July 15, 2020 | Human Resources | Posted by Ascentis
How CFOs and HR Can Work Together to Protect Your Bottom Line
The finance department is one of the most heavily regulated branches of any organization, with dozens of rules involving taxes, withholdings, budgeting, and reporting to keep track of. Adding a slew of human resources regulations into that mix might not seem logical on a surface level, but CFOs and other financial officers are playing an increasingly large role in HR operations. Keeping complaint with such a diverse set of requirements is shaping up to be a key challenge for finance professionals in the modern workplace.
That shift may seem surprising to observers outside of those fields, especially since HR and finance are often seen as opposing forces within an organization. In actuality, HR and finance share a good deal of common ground. A 2018 survey found that 39% of finance executives said their roles had recently expanded to include more focus on human resources in capacities ranging from advisor to data analyst to hiring strategist.
One reason for the cross—pollination between HR and finance is that many smaller businesses and start-ups simply don’t have the capacity to establish separate, full-time roles for both a CFO and an HR director. Human resources is also a heavily regulated field, with day-to-day functions like hiring, benefits administration, and employee scheduling all tied directly into financial operations. From that perspective, involving financial administrators who know how to navigate complex regulations – including the Fair Labor Standards Act (FLSA), Federal Insurance Contributions Act (FICA), Federal Unemployment Tax Act (FUTA), and many others -- in the HR decision-making process seems like a logical maneuver.
A few key considerations where the CFO’s role can offer tremendous benefits to your human resources efforts include:
On average, benefits make up about 30% of an employer’s total compensation costs. That’s a strong reason for finance professionals to be closely involved with developing benefits packages. As an experienced financial expert, a CFO is actually an ideal go-between for an organization and a third-party benefits broker. A CFO also has helpful insight into what practices and policies are most productive and cost-effective when it comes to paid time off, non-monetary compensation, and other employee perks. Considering that around 80% of workers say they would prefer expanded benefits to a raise in salary, the potential return on investment in a financially informed benefits program is well worth the effort.
HR disputes are frequent incubators for class-action lawsuits, in which a small group of plaintiffs sue an organization on behalf of a larger group. Even if management believes they are legally in the clear, no company wants to face a class-action lawsuit. Beyond the expense of a potential settlement, these kinds of cases rack up significant legal fees and generate negative publicity that can damage a company’s reputation and ability to attract top talent in the future. Considering that U.S. courts certified 81% of workplace class-action lawsuits filed in 2019, the highest rate on record, it is a much wiser approach to take proactive steps to avoid employment-based disputes over issues like wages, benefits, or discrimination rather than trying your luck in a court of law.
Keeping employees’ personally identifiable data protected is a major concern in the modern era, especially in the wake of the European Union’s revolutionary General Data Privacy Regulation (GDPR), which sets strict limits on how companies that deal with anyone in Europe must handle and store personal data. CFOs often serve as gatekeepers for much of that data, which puts them in a unique position to develop internal policies and processes that keep their companies compliant with relevant privacy regulations.
It’s easy to dismiss the concept of an employee handbook on the grounds of, “How many employees actually read this thing, anyway?” While it may seem like an annoying formality, a well-considered employee handbook is crucial to an organization’s compliance efforts. Communicating essential workplace policies clearly and directly not only helps ensure that employees and managers follow the letter of the law, it also helps to guard against lawsuits from workers who might otherwise claim not to have known they were violating company policies. The CFO should be closely involved in crafting the language and setting the policies that go into an employee handbook.
Keeping track of that many functions -- from administering benefits to protecting privacy to educating employees to staying legally compliant – is a tall order for any financial professional. Fortunately, HR software solutions can help alleviate many of these areas. HR professionals agree that more than 90% of human resources functions can benefit from automation. That presents some excellent opportunities to reduce human error, simplify repetitive tasks, and focus the attentions of both HR and finance on more pressing and dynamic situations. By working hand-in-hand, your HR team and CFO can use technology to build a system that better serves both your employees and your bottom line.