"Should Finance/
This question was asked at a recent webinar, now available on-demand:
"How A Strong Finance / HR Partnership Delivers Business Value"
Please add your thoughts about it below. Thanks!
Finance full access to employee salaries
Answers
The CFO should have all access, period.
The Finance Department maybe not. But there are ways to obtain the information they may need (like number of employees, aggregate salaries, insurance plans they are on, etc) with some modicum of privacy in place.
HR is not its own organization, it should be a consulting a three-fold division, with a talent acquisition consulting function, a payroll/compliance department and a benefits support unit., all reporting to the CFO.
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I have been associated with many organizations where the HR Manager and the CFO were separated. This structure does work. There is nothing requiring the CFO to be involved with this group. Hiring decisions and compensation structures are negotiated outside of HR.
HR is a service, for the most part, that simply carries out the instructions of Line Managers, Department Heads, and the CEO. It is this group that has the close link to the CFO.
Company information should only be granted to those that require it, to perform their function I do not believe individual salary information is required. Aggregate compensation information is fine for Finance. You should not need to go down lower than a department or class, i.e. salary expense for the
There will be no benefit to knowing what MaryJoe made in 2014, i.e. salary and bonus. Sharing detailed information presents a
I agree with Wayne.
In my 35 years of experience, I have never seen an HR department that did a good job with payroll. They aren't trained in the balancing processes that need to take place. Plus, I think from an internal control perspective, salary entry into the system should be separate from the people making the hiring on-boarding. Just my experience. Sure I just made some HR Managers angry.
@Scott MacDonald:
Yep! I've been in business just as long. And, SOP is a push/pull battle between HR and Payroll and which functions each should have.
The easiest way I know to solve this is to have both as part of the finance department under the CFO. Being a CFO requires knowledge of both payroll process and law as well as HR issues and law. Anything less is just plain dangerous.
And, in cases where I've seen a wily HR head get themselves promoted, often to VP, so that they can report to a CEO and avoid reporting to a CFO, disasters have occurred related to legal liability and fraud.
But, I've been around HR departments a lot and HR types. I have frequently heard them discuss and seen in their media publications the concept of avoiding reporting to a CFO.
Maybe CFOs should start talking about becoming Treasurers instead, reporting directly to the board and avoiding having to report to a CEO? ;-)
As a side comment....
The open/full transparency school of thought (and practice) has been developing in newly minted and/or "progressive" companies. Everyone knows what others are getting for salaries/bonuses/stocks. It is NOT for everyone, it has its pros and cons as well as supporters and detractors.
Can you make a business case for needing the specific salary info for each person, based on your role within the Finance Org? If you are not the CFO, your need to know is diminished, IMHO.
If you need labor costing data, there are ways to collaborate with the payroll manager to get the data by grade/job category etc that masks individual salaries yet provides meaningful data for analysis/projections.
Maybe start by working with your HR colleagues to explain what metrics the finance department (who are "customers" of HR-see Wayne's note above) would like to receive. Then show them how to do it if they are unsure.
All of finance most certainly not, but I just can't imagine how forecasting/planning, variance analysis, validation of the payroll per GL vs. source, etc. gets done without *someone* in finance having access. I would also ask who ensures fraud is not being committed via payroll master data changes and the like? HR can do this I suppose but that is not generally a discipline housed within that function.
I have held roles in large companies where someone (me + others representing a small fraction of our team) was silo'd off with this data to do some of the above and I have worked in smaller companies where someone (me + others representing a larger than ideal share of our team) had access.
In every case we had a zero tolerance policy that was clearly articulated and it was known sharing/discussing salaries was a terminable offense.
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"sharing/discussing salaries was a terminable offense"
That of others, without their consent yes. But, in CA, and probably other at will employment states, employees are free to reveal their own compensation to others. Terminating them for doing so would get their employer in trouble.
Finance absolutely must have access to payroll information by employee. Reconciliations, forecasting & long term planning, metrics reporting, financial control, etc...
That being said, the access can be limited to specific individuals within Finance & Accounting (ie. head of FP&A, Controller and CFO).
Any other way results in unnecessary red tape and inefficiency.
As a government entity, not only are all employee salaries available to accounting staff via our budget planning detail, but they are also posted on the website of large metro newspapers. Not sure why there needs to be such secrecy over salaries in the private sector. It contributes to the problem of not paying people fairly. As some progressive companies are saying, pay what the job is worth, not based on individuals' negotiations or past salaries.
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You answered your own question. When you work in the public sector, all information should be transparent, and as far as salaries, they are, but not all your benefits are public.
I can't just find out what's in your 401K or other pension-type accounts. That's private.
In the private sector, one does not need to be, nor should they be, requried to tell everyone what everyone else is making.
Paying what the job is worth, is based two factors, what the job is, and how well the person will/does the job. I agree past salaries are not anyone's business, including the employer.
Going back to what the job is worth, if someone can bring a higher productivity factor, a higher customer sanctification quotient, that in turns increases the companies standing and sales, why shouldn't they be paid more than someone else?
This lack of true incentive type structure is one of the drawbacks to our public sector's productivity.
Actually Wayne, you can find out how much a public employer is spending on an employee's benefits. All of it. That's public information as well.
But, you are right about not being able to see my 401 plan balance. That's personal information. But you could see how much my public employer contributes annually.
I disagree about your private sector secrecy policy. This would tilt all the power of negotiating compensation in favor of employers. Employees would be at their mercy. Add a bit of colusion in and you might get well..............unions or something.
As far as what a job is "worth". There are more than the two factors you cite. In fact, you left off the most important one: The market.
This is where the public sector falls down seriously. You see it all the time with fire fighters and police and their unions. Even with bus drivers and water meter readers. When their unions are negotiating their pay and benefits, they don't look at an equivalency in the local area. They set themselves up as "special" and make comparisons to the same position titles at other public agencies without respect to location. But, that is a false comparison. The San Diego market has little relevancy to the pay in San Jose. I mean, is that firefighter willing to commute 700 miles!
Throw in the public's rose colored glasses when it comes to safety workers and, you get the 3%@50 plus health-care-for-life pension fiasco that will bankrupt a lot more municipalities yet.
Private industry would never do this. Well, individual firms might. But, they'd go out of business and someone else would eat their lunch.
There is no incentive for increased productivity in the public sector. We live an die to "get more funding to meet the public's demand". i.e. get more
Working on my MPA was the most eye opening experience I've had about the differences between private enterprise and public agencies. Even the professors who taught the classes had little clue how private industry works. All they could do was talk about "profit motive", raising prices and showing disdain for something they had little understanding of.
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Human Capital