A Case for Taking a Seat at the Leadership Table

The organizational chart is a dynamic and evolving tool, especially as it relates to the strategic role that payroll now plays in leadership. Once seen as an administrative task, payroll has evolved into a crucial strategic partner. Its significance in financial management, compliance, and employee satisfaction is undeniable. As companies expand globally, payroll demands have increased exponentially, and its strategic importance is clear. Managing complex compensation structures, handling retroactive salary adjustments, and staying compliant with ever-changing regulations are just a few challenges that underscore the need for payroll to operate with greater autonomy and specialization.

Given these challenges, it's no longer a suggestion but a necessity for payroll to break free from the outdated model wedged between human resources (HR) and finance. The C-suite sees payroll leaders as strategic partners capable of driving organizational efficiency, compliance, and strategic decision-making.

The Case for Payroll Independence

Traditionally, payroll has been entangled in an organizational tug-of-war between HR and finance, pulled between their distinct missions and visions. HR focuses on employee relations, benefits, and compliance with labor laws. In contrast, finance concerns are budgeting, financial reporting, and profitability. This division often leaves payroll in a precarious position, disrupting workflows and creating inefficiencies that impede its ability to function strategically.

To navigate this complex landscape, organizations must rethink their traditional hierarchy. Payroll should report directly to the executive team, functioning as a standalone department with the autonomy to drive strategic initiatives, ensure compliance, and enhance overall business performance. This independence allows payroll professionals to focus on the intricate details of payroll management, ensuring accuracy, compliance, and efficiency while providing valuable support to the overall business objectives.

Michael Francis, CPP, Director of Global Payroll at SBA Communications, emphasizes the importance of payroll independence.

“Payroll should be a standalone department. While HR and finance are tied to payroll, their goals and functions differ,” he said. “HR focuses on employees and business demands, sometimes neglecting compliance, while finance focuses on the bottom line, often making it hard to get budget dollars for payroll needs."

Key to Business Success

Beyond operational duties, payroll is instrumental in managing one of a company's most significant expenses—employee compensation. Payroll's accuracy directly impacts cash flow management, budgeting, and financial reporting, making it essential to foster employee trust and satisfaction. In an era where transparency and fairness are demanded, the role of payroll cannot be overstated.

Important strategic conversations often leave out payroll professionals despite their essential role in the organization. This oversight can lead to missed opportunities to enhance employee satisfaction, optimize costs, and ensure compliance with complex financial regulations. Excluding payroll from the executive table risks undervaluing its contribution to the company's financial and cultural health. Payroll leadership in executive-level deliberations provide key insight to shape initiatives, improve resource allocation, and drive innovation. Decision-making depends upon it.

As Carolyn Hayden-Garner, CPP, Director of Payroll at Tesla Motors, notes, "The main advantage of reporting to the C-suite is having direct insight into the data we process, which is crucial for making major decisions within the organization."

Challenges of the Current Structure

The current organizational structure, where payroll is managed by either HR or finance, presents challenges. However, because neither HR nor finance fully understands the complexities of payroll, this leads to operational inefficiencies, communication breakdowns, and increased workload for payroll teams. Payroll professionals frequently find themselves mediating between departments, resolving discrepancies, and managing tasks outside their primary responsibilities. This increases their workload and exposes the organization to compliance risks and potential errors. The lack of clear ownership and support can lead to delays and errors in payroll processing, ultimately decreasing employee morale and trust.

"In most cases, payroll should be standalone because much effort goes into payroll that can be overlooked if it's part of HR or finance,” said Gerard Hall, CPP, Director of Payroll Operations at CBIZ. “Payroll needs appropriate staffing and focus. Ultimately, payroll should be standalone or at least have the attention and resources it needs."

Moreover, when payroll is not included in strategic decision-making, organizations miss out on valuable insights that could improve financial planning, compliance, and employee satisfaction. The strategic value of payroll data, such as trends in compensation and workforce demographics, is often underutilized, leading to missed opportunities for enhancing business outcomes.

Hayden-Garner shares her experience advocating for payroll’s seat at the table.

"I felt the pain of inefficiencies and manual processes and took the initiative to drive change. By actively pushing for improvements, I created my seat at the table,” she said.

The Future of Payroll: A Call to Action

The question for business leaders is clear: Will you be at the forefront of change, harnessing the full strategic potential of your payroll function, or will you risk a competitive disadvantage, grappling with the consequences of an outdated organizational model?

The evolution of payroll from a back-office function to a strategic partner is not just a possibility but an essential transformation for a thriving business. Organizations that recognize the strategic importance of payroll and elevate it to an independent, C-suite-level department will be better positioned to navigate the complexities of today’s rapidly changing business environment.

Hall summarizes the future needs of payroll leadership this way: "Payroll has evolved but not as quickly as HR. Titles like Executive Vice President of Payroll are rare but shouldn't be. Payroll needs representation at the senior table to ensure proactive involvement in decisions. As payroll becomes more global and complex, having senior leadership with a seat at the table is crucial."

By elevating payroll to the executive table, organizations can unlock new levels of efficiency, compliance, and employee satisfaction, driving long-term success.

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Insights from Industry Leaders

Should payroll stand alone as its own department, independent from HR and finance? The following industry experts provide additional insights into this question, offering a comprehensive view of the potential benefits and challenges:

• "Payroll directly impacts a company's financial operations and plays a critical role in budgeting, cash flow, and compliance with financial regulations. By aligning payroll with finance, companies can ensure accuracy in forecasting, budget management, and tax compliance while maintaining adherence to financial policies and controls." 
• Siovhan Tucker, Payroll Consultant 

• "Payroll handles a lot of data crucial for making major organizational decisions. Therefore, payroll should have its own reporting line, ideally to the CEO, to effectively represent its value and ensure comprehensive insights."
• Michael Francis, CPP, Director of Global Payroll at SBA Communications

• "Payroll should be a standalone department, aligned with either finance or HR due to the nature of its functions, but it needs to have a distinct presence. We need a seat at the table, maintaining our independence while collaborating with other departments."
• Carolyn Hayden-Gardner, CPP, Director of Payroll at Tesla Motors

• "In a standalone department, the payroll head might report directly to the COO or CEO. This setup ensures adequate staffing, separation of duties, and effective partnerships with other departments."
• Gerard Hall, CPP, Director of Payroll Operations at CBIZ