Payroll as a part of HR, finance, or… neither?
Payroll 3 minute read

Payroll as a part of HR, finance, or… neither?

Megan Orr | July 29, 2021

According to a survey of HR and payroll professionals, 25% of respondents believe that payroll should be handled by HR, 24% by finance, and 36% of respondents “believe that the payroll function needs to sit between an organization’s HR and finance department”. Here’s why.

Payroll can be a challenge for even the most seasoned professionals. It takes up a lot of time and requires great attention to detail to ensure that there are no mistakes. 

Want to learn more about common payroll errors and time wasters? Download our latest checklist, Are you spending too much time on payroll?, to discover how you can save time and energy on your payroll processes, whether it’s handled by HR or finance (or both).   

Payroll can be considered an HR function because it’s employee-facing.

Payroll’s functionality goes beyond finance and is an essential part of HR, ensuring that employees are paid fairly and on time. Research shows that “payroll is the largest company expense by a long shot, at 68% of a company’s total overhead. In addition to this, 40% of workers stated that they would find it very difficult to meet financial obligations if their pay check was delayed by even just one week”.

HR is responsible for many employee deliverables, including “the bulk of items processed within payroll—changes to pay, salary, bonuses, employee working hours and benefit deductions”. On top of that, HR may have a better understanding of how time sensitive some of these issues can be, and will be able to address them more quickly and easily than someone in finance. 

Because HR deals with these deliverables, they end up responding to a number of payroll processing issues and therefore have the knowledge to answer the majority of questions that employees may have. HR professionals are also accustomed to dealing with legislation and confidentiality, which is a crucial aspect of payroll. 

There are many aspects of payroll—such as how to properly do reconciliation—that only a financial expert will know how to do. 

Payroll is naturally a finance function. Financial experts have a more thorough understanding of tax law and are therefore more up to date on dealing with compliance issues. Additionally, payroll audits should be handled by financial experts in order to ensure compliance. 

There’s a third option for payroll processing: using a third party payroll provider. 

From the same survey previously mentioned, 15% of participants thought that payroll should be done by a third party payroll specialist. Outsourcing or automating payroll can save you time and ensure a higher degree of accuracy. 

Whether your organization runs payroll as a part of HR or finance—or both/neither—you should ensure that you choose whatever works best for your employees. 

Want to learn more about how you can run payroll more effectively? Download our latest checklist, Are you spending too much time on payroll?, and discover where you might be wasting time. 

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