What are the functions of Payroll and HR and how do they differ?


If you run a business which is small but growing, there will likely come a time when you have more work than you can manage on your own. Taking on employees is a big step and there are two important functions that you’ll need in your business to manage staff well – Payroll and HR. Here we’ll explore the different functions and responsibilities of Payroll and HR and consider when you might need to bring in support to run these areas of your business.

What is the function of HR?

HR (Human Resources) is responsible for managing your workforce. The primary areas that HR is involved with are recruitment, onboarding of new employees, training, development, benefits management, retention of staff, employee wellbeing and satisfaction and managing employee relations.

HR is critical in setting the organisation culture and will play a pivotal part in developing employee policies and procedures that enable the organisation to function optimally, promoting a positive working environment. Another important responsibility is dealing with employee concerns, managing workplace behaviour, grievances, discipline and conducting workplace investigations.

Finally, HR should be involved when employees leave the organisation whether through job/career change, retirement or redundancy to ensure the process is as smooth and stress-free as possible for all concerned.

What is the function of Payroll?

Your Payroll function is not part of HR even though it relates to employees. Payroll is either part of your Finance department or may be outsourced to your accountant or a specialist payroll provider. Payroll services include calculating employee pay, taxes and other deductions. The role of a Payroll manager or adviser is to ensure that staff receive the correct remuneration each period, considering the basic pay, bonuses, overtime, loans, pension payments and any other adjustments that are required. Payroll may also be responsible for managing employee expense claims for reimbursing costs such as travel and subsistence when staff are on company business.

Differences between payroll and HR

The fundamental difference between payroll and HR is that payroll deals with the finances around employees and HR manages everything else including managing employee behaviour and satisfaction. Payroll must be compliant with relevant tax while HR is concerned with employment and labour law.

Outsourcing your HR and Payroll

Managing people is time consuming. As a small business, you may need more people to help you manage your customers, increase your turnover or even make and distribute your core product. Increasing your workforce brings new challenges that you won’t have dealt with before and these need to be well managed to get the best from your people. One popular option is to outsource your Payroll and HR to specialist providers at the beginning when you may be too small to require a full-time person in each area.

HR advisers or consultants will provide a retainer package of hours that you can draw on to help you with employee related activity such as drafting policies, researching and implementing benefits, managing recruitment and dealing with staff issues.

Payroll services providers will receive monthly information from you about new joiners, leavers, salaries, overtime, bonuses, tax codes and other information necessary to correctly calculate each employee’s pay. Payroll for small business may be managed directly by your accountant or for businesses with higher staff numbers who don’t have an in-house payroll function, a specialist payroll provider can handle the processing for you.

While payroll and HR work closely together and should be communicating frequently, exchanging employee information, they do have quite distinct and separate roles within your organisation.

What help do you need to support your employees better?

If you are a small, growing business and you are struggling to keep up with the demands of running a workforce, there’s support available. Please contact the team at Adams Accountancy on 01322 250001 to find out how we can help you run your payroll accurately and on time each month. We can also make suggestions about outsourced HR consultants who can help you deal with all that people stuff that you can no longer manage yourself.

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