Payroll vs HR: Differences and Functions of Payroll and HR

Payroll and human resources (HR) are two important business departments with distinct functions and responsibilities in an organisation. While payroll deals with the financial compensation of the employees and the processes by which they get paid, human resources deals with employee relations. However, certain areas of business such as recruitment, salary increases, bonus payments, benefit deductions, leave and termination often require the attention of both payroll and HR.

In many situations the two departments must coordinate together in order to remain efficient. In fact, the overlapping payroll and HR functions and responsibilities are often carried out by the same person in small businesses. Distinguishing the differences between payroll and HR are important for business owners to understand how the two may work together in harmony.

In this article we will cover the functions, responsibilities and importance of payroll and HR, and how the two departments work together.

What is the function of payroll in business?

The main function of payroll is to calculate and distribute wages, salaries, bonuses and commissions to employees of a company accurately, on time, and in compliance with domestic laws. This function is called payroll processing which may be done manually or through industry payroll software such as Simply Payroll. The function of the payroll department is closely tied with accounting because it deals with all the financial documents of employees. Let’s look at the responsibilities of payroll in more detail.

Payroll processing responsibilities

Payroll processing includes responsibilities such as:

• Examining and verifying the accuracy of all documentation

• Accurately calculating hours worked by employees

• Calculating and processing public holiday pay for employees

• Making adjustments to salaries and benefits

• Running year-to-date adjustment payments

• Preparing unpaid leave estimates

• Validating that timesheet information entered by employees has been approved

• Processing payroll deductions, tax deductions, super contributions and any other withholdings or applicable deductions from employee earnings

• Coordinating direct withdrawals, remittances and deductions and ensuring the transfer of funds to governmental departments and insurance companies

• Producing statements of earnings of all non-Australian overseas employees

• Addresses any payroll-related inquiries or issues from employees

  
  

Payroll accounting and reporting responsibilities

Payroll accounting and reporting responsibilities include:

• Reconciling payroll entries

• Calculating and adjusting accruals

• Maintaining accurate payroll data records ensuring data integrity

• Ensuring compliance with payroll rules, policies and legislation

• Completing payroll remittances and providing reports for the general ledger on a monthly basis

• Completing payroll tax reporting for management or the Australian Taxation Office (ATO)

• Providing a comprehensive breakdown of payroll-related charges, such as salary and benefits in order to help managers with the reconciliation of actual costs vs budget

• At financial year-end, calculating merit increases (performance-based raises), variable pays, lump-sum payments, super contributions, and salary and redundancy pay accruals

Importance of payroll in business

The importance of payroll in business cannot be underestimated as payroll professionals perform critical tasks that:

• Ensure compliant payroll processing: employees get paid on the correct amount on time with compliance to ATO requirements which is vital for maintaining employee job satisfaction.

• Maintain wage and tax compliance: payroll professionals must stay up to date with rules around wages, awards and tax deductions to ensure employers are meeting legal requirements and staff is paid correctly.

• Provide financial reporting insights: payroll records and reports can provide valuable insights into budgeting and forecasting that can help business make more informed decisions