There’s a fine line between the team that makes employee pay decisions and the
team that processes employee pay.
Sometimes, it’s indistinguishable.
The difference between HR and payroll comes down to expertise—in people or
money. But it’s a small difference when payroll is the function that connects
the money to the people.
Are they the same or different?
In some organizational models, payroll and HR are lumped under the same
category. In others, they’re separate departments. And in others, payroll is a
part of finance. None is the right or wrong way to organize your business,
but payroll and HR are technically two separate functions.
Human resources professionals are all about the people. It’s their job to
bridge the gap between human needs and organizational needs. They do it by
placing the right talent in the right positions, developing that talent and
compensating talent appropriately—and they measure every effort to see what
works and what doesn’t.
By contrast, payroll is all about the money—crunching the numbers and
staying compliant. They’re a payroll professional because spreadsheets
and calculators are their happy place. These analytically inclined employees
love detail and accuracy.
But while HR and payroll are two distinctly separate functions, they are still
close friends. And their relationship can play out in different ways.
1. Global payroll as a human resource function
Payroll is deeply intertwined with employee benefits administration and
compensation programs. In fact, most human resource changes, like pay raises
and overtime approvals, directly affect payroll.
On the other hand, HR depends on nitty gritty payroll details to keep the
company out of hot water.
It’s hard to deny the close relationship between these two roles:
- HR enters new hire employee information, and payroll verifies it.
- HR enters benefit deductions, and payroll verifies it.
- HR enters salary/rate changes, and payroll verifies them.
- HR approves bonus payouts and incentive pay, and payroll processes them.
- HR verifies current employee data, and payroll uses that data for deposits and tax reporting.
- HR implements timekeeping policies and payroll reviews timesheets, notifying HR of adherence problems.
Combining HR and payroll under a single department facilitates
collaboration between the two. Employees in payroll functions can easily
access and understand the people policies that impact pay, while HR employees
sit figuratively closer to the folks that oversee compliance.
But putting both functions in a single department also adds risk. With
non-accountants accessing your payroll systems, you open the door for mistakes
that can damage your credibility and cost you good talent.
This is why payroll often reports to finance instead of HR. In fact, 51% of
companies that participated in the Deloitte Payroll Operations Survey stated that payroll
reports to finance within their organizations—and only 31% of respondents
stated that payroll reported to HR.
2. HR and payroll as separate functions
Some say that the difference between HR and payroll comes down to money—and
when it comes to business accounting, there’s no room for money mistakes.
If the numbers are mission-critical, should you really have non-accounting
employees involved in payroll?
It’s a valid question.
When HR and payroll are separate functions with separate reporting structures,
you get a well-defined structure that clearly expresses a separation of
duties. There’s never a question about who does what and no well-intended co-
mingling of assets like payroll data.
However, this separation can also reduce communication between the two
functions, creating a risk that your payroll department may unknowingly
violate an HR law (or vice versa).
With separate functions, you risk mistakes like:
- Inaccurate benefit elections or delays in updating payroll with changes.
- Slow, inefficient payroll processing due to timekeeping or data errors.
- Misalignment on leave policies versus realized leave payments.
- Delays in processing pay raises and bonus payments resulting in off-cycle payments and/or fines.
With pros and cons to both approaches, how can your global company make the
best of both models?
3. A hybrid approach to HR and payroll collaboration
Frictionless collaboration is possible. To make these two functions work well
together, you need to clearly understand the differences between HR and
payroll, the goals of each, and how they impact each other.
For example, HR is focused on managing the employee experience. Accuracy is
important to the HR department, but it’s not the end-all-be-all.
While the payroll team’s goals are laser-focused on compliance, efficiency and
accuracy.
The differences in these two roles can cause friction; for example, your
payroll department may be annoyed by having to clean up data on the back-end
and HR may be frustrated with the hoops they have to jump through to get
payroll changes processed.
Often the best arrangement for these two functions is within one
department—but with a few caveats to keep key pieces separate.
Success with this approach is more likely if you have:
- Clearly defined roles
- Separation of responsibilities
- Processes to ensure data integrity
- Shared KPIs (key performance indicators)
This arrangement helps to improve communication and reduce tension, while also
mitigating the (often costly) risk of HR gaffes and payroll errors
.
A solution to payroll and HR discord
A strategic partnership with Payroll 360
can make all the difference when trying to work out the best way for payroll, HR, and even finance to work together.
With proficiency in both the people and the numbers, Safeguard Global should be on your
shortlist.
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