WHY DO YOU NEED A PAYROLL SYSTEM?

While payroll deals with compensating employees, human resources takes care of employee relations. Although the two departments have distinct roles in an organization, they also share functions that are crucial for the organization’s success. As a business owner, you need to recognize the difference in terms of their functions but also harmonize the tasks of the two areas. Integrating human resources and payroll can reduce paperwork, allows automatic updating and reduce difficulty in providing consolidated reports.

Payroll Functions

The payroll department takes care of wage deductions, record keeping and verifying the reliability of pay data. The payroll department delivers payroll checks, maintains compliance with tax laws, records paperwork for new hires and edits existing employee files. Payroll professionals are also responsible for calculating reimbursements, bonuses, overtime and holiday pay.

HR Functions

Managing people within the organization, the human resources department aims to bring out the best in employees, thus contributing to the success of the organization. The primary responsibility of the human resources department is to hire new employees, and this involves attracting the right candidates for available positions. After they bring on new employees, HR professionals must make sure the employees deliver according to expectations. The HR department is responsible for motivating employees, and to this end, they reward employees by developing compensation packages that may include holiday or midyear bonus awards and salary increments. HR also develops training programs and ensures that employees follow a general direction by reminding them of the organization’s goals.

Coordinated Functions

Many payroll activities are related to HR issues, so the payroll and human resources departments must coordinate shared functions. This includes recruitment, salary increases, bonus payments, benefit deductions, vacation leaves and firing employees. The human resources department must be sensitive to the time devoted to payroll processing because as the champion of employee relations, they’ll face issues directly if paychecks aren’t processed correctly and on time. The payroll and HR departments are privy to confidential employee data, including financial information, social security numbers and home addresses. The two departments must work together to ensure that this information doesn’t fall prey to unauthorized individuals or companies.

The Great Divide

Payroll functions are covered by either the finance department or human resources department in most organizations. Essentially, payroll is number-driven and calls for knowledge of tax laws and accounting. Thus, many respondents believe it should be positioned with the finance department. At the same time, payroll is also considered a function of HR because it pays and deals with people. Take, for example, maternity pay. The HR side is that the company must preserve the employee’s rights and abide by federal and state anti-discrimination and maternity laws. At the same time, the employee must receive compensation, a finance function, in accordance with the company’s policies.