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As a new report reveals that 64% of businesses have no one in the boardroom who represents payroll, we ask, is the payroll director a must have?

Payroll operates as a standalone function in just 22% of businesses. At board level, it has zero presence in 64% of companies. And yet, staff costs are probably your single largest expense. This report of 1,300 companies is valuable not because it largely confirms what we already know, but because it (hopefully) sparks debate.

Is there any other element of your business so directly linked to profitability that isn’t represented by a senior leader?

No longer a bolt-on

For many organisations, payroll is part of a package deal with finance and/or HR, but the growing complexity of payroll, the risks associated with getting it wrong and the challenge of getting it right are such that raising its profile within a business has to now be a serious consideration.

You could make a good case for saying payroll was never simply a matter of logging timesheets and ensuring the wages were paid on time – even in pre IT days – but it’s definitely far removed from that today.

There are the increasingly onerous compliance burdens – and the risk to reputation and the bottom line of getting the National Minimum Wage, pensions auto enrolment, IR35 et al wrong. There’s the relatively new burden of storing and protecting staff data. There’s the technological evolution of payroll and its impact on other areas of the business. And there’s the potential of payroll reporting data to inform wider business decisions, from recruitment and promotion to running overtime and paying bonuses.

Put simply, payroll really matters.

Signs you need a Director of Payroll

Even in organisations where payroll is outsourced, a DofP role can benefit governance and strategy, and help the business face legislative change with confidence.

But where payroll is kept in-house, a directorial steer becomes all but essential, especially where:

  • The cost of running payroll is rising without explanation
  • Payroll errors are regular occurrences, or where occasional isolated errors are proving costly
  • Where you have faced a fine or reputational damage for failing to comply with payroll-related legislation, or have suffered a ‘near miss’
  • Where you face implementing changes (e.g. data protection or anti-fraud measures) without the necessary expertise
  • Where the business is expanding, and recruitment is about to place a significantly greater burden on payroll
  • Where the business’ staff profile is complex, perhaps including gig economy staff, off-payroll workers or a range of shift patterns

Practical payroll

As with all things, ensuring payroll has its influence felt at board level is a question of balance based on the requirement of individual businesses. For a medium sized organisation, adding a payroll director to a board that already contains an HRD and FD might be seen as overdoing things.

But the scope of the payroll portfolio is such that most businesses could benefit from giving it far more prominence and focus. That includes board representation, but it should also feature more widely across the business, with its impact felt from management training to internal communications.

If your payroll management constitutes little more than a line of your finance director’s job description, the chances are that description is now woefully unsuited to the realities of the role.

To find out how to make more of your payroll, and cut the cost and time of processing it, talk to us now.