Many challenges face businesses of all sizes when it comes to payroll, one of which is understanding which department should handle the role of payroll services?

There are effectively four options. First, payroll can sit in the finance or accounting department where it has traditionally always been. Second, human resources (HR) is another department that can handle payroll operations, while there is always the option to spread the role across both divisions. Finally, there is the option to outsource – which is becoming more attractive to businesses of all sizes. 

The role of payroll is to calculate and distribute salaries to employees. It’s a system that tracks everything from taxes, allowances and deductions, time and attendance records and superannuation calculations to name a few.

HR, on the other hand, is an organisational function that deals with people in the workplace. It includes recruiting, hiring, training and development, compensation and benefits administration, employee relations (including labour negotiations), job analysis, performance management and planning, and general human resource consulting.

At times, the lines between HR and payroll can become blurred. However, the two go hand-in-hand because they’re both essential parts of running a successful business.

In many cases, the role of payroll can often be folded into the HR department instead of the finance department or a dedicated payroll arm. As a result, payroll management in HR can be even more challenging. 

What is Payroll Management in HR?

A payroll manager oversees all aspects of the company’s payroll, including calculating wages, withholding taxes, and superannuation payments. They may also handle any other tasks that may be required by law or regulation, such as payroll tax obligations and BAS submissions.  

But is it actually beneficial to have your payroll operations managed under the HR umbrella? Or should these roles be separated for maximum benefits and efficiency in your business?

Is Payroll a Finance or HR Function?

Every business wants to be successful, but growth brings its own set of challenges. 

Gartner data has shown that 90 per cent of S&P 100 companies in 2018 were all competing for the same talent to fill 39 roles. Getting the best talent to join your business as you grow is a dedicated task for HR, which can become diminished if the HR team is also responsible for payroll.

As your business grows, the complexity of payroll increases as well. You are no longer just handling regular pay periods with minor adjustments; additional tasks include balancing, reconciling, and managing records, all while ensuring total compliance with tax and regulation changes (like single touch payroll in Australia).

Technology Has Changed The Payroll vs HR debate

Manual, paper payroll processes have rapidly become a relic of yesteryear as automated, cloud-based solutions replace this redundant way of managing employee payment.

CIPP research has shown that businesses worldwide embrace payroll technology, with almost 80 per cent saying it makes their payroll team more effective. A further 62 per cent believe technology will reduce associated costs.

This allows for a range of benefits, including: 

  • Greater accessibility: Instant visibility across all departments, including HR, payroll, finance and/or accounting
  • Compliance: Automation will drastically reduce instances of human error
  • Efficiency: Through the elimination of repetitive, manual tasks
  • Better HR operations: Modern payroll software generates data that can be used to improve HR functions

Despite the efficiencies delivered by technology, managing payroll is still a significant challenge for most businesses. Whether the function of payroll sits with finance, HR or is shared between these departments, research has shown that payroll makes up almost 70 per cent of all business overheads

While it is beneficial to separate HR and payroll in many instances, this involves time, money and resources that many small (and even large) businesses cannot afford.

Outsourcing Payroll is The Solution

Deloitte research has shown that 16 per cent of businesses are planning to implement process automation for payroll processing, with full payroll outsourcing becoming a popular option in countries worldwide.

With an outsourced payroll company, your employees will have access to all of their benefits through one easy-to-use portal. In addition, you won’t need to worry about managing employee records or filling out paperwork because it’s all done externally.

i3Group is the leading provider of fully managed end-to-end payroll services. We offer tailored solutions to suit your individual business needs and provide you with peace of mind that your company’s payroll will be handled professionally and efficiently.

You won’t need to worry about managing your payroll anymore. Let us take care of it for you so you can focus on running your business. With our expertise, we will be able to provide the best possible solution for all of your payroll needs.  

We also offer a free payroll consultation where we will discuss what the best solution is for you, and answer any questions that may arise before signing up with us. So book an appointment today.