April 08, 2022
There’s a fine line between the team that makes employee pay decisions and theteam that processes employee pay.
Sometimes, it’s indistinguishable.
The difference between HR and payroll comes down to expertise—in people ormoney. But it’s a small difference when payroll is the function that connectsthe money to the people.
In some organizational models, payroll and HR are lumped under the samecategory. In others, they’re separate departments. And in others, payroll is apart 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 tobridge the gap between human needs and organizational needs. They do it byplacing the right talent in the right positions, developing that talent andcompensating talent appropriately—and they measure every effort to see whatworks and what doesn’t.
By contrast, payroll is all about the money—crunching the numbers andstaying compliant. They’re a payroll professional because spreadsheetsand calculators are their happy place. These analytically inclined employeeslove detail and accuracy.
But while HR and payroll are two distinctly separate functions, they are stillclose friends. And their relationship can play out in different ways.
Payroll is deeply intertwined with employee benefits administration andcompensation programs. In fact, most human resource changes, like pay raisesand overtime approvals, directly affect payroll.
On the other hand, HR depends on nitty gritty payroll details to keep thecompany out of hot water.
It’s hard to deny the close relationship between these two roles:
Combining HR and payroll under a single department facilitatescollaboration between the two. Employees in payroll functions can easilyaccess and understand the people policies that impact pay, while HR employeessit figuratively closer to the folks that oversee compliance.
But putting both functions in a single department also adds risk. Withnon-accountants accessing your payroll systems, you open the door for mistakesthat can damage your credibility and cost you good talent.
This is why payroll often reports to finance instead of HR. In fact, 51% ofcompanies that participated in the Deloitte Payroll Operations Survey stated that payrollreports to finance within their organizations—and only 31% of respondentsstated that payroll reported to HR.
Related: Why finance and HR silos may be limiting your payroll datapotential
Some say that the difference between HR and payroll comes down to money—andwhen it comes to business accounting, there’s no room for money mistakes.
If the numbers are mission-critical, should you really have non-accountingemployees 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 ofduties. 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 twofunctions, creating a risk that your payroll department may unknowinglyviolate an HR law (or vice versa).
With separate functions, you risk mistakes like:
With pros and cons to both approaches, how can your global company make thebest of both models?
Related:Payroll data discord: HR vs. finance
Frictionless collaboration is possible. To make these two functions work welltogether, you need to clearly understand the differences between HR andpayroll, the goals of each, and how they impact each other.
For example, HR is focused on managing the employee experience. Accuracy isimportant 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 andaccuracy.
The differences in these two roles can cause friction; for example, yourpayroll department may be annoyed by having to clean up data on the back-endand HR may be frustrated with the hoops they have to jump through to getpayroll changes processed.
Often the best arrangement for these two functions is within onedepartment—but with a few caveats to keep key pieces separate.
Success with this approach is more likely if you have:
This arrangement helps to improve communication and reduce tension, while alsomitigating the (often costly) risk of HR gaffes and payroll errors.
A strategic partnership with Payroll 360can 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 yourshortlist.