Where does payroll belong? Rethinking payroll’s place in the organisation

The role of the payroll function is evolving fast. Traditionally seen as an administrative task carried out behind the scenes, payroll has grown into a strategic business function – one that balances compliance, cost control, and the employee experience. But the question remains: where should payroll sit within a company? In HR, finance, or perhaps somewhere in between?

The answer may not lie in choosing one department over another – but in recognising payroll’s potential as the foundation of a data-led, people-focused strategy.

From the back office to a strategic partner

Historically, payroll sat firmly under the finance department, with a focus on accounting and compliance. This structure made sense when payroll was seen primarily as a process-driven function focused on getting people paid.

Today, with growing demands around global payroll, data transparency, and GDPR compliance, payroll professionals are expected to work more closely with HR teams and business leaders.

There’s now an expectation that payroll solutions understand not just tax rules and (changing) labour laws, but also policies, benefits, and onboarding procedures. It’s become a true business partner function, and with that comes a shift in mindset and responsibility.

Finance-led payroll: strong on compliance, but sometimes disconnected

When payroll sits under finance, there’s often a strong focus on accuracy, forecasting, and compliance. Payroll operations are well-structured, and the team tends to excel at managing budgets and creating efficient payroll processing flows. Payroll software, for example, is typically well integrated into financial systems, which streamlines reporting and month-end tasks.

But challenges can arise when payroll is disconnected from the human resources function. For example, questions from employees may not be answered promptly, or policy changes from HR – or labor laws may not be translated properly into payroll data. When the payroll team is focused only on metrics and cost, the employee experience can suffer – and that can lead to a rise in payroll errors or missed opportunities to support broader payroll strategy goals like retention and wellbeing.

HR-led payroll: people-first, but sometimes underpowered

Placing payroll under the HR function makes sense in people-centric organisations. It allows for better alignment with core HR practices like employee onboarding, compensation, and employee engagement. HR is often better positioned to understand the employee impact of late paychecks, miscommunications, or delays in payroll-related issues.

However, HR professionals may struggle with the more technical aspects of payroll management, such as reconciliations, journal entries, and ensuring clean data for the payroll system. Without the financial oversight provided by finance, payroll departments run the risk of becoming reactive rather than strategic.

Payroll: the untapped data engine for HR

In many organisations, payroll is still seen as a cost centre – focused on compliance and continuity. But especially within HR, payroll holds far greater potential.

Payroll data offers a near real-time view into workforce dynamics: sick leave trends, interim worker flows, and total labour costs. For medium to large organisations, this data should be the baseline for understanding workforce health and performance.

As HR is increasingly expected to be data-driven to influence C-level decisions, payroll becomes a critical enabler. Done right, it supports evidence-based policy changes and helps quantify their financial and operational impact.

However, many HR teams hesitate to fully embrace payroll’s strategic potential – often because it requires engaging with employee data and financial detail that may feel outside their traditional comfort zone. But in today’s data-driven environment, avoiding the numbers means missing out on critical insights. To become true strategic partners, HR leaders must embrace payroll’s strategic role – not just as a process, but as a powerful source of workforce intelligence that can shape smarter, more impactful decisions.

The future payroll professional: bridging departments, driving change

These shifts in structure and strategy are also reshaping the role of the payroll professional. Tomorrow’s most effective payroll professionals won’t just process payroll – they’ll bring teams together. These experts will act as honorary members of both HR and finance, understanding the goals of each and blending them into seamless, employee-centric payroll processes.

They’ll need strong technical skills, but also excellent communication skills and adaptability. They’ll guide organisations through automation, outsourcing, and digital transformation initiatives, while keeping payroll operations compliant, efficient, and human.

The solution: a hybrid model built on collaboration

To truly thrive, payroll should be seen as a shared responsibility. The most forward-thinking businesses treat payroll as a shared services function, combining the precision of finance with the empathy and policy awareness of HR. This model encourages decision-making based on both financial performance and employee satisfaction.

A strategic payroll function supports data-driven decision-making, uses automation to reduce errors and streamline processes, and leverages tools like payroll software to enhance visibility and efficiency. It also provides valuable insights to HR and finance teams through real-time payroll reporting and clean, reliable employee payroll data.

Payroll is the foundation of a data-led HR strategy

So where do payroll services belong? Not just in HR or finance – but at the core of a modern, data-driven organisation.

Payroll is more than the process of paying employees. It’s the most consistent, reliable source of workforce data available to HR. When used strategically, it becomes the foundation for smarter decisions around workforce planning, policy changes, and employee experience.

In a world where HR is expected to speak the language of data and impact, payroll is no longer optional – it’s essential. It enables HR to move from intuition to insight, from reactive to proactive.

Whether your in-house payroll team reports to HR, finance, or operates as a shared service, the strategy must be the same: integrate payroll into the heart of your organisation’s decision-making. Because when payroll is done right, it doesn’t just pay people – it empowers people.

If you’re building a future-focused payroll department or growing your career in global payroll, now is the time to think beyond structure. Think strategy. Let’s start a conversation.