HR and payroll: Responsibilities, functions, and how they’re connected

When you think about your business, what are your main goals? For some, it’s growth. But for 45% of small business owners, stability is more important than growth. If you’re one of them, you’ve likely found that your employees have a huge impact on your business’s stability. When they’re happy and committed to doing their jobs well, your business is more likely to be successful.

Two critical functions or departments can have a major impact on your business’s financial and cultural well-being: HR and payroll services. 

In this post, we’ll cover the differences between HR and payroll, the core functions of each department, and how they work together to boost business success, what you can do to improve collaboration between the two.

• What is payroll?
• What is HR?
• Is payroll part of HR?
• How does payroll interact with HR?
• HR vs. payroll: How to improve collaboration
• Next steps for streamlining your payroll

What is payroll?

Payroll is the process of paying employees in the workplace. Calculating employee wages and factoring in federal and state payroll taxes are all part of running payroll. 

Payroll can also refer to employee financial records at a company, paychecks sent to employees, and employee wage records kept annually.

Alongside inventory and other overhead costs, payroll might be a company’s most expensive overhead expenditure. Furthermore, the payroll procedure is complex. 

However, knowledge of each component of payroll may help you have a better understanding of your company’s finances. It can also help you stay in compliance with federal and state labor and tax regulations.

Common payroll functions

Payroll functions tend to be more administrative and straightforward. A good payroll department ensures that employees’ pay is correct, delivered at the right time, and documented correctly. 

Here are some of the functions you can expect to assign to your specialists or payroll tasks you can do yourself if needed:

• Manage payroll accuracy: The payroll department is responsible for processing pay during each pay period and ensuring the right amount goes to the right employee.
• Maintain and update employee data: It’s part of payroll’s duties to use payroll software to manage employee data. Any changes to names, addresses, personal emails, and other contact information need to be updated by the payroll specialist.
• Update employee pay rates after raises: Anytime a staff member gets a raise, the payroll team needs to update their pay rate in the system to reflect that new wage.
• Manage W-2s and W-4s for employees: It’s the payroll team’s responsibility to manage deductions, withholdings, and withholding allowances for all employees. 
• Comply with IRS tax laws: Payroll oversees the payment of payroll taxes and files taxes for the business to ensure compliance.
• Oversee employee time-tracking: Payroll also maintains records of employees' time entries and may troubleshoot discrepancies. They also review timesheets for each pay period to ensure that hours, rates, and pay align for each employee.
• Manage deductions to 401(k) contributions and insurance premiums: The payroll team manages all paycheck deductions for insurance premiums and employee contributions to 401(k) accounts.
• Verify pay for new hires and terminated employees: The payroll department must verify new hires’ salaries and ensure that money owed to former employees after terminations is fully paid out.

Keep in mind that the exact responsibilities will depend on your business’s needs. 

What is HR?

The human resources department, often referred to as HR, effectively oversees the people you hire at your company. HR professionals are there to support your team, help your company grow sustainably, and are widely considered to be one of the most important parts of a business. 

Depending on the size of your company, HR specialists may oversee payroll specialists or may perform payroll tasks despite being a separate discipline.

Common HR functions

Though HR teams can oversee certain financial tasks and payroll needs, it’s not their primary function. HR professionals are trained in conflict resolution, managing negotiations, and other interpersonal-oriented business needs. Some essential HR functions to keep in mind include:

• Managing talent acquisition: Your HR team may help in recruiting new talent, conducting interviews, and other tasks in the hiring process when your company is expanding.
• Overseeing time off policies: HR teams often administer paid time off, sick leave, and other forms of leave for qualifying employees who make requests. 
• Processing salary information: HR typically oversees changes for raises and enters pay information for new employees.
• Verifying and updating employee information: HR often verifies, maintains, and updates key employee information such as phone numbers, addresses, and Social Security information. 
• Taking care of benefits enrollment: HR departments help employees enroll in insurance plans and offer insight and support for the full employee benefits package. 
• Managing conflict resolution between employees and management: If an employee has an argument or gets into a dispute with a supervisor or manager, HR helps resolve the conflict.
• Managing conflict resolution among employees: If employees get into a conflict with each other, HR specialists can help them reach a resolution. 
• Getting new team members up to speed: Onboarding new employees and running new employee orientation programs typically fall under HR’s responsibilities.

Having solid HR services at your business can help improve employee retention and overall employee experience. They can also help with everything from data entry to running innovative webinars. The bottom line is that HR professionals are versatile.

Is payroll part of HR?

Payroll can certainly be part of your HR department. But it depends on the way your organization is structured. Some managers think that, because payroll deals directly with employees, it’s best suited as a part of HR. However, others may think that the finance and accounting wing of an organization is better built to tackle payroll because of their numbers expertise.

Ultimately, the way you organize your business is up to you. However, some of the ways that payroll and HR interact are good to keep in mind as you finalize business plans or consider an expansion.

How does payroll interact with HR?

No matter how your organization is structured, payroll needs to work closely with HR. That’s because there are many areas where HR and payroll administration can overlap, such as:

• Negotiating pay
• Negotiating and administering employee benefits
• Bonuses
• Addressing complaints about pay

Ultimately, however, these two departments take different approaches and serve different functions when it comes to these and other issues. Let’s break it down.

HR vs. payroll: How to improve collaboration

Though HR and payroll can function as seemingly separate departments, they still need to collaborate regularly to keep your business running smoothly. Here are a few tactics you can use to improve collaboration and open the lines of communication between your payroll and HR departments.

1. Maintain clear communication

Every part of a business should maintain clear communication. The relationship between payroll and HR is no different. HR professionals and payroll professionals should maintain constant and clear lines of communication to ensure no information falls through the cracks.

You can foster an environment of clear communication with a bit of effort. Here are a few tips to help you get started:

• Have weekly meetings where different professionals can share updates.
• Host a channel on a business messaging platform like Slack where team members can ask questions and identify who to talk to for individual issues.
• Provide an open floor plan or office layout that fosters communication and collaboration naturally.
• Ask your team for advice and listen to their suggestions and feedback.

Consider what makes the most sense for your business and don’t rule out asking your HR and payroll teams for advice. They know their main pain points and may offer solutions that will help improve processes and productivity.

2. Establish a centralized data management system

Another way to facilitate stronger HR and payroll relations is to have one shared system for all employee information. A solid HR software platform that can house payroll data, for example, is a great way to make sure everyone’s on the same page. Whenever an HR or payroll professional needs access to critical data, they can simply log on to their shared database and access the information they need quickly.

As a bonus, using one platform as both your payroll and HR system will likely save your business time and money.

3. Ensure roles and responsibilities are clearly defined

Having clearly defined roles and responsibilities can improve collaboration and communication between both payroll and HR teams. When everyone understands what they’re responsible for and who to speak to for different concerns, nothing is left to chance.

You may need to create a flow chart for both teams, showing who fills each position and who to report to in certain situations. 

This can reduce the risk of mistakes and help your team get more work done faster. Keep in mind that clear roles and responsibilities may be easier to take care of with an all-in-one payroll, accounting, and HR solution.

4. Invest in quality payroll and HR software

Investing in a comprehensive HR and payroll software system can take the stress out of managing information and communicating between departments. Here are a few features to look for as you explore your options:

• Ready-made tools and templates: Job descriptions, onboarding checklists, and employee handbooks can all be customized to help your workers perform better.
• HR and payroll together in one place: Look for software that houses both payroll and HR information in one place.
• Legal compliance: Make sure you can get up-to-date information on state and federal pay and overtime regulations, as well as the basics of hiring, firing, and employment laws.
• Easy tax filing: Look for payroll software that can file and pay your payroll taxes so you can get back to focusing on what matters most: your business.
• Self-service functionality: Pay attention to the interface of each program you consider. Look for one with an intuitive design built to put the power in your hands, you can gain the insights you need and tackle tasks with confidence.
• Automatic integration: Make sure the software integrates with other key programs that you use in your business. With QuickBooks Payroll, it’s easy to get started managing your business finances with accounting software. Just a few simple clicks get you the automation and insight you need to succeed.

Your payroll and HR software should be able to grow with your business. Look for features that you’ll use immediately and consider how those features will benefit your growth plans.

Next steps for streamlining your payroll process

Both HR and payroll are essential departments for most businesses. By understanding the differences in core responsibilities and finding ways to improve communication between departments, you’ll be better able to streamline your processes.

But even the most well-organized HR and payroll teams need the right tools at their disposal to perform their tasks to the best of their ability. QuickBooks Payroll, alongside HR services, can be one of the most effective ways to streamline your workflow. QuickBooks payroll is built to take the hassle out of payroll processing, reduce human error, and make essential payroll processing easy to complete in minutes.