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Getting Two (or More) for the Price of One

Payroll data provides a fulcrum for harmonizing HR and business effectiveness across the organization

by Phil Fersht

HR data is the fulcrum of any business. The ability to have real-time, integrated information about staff profiles and performance, compensation, and location is paramount to providing management with crucial information to make decisions.

Moreover, for the international corporation, the benefits of managing an integrated global HR operation increase exponentially in today’s markets. There is often no better platform to base this HR data than at the payroll level, where all the metrics necessary to ensure staff are fully accounted for, paid, and organized are stored effectively. If companies can harness that, they can develop additional human capital-related programs using the data.

An integrated payroll system also supports the management structure of the multinational organization that has matrix-type organizational structures, which have product lines and managers working across national boundaries. Multiple interfaces into other applications and processes can give management the ability to have a truly integrated HR function.

The changing role of the HR leader, particularly in an outsourced environment, is to help facilitate the alignment of integrated HR data with senior management decision-making. A third-party HR service provider can offer the tools and service structure necessary to enable such alignment, but the HR leadership must work to map out its internal HR process and systems.

Payroll is so central to HR and HR systems that if it is handled separately, which many companies opt to do (especially in Europe), they often take themselves down a route that does not provide a solution for broader HR services and employee self-service. There are a whole series of payroll providers which are standalone, do not have multiple system interfaces, and do not easily integrate (if at all) into a holistic HRO solution.

The problem lies in the fact that many organizations have been focusing on outsourcing payroll simply to cut costs and are missing out on the opportunity to leverage the payroll data platform to integrate and streamline processes. Consequently, HR and payroll are not operating together in many organizations: the short-term gain is offset by longer-term integration issues.

The exhibit illustrates where payroll sits across organizations on a functional level. In some organizations, payroll reports to the HR function, however, the majority of organizations has payroll reporting to the finance function or sometimes procurement and even supply chain/operations. Hence, there is a marked difference between the approaches towards HR transformation and HR sourcing, depending on organizational structure. Outsourcing the payroll function can eradicate many of these issues and enable payroll data to be far better integrated across the organization.

1) Think holistically. Are you just looking for a more cost-effective payroll solutions, or do you want to leverage other HR functions?
2) Where will payroll sit in the future? Finance, HR, procurement or supply chain?
3) Where are the most significant integration points? Audit concerns, etc.?
4) What is the organization’s operating structure? Country-focused or by lines of business; what info is needed across borders for operations; do employees “move”?
5) Will you manage the integration of payroll solutions within an HRO services contract? Through managed payroll, bureau payroll, etc.?

Tags: Consultants & Advisors, Enabling Technology, HRO Today Forum APAC, HRO Today Forum Europe, HRO Today Forum North America, HRO Today Global, HRO Today STA, Professional Contribution

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