Hiring and exit costs finance never sees on time

Why people costs reach finance after the fact

Hiring and exit costs reach finance late because HR commits to them at the offer or resignation stage, while finance only sees them when an invoice or a payroll run lands. Closing the gap means HR tells finance at the moment of commitment, with an estimate, instead of waiting for the bill.

An HR manager who agrees a relocation allowance in an offer letter has created a liability. A department head who accepts a resignation and waives the notice period has changed the final pay. Neither decision passes through accounts payable or the payroll calculation until much later, by which time the month is closed and the cost sits in the wrong period.

Finance does not want to approve every hire. It wants to stop being surprised.

Costs that start on the hiring side

Recruitment agency fees are the classic surprise. The agreement sits with HR, the invoice arrives when the candidate starts, and finance has no purchase reference to match it against. Job board subscriptions and assessment tools follow the same pattern.

Offers carry their own costs: sign-on payments, relocation, temporary accommodation and allowances that begin before the first salary. A hire who starts mid-month changes the payroll total, and the new employee's EPF and SOCSO contributions begin with the first wages. Every one of these is known on the day the offer is signed.

Equipment for new joiners also starts in HR, even when admin or IT buys it. If the laptop budget belongs to the hiring department, finance needs to know which cost centre to charge.

Internal promotions and transfers that bring a higher grade or a relocation allowance belong on this list too. They rarely pass through recruitment, so they slip past whatever checks the company applies to external hires, yet the cost lands on the payroll just the same.

Costs that cluster around an exit

Exits generate several payments in a short space of time. Final salary, payment in lieu of notice where it applies, encashment of unused annual leave where the contract or policy allows it, outstanding claims, and any agreed termination or retrenchment benefits. Deductions for unreturned equipment or unpaid advances move the other way.

What an exiting employee is owed depends on the contract, your policies and the Employment Act where it applies. Have HR confirm the calculation basis with your adviser or the Labour Department's guidance, then give finance the result early rather than the raw ingredients late.

Mutual separation and retrenchment exercises need special handling. They are confidential until announced, so finance is often told last. Bring the finance head into the confidential group early, because the cash impact is frequently the largest people cost of the year.

HR events that should trigger a note to finance

Agree a short list of trigger events. When one occurs, HR sends finance a note with an estimated amount, the cost centre and the expected payment date.

• An offer accepted that includes a sign-on payment, relocation or allowance outside the standard package
• A recruitment agency engagement signed, with the fee basis and when the invoice is likely to arrive
• A start date confirmed that falls part-way through a payroll period
• A resignation accepted, with the last working day and any notice waiver or buyout agreed
• A termination, mutual separation or retrenchment approved, once finance is inside the confidential group
• An employee leaving with unreturned assets, outstanding advances or unsettled claims
• A transfer between cost centres or legal entities that changes who carries the salary

Estimates, accruals and the month-end conversation

Finance should acknowledge each note and record the estimate against the right period. When the final figure arrives, the difference is small and already explained.

HR teams sometimes hold back because they lack exact figures. An estimate is enough. Finance can accrue against an estimate and adjust it later; it cannot accrue against something it has never heard of.

Add a short people-cost item to the month-end close. HR lists every open trigger event and where it stands, finance confirms what has been accrued, and both note anything still uncertain. Once the habit forms, the conversation takes minutes, and it gives your accountant a clear trail when reviewing the period.

Keeping the commitment and the payment connected

People commitments usually live with HR and payments with finance, and the note between them keeps both sides honest. Teams that record offers, exits and approvals in BukuHR and manage bills, supplier payments and period reports in BukuCloud have a clear home for each half. Whether trigger events should flow from one to the other automatically is a scoping discussion with Fasttrade; plenty of companies start with a structured notification and decide later.

Frequently asked questions