What is Cost Centre?
Cost Centre is a part of an organisation that does not produce sales but incurs costs and indirectly helps the organization in conducting day-to-day operations. It may include some human resources, IT, and accounting departments, among others. The objective of all cost centres is to minimise cost while still offering supporting services. In that respect, reporting on the costs incurred by each cost centre assists organizations in achieving their budgetary objectives efficiently, making appropriate resource allocation and planning decisions. Even though they do not directly generate revenues, cost centers are very important for the generation of revenue-generating activities.
How HR teams use this term
HR teams usually use Cost Centre when they write policies, explain employee communication, review payroll or leave records, or keep employee data clean in an HRMS.