Payroll and human resources (HR) are two extremely distinct functions within a company. While payroll deals with the compensation of employees, HR primarily handles employee relations. However, there are situations where the two roles overlap, and are often performed by the same person, especially in a small company. While this arrangement might look good on paper, since it involves fewer employees to pay and an integrated approach to the functioning of the company, it can cause many problems.
A company owner must know the differences in their functions and terminology, but also how the two functions can work together to produce better results.
Functions of Payroll
Payroll refers to the process of paying employees their salaries or wages. Apart from ensuring that the money reaches employees on time, the payroll department is responsible for processing, balancing and reconciling payroll data with the accounting systems, as well as processing taxes and other deductions.
The process involves calculating bonuses, reimbursements (such as travel and phone expenses), holiday and other pay, and overtime due on a weekly, monthly or yearly basis. Members of the payroll team take care of wage reductions, recordkeeping and verification of pay data before processing. And once the salary has been processed, the payroll department is also responsible for making sure that every employee gets a pay slip.
Functions of Human Resources
The main responsibility of HR is the management of employees within an organization by bringing out the best in them and to ensure that the company is compliant with labor laws and regulations.
HR covers a wide range of activities, including recruitment, creating and implementing HR policies for engaging staff members or for developing a specific type of company culture, performance development and applying employment laws within the organization. It also covers such transactional responsibilities as updating employee records, dealing with compensation issues, handling HR data and providing reports.
For an organization to run smoothly, both departments (HR and payroll) must work together in tandem. It’s the HR department that hires employees (or lets them go) and sets them up on the system. Then, it’s then over to payroll, which ensures that all aspects of their payments are taken care of.
In addition, sick, vacation and other leave balances are tracked by both payroll and HR — the information is sent to the supervisors and managers, who are then responsible for effectively scheduling time-off requests.
Confidentiality is one area where the combined efforts of both payroll and HR will make a notable difference. Both departments are privy to confidential employee data, such as Social Security numbers, financial information and home addresses. It’s the responsibility of the two departments to work together to ensure that this information doesn’t fall into the hands of unauthorized parties.
Payroll Services vs. Human Resources
The biggest difference between payroll and HR lies in the type of people that are hired for these roles, since both jobs require very different skill sets. Payroll is a finance-based role that requires a thorough understanding of numbers in addition to detailed knowledge of accounting processes and tax laws. Hence, those working in the payroll department should be highly logical and mathematically-inclined.
On the other hand, the HR department’s main focus is on people management and organization, so individuals who are organized, have excellent communication skills and enjoy talking to people are best suited for this role.