The CFO and Payroll – a personal perspective

How a CFO Feels About Payroll

A CFO should regard payroll as a critical function and a top priority. After all, a payroll should be 100% correct through every pay run to maintain employee morale. Accuracy and controls are critical due to the high cost of salaries and employee taxes. Moreover, it is an area that is highly susceptible to fraud and requires careful management of highly confidential information. Compliance is critical, as regulations continually increase in volume and complexity.

However, payroll and the payroll department are a low priority for most CFOs. For most of my CFO career, strategic priorities and more pressing operational issues have taken precedence. Payroll requires a high degree of technical competence, reliant upon rules and regulations that are unfamiliar to trained accountants and tax professionals. Also the operational expenses are not great, and payroll teams tend to be more stable than in other areas of finance. It is an area that seems to run by itself almost invisibly when done well.

I suspect there is another factor at work. Like many CFOs, my first role was in a single-country business. In a domestic setting, it is rare to see payroll done badly. Payroll staff understand compliance, and they know the supplier with whom they outsource. They know when and how salary and benefit changes are made, and they are aware of any organizational restructures. The systems and processes are geared up to meet the needs of the domestic payroll, particularly any complex employee arrangements. All in all, domestic payrolls are typically well managed, and so they reside low on the radar of the CFO.

How a CFO Feels About Global Payroll

However, the CFO can feel differently about payroll in an international or global context. To understand this more fully, imagine you are the CFO of a company that is expanding abroad and employing non-domestic employees for the very first time. It is your job to ensure that your new international employees receive their salaries accurately and on time. You also have to discover all local compliance and taxation requirements and ensure that they are met. To do this, you have to establish a new payroll team managed either in-house or outsourced in an unfamiliar location. If you choose to outsource, you have to find a new supplier you can trust to be competitive and compliant. For all these reasons, global payroll can be a much bigger pain point than domestic payroll for the CFO.

This is an extract from my article in June 2015 Global Payroll magazine. I discussed this topic during a webinar hosted by the Global Payroll Management Institute.

For expert advice on implementing global payroll, or for any help on international accounting, tax and payroll, contact us at contact@galvininternational.com

John Galvin, CEO Galvin International

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