Payroll is the largest cost line for most organisations. On top of the baseline wages cost there are often on-costs such as payroll taxes, workers compensation accident insurance, social health insurance, pension and other employee benefits. For every $1.00 spent on payroll, the organisation can easily incur an additional 10 cents to 20 cents in on-costs.
Yet payroll rarely appears in business school curricula, and organisations seem (experientially speaking) to attract low qualified and poorly motivated staff, often transferred in from other departments.
How many academics, CPAs or MBAs choose to specialise in payroll?
How many of those actually in the payroll department deliberately chose it as a career?
Has anybody else observed this phenomenon in how payroll is (a) taught and/or (b) managed?
Has this been covered in the literature?
Having posted this question a week ago I find it highly interesting there have been no responses. It would seem Payroll is an under-researched area, despite its significance to most organisations, individuals and the economy. Surely I do not have this topic all to myself?
It is in the mind of everyone---as most of us are on payroll. In the organization, payroll is generally subsumed under accounting function. In practice, issues, such as social security contribution, insurance deduction, payroll tax, etc. are coded into accounting software and treated as "automated" issue. Although this is a common practice, in reality when the organization is in full operation, payroll may account for as high as 40% of the organization's cost. In HR department, for instance, the decision to hire and fire some times considers payroll quite significantly---hence early retirement is a good example of "worker friendly" payroll management issues. The issue of payroll is an unavoidable issue, but management practice subsumes the issue under other functions in the organization. Perhaps this is due to how managers are trained---from business school to on the job practice. We learn about "labor cost" but never in details of how labor cost lies in the domain of payroll and that payroll plays a significant roll in accounting and finance in the organization. This apparent oversight may be addressed by those in the teaching profession by bringing up the significance of payroll in the classroom so that a new generation of managers would see it in different light. We are often shocked and amazed by CEO salary---but we elect not to look at it as a payroll issue. Even the management would feel more comfortable to treat it as "intra-organizational meritocracy."
As you rightly point out, payroll cost can amount to >40% of total organisation spend.
It is also data-rich, with each employee incurring start time, finish time, hours worked, breaks, holidays, sickness, standard pay rate, overtime pay rate, allowances, and so forth. On top of this are, as you also point out, payroll taxes, pension and social/health insurance on-costs. Labour laws are subject to frequent change with governments increasingly keen to protect the lowest paid while also keeping a cap on future pension liabilities. Therefore payroll systems need to take account of this environmental and changeable complexity.
Yet as far as I can see, experientially, the personnel assigned to administer payroll systems are often minimally qualified creating a competence bias into how payroll is managed. On top of that, payroll is often surrounded by secrecy due to the inherent nature of employee pay. These biases increase the risk of error, and fraud, as I have found repeatedly through the internal audit process.
While we may be shocked at the CEO’s remuneration, that has probably been negotiated and agreed at board level, and entered through a legal contract. What about those whose remuneration is less visible, such as the night shift worker who is paid penalty rates plus overtime while working half the contracted hours due to early knock-off? Or the worker who claims allowances to which he/she is not entitled. A distribution analysis of the entire payroll can reveal individuals or groups who are unusually well remunerated due to gaming the system, and conversely low remunerated personnel representing excellent value to the organisation. This can open up questions around value for money, internal control and fraud.
I am doing practitioner-based research on this at present with a view to hopefully publishing later in 2015 or 2016.
I have worked in the Payroll section for several months. The department was called "Compensation and Benefits". This department was under the Human Resources Department, while at some companies it is under the Accounting/Finance department. It was interesting to review and control the salary ratio and prepare salary structures. I have not learned these issues during my educational life (BS - MBA). They need practice and efficient implementation. C&B is one of the HR major Roles. It should be paid more attention at all universities and colleges.
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