It's no secret: Finance and Human Resources (HR) are often at odds with each other. But is it destined to be this way?
Folks often see these two groups as completely distinct entities. In reality, they're co-dependent. They need each other. The truth is, HR and Finance can (and must) work together to create a more efficient workplace.
In this article, you'll learn more about how HR and Finance can work together in important areas of business, including:
- Hiring employees
- Payroll and benefits
- Healthcare and wellness
- 401K plans
- Stock options
- Terminated employees
What do those people even do?
Let's clear the air: both finance and HR are crucial for any company. Full stop. There's no company without the hiring, onboarding, and ongoing support that HR provides.
And guess what?
That company won't last long if it spends recklessly or the financial strategy hasn't been ironed out. In other words, a company needs both departments to keep the lights on.
But what does that mean for the relationship between HR and finance? Well, it should be a partnership - not a competition. Otherwise, the overlapping of responsibilities leads to duplication of effort, confusion, and lots of conflict.
How can finance and HR work together?
Finance and HR must be in sync for the hiring process to function at all. For example, Finance must work with all departments to create the hiring budget. However, they also need to confirm with HR that it's realistic to actually find and onboard quality candidates for those roles within that budget and timeframe.
Communication should continue throughout the entire hiring process. For example, let's say an HR manager finds a candidate they're excited about but whose salary expectations are outside of the budget. Should HR just move forward full throttle anyway? Not unless they want to ignite conflict.
Instead, the HR manager should reach out to finance to discuss the possibility of increasing the budget or negotiating with the candidate. Without this line of communication, the company may miss out on a great candidate. Or even worse, it may hire someone who isn't the right fit.
After a new employee is hired, many forms need to be completed from both a financial and HR standpoint (think legal and bank account info, tax & benefit forms, and so on).
Finance teams need to know about the new hire in order to set up payroll and process tax forms. To make this easier, HR should have a system in place (an HRIS) that automatically shares this data with Finance when a new employee is onboarded.
That way, everyone is on the same page. This communication should be ongoing, as changes in taxes, benefits, immigration status, and other details will impact both departments.
The same goes for setting salaries. HR is usually in charge of researching the going rate for a certain position and location. However, they need to consult with Finance to ensure that the company can actually afford to pay that salary.
They also need to consider things like raises and bonuses. For example, if an employee is being promoted, HR will need to work with finance to adjust their salary accordingly.
Finance also needs to be involved when it comes to setting up commission structures and other types of incentive-based compensation. This ensures that the company is spending its money in the most efficient way possible and not overpaying employees for meeting certain targets. Meanwhile, HR needs to ensure that an employee's total compensation is fair and consistent with the rest of the market.
Payroll & benefits
Payroll is a function typically handled by the accounting & finance department. However, payroll data is crucial for HR purposes, especially when dealing with new hires and terminations. Make sure your payroll system standardizes communication and shares this data between the two departments. Again, a single source of truth removes the risk of duplicate or incorrect data.
In addition, HR and finance departments can collaborate on benefits administration. By working together, the two departments can ensure proper communication so employees can make informed decisions on their benefits.
Healthcare and wellness
For healthcare, the two departments should collaborate on open enrollment so that employees understand their health insurance options and make the best choices for themselves and their families.
They can also work together to manage the plan costs that the company incurs. By sharing data and working together, they can find ways to reduce insurance costs while still providing high-quality plans.
Finance and HR should also cooperate to form wellness programs. They're a great way to reduce healthcare costs by encouraging employees to live healthier lifestyles (e.g. gym membership reimbursements).
401k plans are also an area ripe for collaboration. Finance and HR should create resources together so that employees understand what your plan offers (especially company matches, that's free money for them!) and can make informed choices.
Stock options for new hires are important because they help attract and retain top talent. On the backend, Finance needs to make sure that the stock options are properly accounted for (and approved by the board of directors). This includes understanding the tax implications and tracking options as they vest.
Meanwhile, HR needs to ensure that employees understand their stock options and how they can impact their future. An equity management platform can help with this.
Terminated employees must complete paperwork for all the benefits mentioned above. There are usually strict deadlines to complete everything. This includes post-termination exercise periods for stock options, COBRA for healthcare, and 401k terminations.
Finance and HR should get clear on their roles in this process by creating a shared checklist of actions and approvals that need to happen. You can use a tool like Trello to create an offboarding template that keeps everyone in the loop on a given employee's termination progress.
The Finance and HR departments both play a vital role in keeping the company running smoothly. By working together, you can improve coordination and communication to better meet the needs of all employees.
So, next time you're feeling like you're in a silo, take a look around and see how you can help your fellow colleagues. Chances are you'll benefit from it too.