HR admin to merge with F&A

THERE WILL be greater convergence of the transactional and administrative processes within the HR function and finance and accounting, according to a global market intelligence firm.

“HR is one of the largest spending areas within organisations, yet it typically has the weakest measurement capabilities and often lacks explicit alignment with organisational goals,” said Aprajita Sharma, senior analyst, outsourcing and BPO for IDC Australia.

Speaking at a business briefing sponsored by ADP Employer Services, Sharma said the infrastructure and service delivery requirements for HR, payroll and benefits administration outsourcing are similar to those required for finance and accounting processes.

Underlying a possible shift towards convergence between them is growing demand for improvements in reporting capabilities, shared technology and information needs and vendor management.

Payroll gross-to-net calculations are complex financial computations that link to the accounting general ledger, require accruals to the balance sheet and result in contributions to multiple tax, investment and bank accounts.

“In about half of companies, payroll is an HR function; in the other half, payroll is in finance and accounting,”she said.

“Given these similarities, the shared technology and information needs, and the desire for vendor management and stronger reporting capabilities, it seems inevitable that there will be a convergence of the transactional and administrative processes within HR and finance and accounting.”

Most HR professionals or service providers are also concentrating on current requirements – the specific process that the organisation needs to outsource.

However, “not many are able to define how the other sub-processes or activities within the HR function or other functions like finance and accounting and procurement would integrate into this sub-process that is getting outsourced,” she said.

For organisations providing HR outsourcing services, Sharma said the challenge is to move up the value chain and build new skill sets on best practices within HR planning, policy and strategy.

“Also, since organisations consider the IT component (the application and the infrastructure) underlying the HR process as a strategic enabler for that business process, they are expecting the service providers to bring in the application outsourcing capability as well,” she said.

“This would involve creating new partnerships with IT service providers or building the expertise in-house.”

Australian service providers within the HR space would have to address the new outsourced business model, she said, which involves managing the function with performance metrics, linked to areas such as improvement in process efficiencies and performance.