, I would always leave a basis of knowledge within the function because they do different things and have different drivers and measures of success.

 

To bring them completely together you run the risk of potentially upping some of the customer service at the expense of the attention to detail. I wouldn’t be willing to sacrifice some of that accuracy, but there is a level at the top, around customer service, which is your entry into that shared service team and 60/70/80 per cent of queries can be answered by anybody. However, there will always be technical payroll expertise that I will protect.

 

JJ: In our team we’ve kept the payroll expertise in our subject matter expert team. There are payroll experts in overpayments, payroll control and technical. So even though you’ve integrated, you’ve still got the expert teams there.

 

MB: No matter how much training you give someone it’s the experience behind it as well. So when I’m saying integrate, which does have its benefits, you will never remove the fact that you will need someone who does specialise in the back to basic “old school” knowledge.

 

LH: The customer has the right not to have to negotiate their way through an HR function. They need one point of contact who can answer the majority of their questions. As you review those questions you notice patterns so that you can train people and roll it back out. The risk that you run is that that small and medium enterprise knowledge runs back out to the frontline staff and you get this distinction again where the team starts to self-manage and payroll does the payroll questions, and vice versa for HR. So you have to be really careful to make sure that there is no distinction at this level, it’s an HR service – not payroll and HR. You need to keep reinforcing that otherwise you tend to have a split.

 

JJ: The HR customer services team is our first point of contact – if it can’t answer the question and it’s not scripted or it doesn’t know, then it comes straight back to the back office. So the customer never gets a “we’ll get back to you” answer. This makes sure that the customer journey is quite smooth.

 

KS: What factors affect the decision to integrate the functions?

 

LH: Customer service, costs – quite often the technology that sits behind it will be used, such as enterprise resource planning (ERP), which drives a shared service, and if you haven’t got that then it’s quite difficult to create the momentum.

 

HV: The financial climate – some of our customers have integrated two elements to cut down on cost because at that point in time it seemed like the right thing to do. It depends on the customer, the size of the business and on the company. There are a lot of different factors.

 

JM: It’s a skills issue. If you can only justify one person, then you’ve got a huge exposure – what if they leave, get sick, go on maternity leave, etc. That’s a huge problem.

 

JK: Also if you get a good payroll person you hold on to them. However, if they do go then you’re trying to recruit and it’s so difficult to find somebody who understands payroll. Then outsourcing becomes another option. Is it easier to outsource, even if it’s just for 12 months, until you find the right person?

 

JM: The problem with outsourcing goes back to data because companies tend to send across all sorts of data and assume that the outsourcer will just handle it.

 

Consequently, the costs are going up because the outsourcer is saying that they need 10 people to process all this information, as it is being sent over in different formats and at different times of the month. As a result, outsourcing costs spiral and you end up paying a huge amount of money, and that’s often a shock as originally the company perhaps had one person doing this in-house.

 

LH: The trend for outsourcing for HR has driven some of that integration too. If you’re talking to an HR process outsourcer they will usually say, “now let’s talk about your payroll”. If you’re going down that road, you might choose to bundle that, then you at least get all of your HR services in one place. So that has led to some of that integration being forced on the profession because you buy that as a service.

 

JK: If you’re outsourcing all they’re literally doing is putting in the data that you’ve sent through to them so you’re the one that does that final check and sign-off. It still comes back to the employer even though the outsourcer has done the work; it is still the employer’s responsibility.

 

KS: Cost is quite a big driver for integration. What other reasons are there?

 

LH: Customer service is the top reason – cost is a subsidiary benefit of that. The most important point is what the end user can get. I would love to say that that is always what drives it, but cost does come into it. However, you have to go from the position of: is this going to improve our service? Hopefully this will be at a cost neutral level, or maybe even with some savings.

 

JJ: Cost and making savings has an effect on the service that you can provide. You may not be able to carry on providing a gold-star service, you may have to say, “with the resources I’ve got I can only provide a silver service”.

 

LH: That’s the real challenge, as the customer won’t know that the reason for combining the teams was a cost driver because that won’t be the sell. We’re not very honest as a profession in terms of our reasons for combining services. 

 

JM: It is technology which is enabling all of this to happen. Technology is helping to change the profile of the cost and lower it in some cases. In terms of making things happen, it’s the availability of technology that enables you to automate some of the skills that you used to have to hire.

 

KS: What changes take place as the result of integration?

 

JJ: System wise, if you’re going to integrate the service you might look at a different payroll and HR package, whereas before you might have been running an in-house payroll and a different HR or personnel system. If you’re going to integrate the teams then you need an integrated payroll and HR system as well. That can impact on the team – as well as learning a new role; you’re learning a new system. So I’d advise not to do both at the same time.

 

JK: It’s change management – it comes back to getting everyone to buy into the project. Right upfront you need to say, “this is the plan and this is where we’re going” to keep everyone on board with it and to keep them involved as well.

 

JJ: The other thing that people worry about is whether or not it’s going to affect their job. The first thing that many people think about when integration is announced is, “will there be a reduction in staff”.

LH: The change management of doing this is always massive. The integration that I was most proud of was when I was working for Fosters in Australia. The reason that it worked so well was that I got the two teams to design the processes that they would work at together. Having involved both HR and payroll really early on and getting them to co-craft how it was going to work made a massive difference. There wasn’t an issue of cost as it was purely a customer service drive, but they felt ownership, they felt integrated and consulted on what happened. Plus they also felt a degree of ownership post-implementation. The technology should support the optimum process, not the other way round. It’s very easy to take the PeopleSoft standards and just deploy them.

 

JK: When you talk about a system you need something where you can build those rules in so that you can decide how it’s going to work for you as a company. You need to think about your own internal processes first and then you tell the system what you want it to do.

 

LH: You don’t always get the luxury of doing that as there is the issue of cost and time.

 

JJ: If they’re part of the project staff are more enthusiastic about it and they want it to work. If you’re not including people and not involving them as part of the project then you get negative feedback.

 

JK: I’ve had experiences where I’ve said to the project manager these are the issues that your payroll team are experiencing, and they don’t even want to deal with it. So from our company’s point of view we do project meetings right from the beginning of the implementation and every time we involve the payroll. If they’ve bought the payroll system I want to see the payroll manager as they’ve got to be on board immediately.

 

LH: It’s a really good point, as so many of the big ERP systems have payroll systems bolted on as an afterthought. It’s a module that has not been developed as a specific payroll service; it has just been created because they have to have the payroll interface. Or you are left with a legacy payroll system which you then have to integrate, which doesn’t always work either.

 

JK: You tend to find with those kind of interfaces that it’s usually data exported out and then data imported in.

 

MB: With regards to implementing any type of system, if you say to a payroll person that you’re going to implement a new system, I guarantee you that they will speak to every department involved in data submission or output of data. If you look at it in terms of the business, when you’re introducing a new system, payroll will put that at the forefront. Again it’s perceptions of the department, the communication – it’s not a fault, it’s just the history.

 

LH: If I was to buy an HR Information System I would consider payroll. Quite often with some of these big ERP implementations it’s a decision which is taken at a corporate entity level and nobody has had that conversation.  With a lot of these big overarching systems the principle is fine but the user access is not great.

 

HV: It happens in small companies too. A lot of our customers are smaller than those you’re talking about, but they too quite often have somebody at the top who doesn’t see the overall picture. Or they do ask HR but they forget about payroll as there’s only one person there.

KS: Does technology have a big role to play in integration? How does it influence how successful the integration is?

 

JJ: It’s very influential as this is all about people’s pay. If it’s not working then everyone will know about it. With pay you’re right at the forefront as the failing team if it’s not working.

 

JM: Technology is often the fall-guy for problems in these implementations. Technology at this level is a relatively passive entity and if it’s configurable software then the issue so often is that the specification of the solution is inadequately done because nobody knows. The gap between what large companies need and what the HR and payroll department initially think is required is sometimes quite large. So technology immediately suffers because your requirements are wrong. Then you have the other problem which is the people who are using it don’t buy-in. Those are the two big issues. Technology is fundamental to what’s going on now and is the vehicle to change. It is the data that is driving this change.

 

JK: Technology plays a massive part. It comes back to the idea that every five years companies should review their system, to make sure that it’s achieving everything that you want it to do and how you can make it better. Again, that’s users and managers looking at the system, not just internal processes but the system itself. This is why you go out to tender – is there something better out there and how much does it cost?

 

LH: Technology is an enabler; the problem is when you let technology drive the solution. It has to fit with your optimum processes, and if you’re going out to buy a system that’s a key requirement for me.

 

HV: HR is visible and it does a lot of different things, therefore the system needs to be configurable. However, there’s a misconception that payroll is payroll – although it’s black and white to a certain extent, you still have to set up certain elements within that payroll. Sometimes people forget that, they assume that the payroll system will just work and so the focus is on HR because of the different things that can be done with it.

 

JM: It’s that interface with the HR and payroll which is the problem and nobody pays any attention to it. It’s the perception that payroll is going to stay the same. This is wrong because all of that data which crosses into payroll comes from so many different sources and that all gets changed when you implement new technology.

 

HV: When you’re implementing a system people do focus on the HR side because they want to be able to configure various aspects of it, but actually perhaps payroll could benefit from a few workflows too.

 

JJ: With self-service people think a lot more about payroll now than having it done for them. Now it’s affecting customers, it’s visible and it’s self-serving, it has more of an impact.

 

KS: Have salary sacrifice and Real-Time Information (RTI) encouraged payroll and HR to integrate?

 

MB: As employers understand more about the implications of RTI, more departments will find that they have no choice than to work more closely together.

 

KS: Is this going to force payroll and HR together?

 

JK: From a payroll point of view it comes down to that deadline and HR sometimes doesn’t really understand that deadline of getting information in on time. Because information will have to go through to HM Revenue & Customs (HMRC), when you pay an employee their net pay this information is immediately going to go to HMRC so they’ll have to up their game as it’s going to impact both internally and externally. 

 

LH: What’s going to happen if the quality of data continues as it has done? Is the amount of rework going to increase exponentially?

 

KS: Who needs to takes responsibility for a successful integration?

 

MB: It’s both parties, it doesn’t just sit in one domain.

 

JJ: It’s a joint effort and a really good change manager is needed to lead from both areas.

 

JK: They also need to be able to adapt and apply accordingly; they need to be able to change if after three weeks something isn’t right after that first initial impact to keep it moving forward. It’s all about the planning and to keep it realistic.

 

We’ve been in planning meetings where people want things fully implemented in six months, so it’s about managing that expectation. A lot of this pressure comes from above, but in reality you need to take it slow and steady in order for it to be successful.

 

HV: What we find is that when a company is implementing a system they forget that the project manager is someone who is trying to maintain their own job and also take on the implementation of a new system. That often involves duplicate data entry, parallel running, etc and often that doesn’t get taken into account. That is why you’ve got to be realistic, as these people are doing their full-time job as well as implementing a system – and it’s difficult.

 

LH: That’s why the cost of implementation should include the additional resources. It works when you’ve taken people out of HR and payroll and have made this their job for a period of time and have back-filled their role. So often when the implementation plan is done this isn’t thought through.

 

HV: If you don’t have the luxury of that, as some small employers can’t spare the resources, you’ve got to take it into account with your planning.

 

LH: There also has to be willingness. So upfront there has to be a lot of discussion and a lot of engagement about why it is being done. You need to take people on that journey with you so that they understand. So often organisations just expect people to get it, and they don’t because they’ve been through all of the demonstrations and workshops. You have to work quite slowly at the beginning just to inch them along so that they feel comfortable. HR and payroll are not good at adapting to change, so you have to be more careful when taking them on that journey.

 

MB: By default payroll and HR were always working together, not necessarily at the same time, but to a certain degree because of the sheer level of legislative changes, there is a huge crossover in knowledge. Some of the earlier signs were in relation to statutory payments such as when Statutory Maternity Pay was first introduced. The rules were so complex that both HR and payroll were reliant upon each other. So for years there has been that relationship forged by default. It may be disjointed at times, but it’s acknowledging one cannot really function without the other.

 

LH: Employment regulation and employment law has accelerated so much recently. HR and payroll don’t do a good enough job at going out and sharing that knowledge with employees. Most of the time a change hits employees and they don’t know anything about it. We assume a level of knowledge around tax changes and actually it doesn’t exist within the wider population.

 

JM: HR and payroll are both functions that get neglected and not factored into the way that businesses drive through change. Somehow it has been like that traditionally, but it is changing. There’s a lot more money going into HR, payroll and benefits and it’s all being revamped quite dramatically. It’s perhaps the last area where process engineering is still required, all the other functions were done in the 90s but now HR and payroll are coming under review. Payroll’s integration will become part of the whole process re-engineering change. Self-service is what is making this possible.

 

LH: My job has changed a lot in the last 20 years. It’s so much now about data, analysis and then recommendation based on analysis. Payroll is a huge part of that because it takes up so much of the spend, so they have to be together.

 

JM: Data is coming to the forefront of HR. HR is going to be about managing data. Payroll will fall into that because payroll has always been about data. So suddenly there will be a camaraderie emerging. Technology is enabling it, and self-service is making data management feasible so these things are all coming together. In five years this conversation will be sort of impossible because it’ll just be obvious.