Payroll and HR have a lot of overlap, but they serve different functions in a business. Learn the difference between payroll and HR — and how they relate to each other.
As your organization grows, you’ll likely add new departments into the mix. Payroll and HR often work together, but seeing where the line gets drawn can be challenging. With small teams, HR can handle payroll, making the lines even blurrier. If your organization has two separate departments or you want to create them, it’s time to learn the difference between payroll and HR.
Find out how each department functions, the ways they impact your business, and how to strengthen the relationship between the two.
What are payroll functions?
Payroll is typically a department within finance or human resources. Payroll administration helps organizations pay their workers and comply with tax laws. The payroll department toes the line between finance and HR to ensure that people get the correct checks on time.
Here are a few of the significant functions of payroll:
- Process paychecks and make sure employees receive them on time.
- Handle wage deduction information to ensure checks are accurate.
- Ensure payroll compliance and payment of taxes and fees.
- Add new employees to the payroll system.
- Calculate and send any employee reimbursements, bonuses, and holiday pay.
What are HR functions?
Human resources is a varied field, and the curriculum for an HR degree is diverse and broad. Essentially, HR works to support a company’s talent.
Here are some of the functions HR teams need to be familiar with:
- Recruit and hire new team members.
- Follow up on employee complaints to foster a safe work environment.
- Investigate and solve employee disputes.
- Educate employees on topics like diversity/inclusion and labor laws.
- Comply with city, state, and federal labor laws.
- Update company policies and procedures.
- Conduct benefit and pay analysis to ensure the company is competitive.
- Keep employees engaged by supporting their needs.
- Maintain legal records like the I-9 and W-4.
- Conduct performance reviews with the help of company managers.
- Ensure that shifts are maintained and well-staffed.
HR vs. payroll: What’s their relationship in your business?
When HR and payroll don’t communicate, employees don’t get paid, raises get delayed, and benefits don’t get properly applied.
HR vs. payroll need to work together to create a cohesive employee experience. When HR and payroll don’t communicate, employees don’t get paid, raises get delayed, and benefits don’t get properly applied. Here are a few other ways this critical relationship should function in your business.
Headcount planning is a strategic initiative between finance, HR, and managers/executives. Each team in your organization has specific staffing needs, but fulfilling these needs has to make financial sense.
Finance and payroll teams work closely with HR teams to determine how much money is available for payroll. Next, HR and managers make specific cases on where the organization needs staff members most. From there, HR can work with managers and executives to recruit and hire the right team members.
Headcount planning is highly numbers-driven. You want to make sure you have enough money to pay employees to avoid layoffs and rescinded job offers. Without collaboration early on, headcount plans would be challenging to execute.
Paying new team members
Next, payroll and HR work together on paying new team members. Paying a team member is routine once you have a handle on where to send the money. However, the first time a team member gets paid, there are a lot of hoops to jump through. For example, employees usually must fill out a direct deposit form and a W-4 (Employee Withholding Certificate) to determine tax withholding.
HR is often in charge of collecting these forms and sending them over to payroll for processing before the first paycheck is due.
Applying raises, bonuses, and extra incentives
Once a person does well at work, they may be eligible for additional financial compensation. However, all these bonuses can lead to other taxes, and they may even fall outside traditional payroll periods. HR needs to coordinate with payroll to make these extra payments and ensure everything is compliant and taxed appropriately.
Firing employees or handling resignations
When an employee leaves, there are a lot of steps that HR must complete, such as delivering a layoff notice or holding an exit interview. Payroll gets involved in the equation when it comes to money. The U.S. Department Of Labor has specific guidelines for when employers must deliver the final paycheck. Specific states and other countries may also have their own laws about the last check.
Companies may involve payroll in other financial disputes around leaving an organization. One example is deducting pay for not returning company property (if it’s allowed in your state.)
Payroll is also in charge of ensuring that paychecks stop once an employee leaves the organization. Many employees may not be actively logging hours because they work in salaried positions. It’s up to payroll to work with HR to ensure past employees aren’t still getting paid.
When an employee leaves, there are a lot of steps that HR must complete, such as delivering a layoff notice or holding an exit interview. Payroll gets involved in the equation when it comes to money.
How to ensure the relationship between HR and payroll is strong
Since payroll and HR work together in such a tight capacity, everyone needs to be able to collaborate. With a tool like Zenefits, you can build the relationship and make sure that every change is communicated across your network.
Our payroll solution is just part of our software equation. Everything the HR department enters into Zenefits — such as new employees, time-off requests, salary changes, and time tracking — goes to the payroll software once approved. This automatic collaboration makes it easy for payroll to figure out what, when, and how to pay employees.
Your payroll team may already use software like QuickBooks for accounting or Guideline for 401(k) benefits. Zenefits integrates with many tools in the accounting, finance, and retirement spaces. These integrations will make the relationship between HR and payroll even more fluid.
Building a bridge between HR and payroll
Here’s the good news: HR and payroll don’t have to be mortal enemies. You can work together seamlessly without delay in data collection. Whenever HR tweaks information, payroll should get the information and vice versa. Software like Zenefits makes that possible.
Instead of worrying about another HR-payroll mishap, you can move forward together.