Payroll is the statement of salary payments to be made to employees of a company. It is a routine but one of the essential activities in an organisation, and if there is no Payroll, there is no salary. Many employed people may have experienced and know what it is like when the monthly salary is delayed. It is not at all a pleasant feeling.
Payroll means money, but it is money to be paid to employees. It is not payments to be made to any other external entity like vendors or associates. Therefore, the debate about whether Payroll is the Finance department’s job or the HR department’s responsibility has come up many times. In many organisations, this internal ‘tussle’ has happened both ways, i.e. the finance and HR departments believing that it is the other departments’ responsibility or both these departments wrestling for control of this function. This article takes a look at a few points and tries to settle this argument once in for all.
The following table provides the functions of Finance and HR with respect to Payroll Preparation. It is important to note that in employee compensation, there are payments that are payable on a monthly, quarterly, semi-annually or annually. This is the overall framework, and each company chooses its employee compensation structure.
| HR | Finance |
| Employee Attendance – This is a basic function under Employee Management and tracks the attendance of the employee on working days. This forms the basis for monthly salary calculation. | Salary Processing – The information provided by the HR department helps in starting the processing of monthly salary. This statement is the basis for further calculations and processing. |
| Leave Tracking – This function tracks the number of leaves an employee avails. If this number is more than leaves allowed as per company policy, the necessary salary deduction or Loss of Pay has to be applied. | Taxes – The applicable tax deductions have to be computed and deducted from the employees’ salaries. The amount of tax deductions varies from person to person. This computation is statutory financial compliance. |
| Overtime – The number of hours put in by an employee over and above the normal working hours is tracked under overtime. The additional payment is computed and is to be paid to the employee along with the monthly salary. | Number Function – Final salary computation is a number of activities. All money related number activity belongs to Finance. Therefore, at this point Payroll becomes a Finance owned item. |
| Leave Travel Assistance – This is an annual part of an employees’ salary. Based on the submission of tickets, bills, and documents, the eligible or sanctioned amount has to be paid to the employee. | Salary Advise – It is the responsibility of the Finance department to compute the final monthly salary payable to each employee. This statement is called a Salary Advise. This data is provided to the company’s bank. |
| Common or Performance Based Bonus – The former amount is arrived at or declared by the management. Based on the employees’ performance, the latter amount is recommended by the Heads of Departments. | Expenses Management – The Finance department manages the money of a company. Salary is an expense head which they need to monitor and manage so as to fall within the set recommendations. |
| Advances & Allowances – Salary advances and local, outstation or international travel and related allowances need to be paid to employees based on their request or submissions. | Banking – Ensuring the transfer of salary funds from the company to employees which is a part of managing the company’s finances through banking is managed by Finance. |
Payroll function contains many activities that combine HR and Finance.
Recommendation 1
Nominate 1 employee from HR and 1 employee from Finance who can work as an interface between both departments. These 2 employees should be trained to handle the Payroll function as a team. Both these employees can also handle other tasks in their respective departments out of which Payroll can be made as one of their essential responsibilities.
Recommendation 2
Hire or appoint a Payroll specialist who can coordinate with all required stakeholders in the HR and Finance departments and handle the entire responsibility.
Recommendation 3
Outsource your Payroll to a vendor associate like TalentPro. This may be a good move as this will solve your Payroll problems of owning, running, managing and being responsible for the same.
