Why Human Resources, Finance, and Payroll Must Work Together

While teamwork and collaboration across departments are always important, it’s vital for an organization’s human resources (HR), finance, and payroll departments to work together. According to one workforce management report, 43% of companies use at least three internal systems, and 65% of executives believe silos hinder collaboration among departments. Another survey reveals only 32% of managers (and 21% of workers) consider their company to be a 'well-oiled machine.'

This causes several problems for a business. If companies expect to be successful and compete – especially on a global level – they must focus on recruiting and retaining the best workers. Employee engagement and satisfaction are necessary components of worker retention.

Break Down the Silos

A lack of cross-departmental collaboration among HR, finance, and payroll can negatively impact employee engagement and satisfaction on two levels.

First, while employees want jobs that are fulfilling and allow them to utilize their skills, they also want to be paid on time, and any glitches in this process are likely to produce discontent among workers. Payroll checks must be issued and direct deposited promptly. Any increases, bonuses, or deductions should also be handled correctly and promptly. Successfully juggling all of this requires collaboration between the three departments.

The amount of an employee’s payroll check is based on a variety of factors, including social security taxes, insurance deductions, and approved leave time, and can also vary based on overtime, holiday pay, and other factors. This information needs to be coordinated by HR and payroll to ensure that it is accurate.

When employees are awarded bonuses or raises, HR needs to communicate this info to payroll and finance to ensure the changes are reflected on the employees’ checks at the agreed-upon time. Finance should always be abreast of any changes that affect payroll to ensure that payroll funds are available to prevent any delays. Missing information in any one of the above scenarios can result in a lack of employee engagement and depending on how frequently this occurs; workers may consider looking for employment elsewhere.

Benefit Management is a Team Effort

HR, finance, and payroll should also work together to select health care insurance, retirement, and employee rewards programs. Cost is always a driving factor, but the departments should also agree on the processes for managing these benefits programs. Selecting a software tool that is tedious for one department will inevitably result in delayed or missing information, which will affect all three areas.

Hiring is Everyone’s Responsibility

Coordination is also crucial when recruiting and hiring new employees. HR is directly involved in the hiring process, and should ensure that the proper documents have been forwarded to finance and payroll – and it is also incumbent on these departments to process the information in a timely manner. No new employee wants to be told that 'something' happened with their first paycheck, and they won’t be receiving it as planned. If the company gets a reputation for these types of antics, fewer candidates are likely to apply in the future. Using a human resources information system (HRIS) that integrates with payroll and accounting software can provide your team with a single source of truth for hiring documents that payroll and finance teams will need.

Cooperative Compliance 

HR, finance, and payroll must also work together to ensure legal compliance. Tax laws must be adhered to, ranging from collecting and revising employee documents (like federal, state, and local tax forms), to ensuring that social security numbers, addresses, and other information is correct and stored securely. Some employees live in one state and work in another state, which can complicate tax compliance. Also, some employees change addresses and forget to inform everyone at the organization. For example, an employee may tell HR, but fail to notify the other pertinent departments. However, payroll needs to know how much to withhold, as this is based on an employee’s residence and work address. And incorrect tax filings can result in penalties and amendments.

Security is Paramount

HR, finance, and payroll all have access to sensitive data. A Ponemon data breach study reveals the global average cost of a data breach is $3.62 million. While the cost has declined by 10% over the past few years, the data breaches are larger and have increased by 1.8%. Social security numbers are particularly valuable to cybercriminals.

However, any type of employee data, including financial information, as well as

addresses, can be lucrative to cyberthieves. In addition, there is also a threat from nosy employees and vindictive ex-employees. This sort of information must remain confidential, and the three departments must work together to be sure that data does not fall into the wrong hands.

HR, finance, and payroll can have a significant impact on a company, for better or for worse. When these three departments work together, they can create an efficient, effective work environment that attracts and retains productive workers.

Terri Williams is a writer for TechnologyAdvice.com. She has covered business and tech topics for a variety of clients, including The Economist Careers Network, Intuit Small Business Blog, Investopedia, The Houston Chronicle, Daily News Energy, and Homeland Preparedness News. Follow her on Twitter @Territoryone.