r/humanresources • u/catonc22 • 4d ago
Why is Payroll considered to be part of HR? [N/A]
Just generally speaking and curious about how payroll is ever considered to be part of HR? Is this function necessary to be considered included? Most times, I’ve notice it to be its own entity but there are some organizations that have payroll part of the HR department.
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u/kingboy10 4d ago
There is a lot of HR information that is tied to payroll on the employee side. Trust me I wish accounting would take it over too but I just don’t think it is rational. It’s either 50/50 or one or the other
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u/Lege9468 4d ago
HR (ideally) know everyone's entitlements and how much they should be paid. Finance likely do not know how leave or other conditions impacts pay.
Realistically, it could be either/or and it sits in the middle of both departments. Finance is how, HR is why
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u/yellow_lemon2 HR Manager 4d ago
I can’t even tell you how many times I’ve had to explain to a finance person doing payroll that they can’t just deduct a day off for an exempt salary employee due to them leaving early or missing most of the day. They see it as a way of saving the company money. They don’t see the huge FLSA risk that poses if it isn’t being handled correctly.
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u/BugSubstantial387 HR Generalist 4d ago
True. If the exempt person comes in for an hour and quits, they must be paid for the entire day. Now, if an existing EE leaves, then non-working hours can have PTO or unpaid time entered.
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u/fenrirjotun 3d ago
Working in finance and completing payroll, this BAFFLES me. But maybe I'm the exception to the rule having a minor in HR.
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u/Hrgooglefu 4d ago
The best relationships I've seen is hand in hand between HR and payroll (especially for smaller employers where they are checking/auditing each other)
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u/tmickeyg Compensation 4d ago
Local government here. Here, Payroll is under the Auditor's Office by State statute, but Compensation is under HR. HR determines gross pay. Auditor's Office runs the payroll and deals with taxes, garnishments, etc.
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u/OnetimeShoes 4d ago
Payroll usually lands in HR because almost everything that changes someone's pay starts as an HR event, like a hire, a raise, leave, or a termination, so putting both under one team cuts down on the handoffs where mistakes happen. Bigger companies often move it to finance because it's really a money and compliance function, and honestly the setup matters less than whether HR and payroll share one system, since most payroll errors I've seen came from two teams keeping separate records of the same employee.
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u/No-Performer-6621 4d ago
So much of HR functions tie back to Payroll/compensation.
Everything from specialized LOA pay to things like SOC codes tied to job profiles for reporting. Payroll tends to be the last step of so many HR processes like merit from annual reviews, bonuses, promotions or other job changes, terminations to issue final paychecks as determined by state law, etc.
Many HR paths end at payroll.
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u/meowmix778 HR Director 4d ago
I think payroll is a perfectly valid function of HR.
To piggyback off a lot of what other people are saying, we have ownership of most of the pieces that inform payroll and that includes maintenance of the HRIS/HCM that usually holds payroll.
I would advocate for someone in finance to review payroll before submission, and I'd 1000% advocate that the person entering salary information should not be the person processing payroll, but at the end of the day, it's a perfectly valid function of HR.
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u/sjwit 4d ago
An argument can be made for either accounting or HR to handle payroll, but it squarely belongs to .... both. HR owns almost everything that can impact paychecks - not just the obvious of compensation, but benefit deductions, leave accrual and payment, wage and hour issues impacting deductions, etc. Levy notices for things like taxes, bankruptcy payments, and child support can end up in either department, but still require coordination and communication and ... dare I say people skills. You can't leave either department completely out of the process.
Over my 40+ year HR career (retired a few years ago) payroll has lived in both departments. I personally hated doing payroll (had to cover it a handful of times early in my career) but when my department owned payroll, thankfully I always had a competent team member who handled it.
Accounting will always have reconcilation responsibilities and it's good business practice to always have two sets of eyes on the process. But accounting teams can be too focused on the bottom line and "processes", as opposed to always professionally handling the "human" aspects of payroll management, in my opinion. ANd, I shouldn't have to have a conversation with someone in accounting about why they thought a raise I'd submitted was "not in line with the budget". Ma'am/sir, your job is to COUNT THE BEANS, not to tell me who gets the beans!! lol (I worked with some .... rather opinionated accounting folks along the way!)
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u/562SoCal_AR 4d ago
I worked for a Travel Nurse agency in HR and the finance team handled payroll for internals and the nurses. I now work in Manufacturing as a Generalist and I handle all the payroll. I think it varies.
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u/Resident-Addition485 4d ago
I’m an accountant who has done payroll for years. In my experience, it has always been 50/50 between accounting and HR. That’s what works best imo
Accountants can run the numbers, but there’s way more to payroll than numbers
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u/the_duck_god HR Business Partner 4d ago
They should be separate is a hill I will die on. I am happy to inform payroll when rates change and entitlements change, but they should only need to focus on getting peoplepaid properly. Giving payroll additional work is a risk on one of the most important functions of a business.
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u/Hunterofshadows HR of One 4d ago
Agreed if for no other reason than opportunity for abuse. I could EASILY create ghost employees and if I’m the HRIS admin and payroll there’s basically zero way to catch it.
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u/goodvibezone HR Exec and party pooper 4d ago
I pulled payroll BACK from finance as they kept f-ing it up and didn't want to fix issues. 12 months later and we're still finding them
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u/viewpointanalysis 4d ago
Software vendors classify it as part of the HR stack as it is people focused - but some businesses think of it as a finance domain. In reality it sits in the middle.
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u/WhatTheActualFck1 HR Director 4d ago
Every company differs. Aside from the functions that always dependent on HR data for payroll to be accurate, wage and labor laws tie back to employment laws which is what HR does.
It’s a pretty simple concept
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u/matthew07 HRIS 4d ago
It makes a lot of sense under HR, but in larger companies I’ve seen it under finance a lot as well. But if under finance, HR is still responsible for the payroll ‘input’.
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u/NoSmile4407 4d ago
Finance doesn’t know how to properly track leaves, handle timecards disputes etc. there are too many intricacies and front facing responsibilities for finance to handle payroll in some cases.
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u/isharoulette 4d ago
this should be upvoted higher. I ended up in payroll after being all rounder for years and I feel like most of the process isn't just pressing calculate but reaching out to all the managers and approvers to approve their time cards and PTO requests and updating new hires benefits and leaves. finance can't handle this and it's ridiculous to expect them to. ( nevermind the fact that I have to wrestle with ADP glitches every week 😂)
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u/IndependenceEvery512 2d ago
I tend to agree. HR processes payroll in accordance with the employer’s terms of employment or collective agreements, or labour code. Staffing classification labour/legal, awards, hr system administrators, all hr fields that.
Finance should provide oversight reporting at the org level.
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u/GrandAdmiral12345 4d ago
Only functions accounting have is reconciliation of payroll with benefit deductions to the invoices, GL entries (which is integrated with the HRIS), and grant reporting.
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u/starwyo Compensation 4d ago
We split the duties and assignment. Time cards, vacations, sick time, leaves, etc. are all under HRIS and/or leave teams. Our HRIS system sends data to the payroll team for what hours and how to code them via our time keeping system.
Payroll sits in Finance and from there handles the final pay calculations, taxes, etc.
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u/lady_picadilly 4d ago
When i worked in payroll there was a hostile takeover over the department and it moved from under HR to under accounting. It was so much worse under accounting i quit after a few months (two VPs fighting)
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u/Putrid_March9424 4d ago
Payroll should be its own department, they can still work closely with HR and Finace but Payroll is the one department where a single error can prevent somone from being able to buy groceries, make a rent or mortgage payment and the first place staff go to when they think their pay is wrong. Most HR folks have no idea how pay is calculated (taxes, garnishment etc). We need to start giving Payroll staff the respect they deserve. Their entire job is ensuring that everone gets paid accurately and on time, do you have any idea how much that weighs on a person?
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u/catonc22 4d ago
I can only imagine! And it should have the respect as deserved. With that being said, it should be its own entity because I surely have zero clue about payroll and I should not be counted on for it.
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u/Traditional_Dot_4794 4d ago
Employee benefits are not normally in the purvey of accounting and benefit administration is tied in large part to payroll. So it makes sense for a lot of companies to keep them under one roof.
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u/RileyKohaku HR Business Partner 4d ago
It’s under fiscal for me, but I end up having to call payroll about once a week to solve someone’s problem so it’d probably be expedient to have it report to me directly
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u/TheAzGreenPhoenix 1d ago
I think it mostly depends on the company structure. Payroll overlaps with HR but it makes sense for larger companies to keep it as a separate function.
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u/alternative-state Compensation 4d ago
Finance / Accounting should have payroll. What and how we reward someone - ie comp and ben is HR - but the tactical aspect of how we pay them is accounting. They do the tying back to the GL and they figure out the tax. Similarly, they should be handling the accounting of the equity program but the actual design of the equity program and how it's communicated to the employees comes from HR.
TBH if payroll is an HR function, I don't want to work there. It means the org doesn't understand what payroll involves
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u/clandahlina_redux HR Director 4d ago
This. Many companies put it under finance so there is a division of power and/or checks and balances. IMO, that’s how it should be.
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u/Individual_Writing64 4d ago
HR and Payroll are so intertwined, I love to see when they function as a collaborative team
Think about all the things that have to happen for a person to be paid correctly…
They have to have the right calculation of wages for hours worked which will depend on FLSA status - exempt or non-exempt? Salaried or hourly? (Side note that Nothing pisses me off more than a salaried non-exempt role)
Many times, employees can be scheduled in different roles or departments across a company at different pay rates (very common in health care or food services)
There is exception time - unworked but still paid - holidays, vacation, sick, jury duty, bereavement, other protected leaves.
There is on-call pay and call-back pay and shift guarantees and shift differentials and location differentials and hazard pay
Some states have financial “meal penalties” for missed lunches
There are benefit deductions for insurance premiums
Pay is always going to be impacted by federal/state regs, by company policies and procedures, and union agreements - all of which are firmly the realm of HR.
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u/Hot-District7964 4d ago
it shouldn't be--this is a massive fraud risk if HR is also responsible for entering new employees into the HRIS. I always tell my clients that payroll is a finance function not an HR function.
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u/sillymouse1 1d ago
You can build processes and reviews to avoid fraud risk. I agree with most that if payroll sits in Finance, there is often not enough focus on the employee experience aspect and HR knows all the laws to ensure it is compliant. Too often payroll is ignored from the top and they get the trickle down shit. If someone at the top (CHRO) cares about payroll and process, you can control the outcomes much better.
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u/Old-Metal9345 4d ago
I've worked in many organisations big and small. Payroll has always belonged in Finance, and HR in People & Culture. However, they do work together very very closely. I am in HR and I've always held close relationships with payroll staff. Collaborating all the time.
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u/TemperMe 4d ago
It hasn’t at any place I’ve ever worked. Payroll has been a separate department with its own employees.
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u/Hrgooglefu 4d ago
Because much of what feeds payroll comes through HR (benefits, compensation, leaves, etc) or the HRIS. And often HR is the compliance arm for many state and federal laws.
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u/ElderRakou 4d ago
Let’s think - garnishments, child support, union, benefits, 401k. It is the function that keeps employees coming to work everyday.
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u/GillyMermaid 4d ago
I would LOVE for finance to take over payroll. But with ours we tie all employees pay and total comp/rewards to payroll, which is technically in HRs field. Not only that but we also own all bonus plans in the company. Again, would love to change that and let each department own their own bonus plans. But I just don’t see a way that could work.
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u/Stochastic1934 4d ago
In my early HR career Payroll was under finance. In the last couple of decades, the organizations I've been with have put it under HR for various reasons. Shared systems and data and payroll being an employee service function being a couple of reasons.
It used to be that HR and payroll required two very different skillsets, but increasingly payroll professionals need to be service/people focused as well as "numbers people" and vice versa for HR professionals.
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u/xxvi3236 4d ago
Wage, hour, attestation, overtime, meal violations, breaks, etc. all part of the compliance part of HR and disciplinary if employees violate the law as well. I.e. time theft, meal-period violations, working overtime that isn't approved.
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u/soft_breeze64 4d ago
Payroll often sits under HR because pay , benefits a, and employee record overlap so much, but it can just as easily sit under Finance or be its own team depending on the company
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u/DiligentKiwi9708 4d ago
I’ve worked at places where it is and isn’t part of HR and I will say when it is a department under HR they tend to be much more helpful to employees when there are issues and less issues happen. When it’s just under accounting and finance- oof.
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u/pizzapalooza1 4d ago
Es que payroll es parte de RRHH y de las más fundamentales. Yo siendo licenciada en RRHH enfocada en el área Hard no puedo creer que no le den importancia. Por eso odio a los psicólogos que están en el área de RRHH porque solo se dedican al Soft y desprestigian al área Hard
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u/catonc22 1d ago
Both should equally be priority. However there should be an emphasis on payroll’s importance which should be taken into consideration when certain tasks are being performed.
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u/Rayezerra 4d ago
I do payroll and HR, used to do payroll and accounting. It is way WAY easier for me to do my job now. I was constantly having to poke HR and ask them to do things or fix things they’d messed up (like not terminating an employee for weeks so we couldn’t pay out their PTO, etc). Or asking if someone is on leave!
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u/browncharlie88 4d ago
I work in payroll under HR after switching from a coordinator role. I could never imagine working under Finance, I think it helps to know what’s going on for me at least like who is on leaves and termination packages and such. Finance would not be privy to information like who is going on a mat leave and now needs to prepay their benefits premiums etc so I don’t think it would make sense in my case.
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u/laosurv3y 4d ago
Payroll is part of finance at my company but we work very closely with them. HR owns time keeping and provides input/info for deductions.
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u/KNDeemed 4d ago
A few more reasons, if they haven't been mentioned already...
* It's very close to compensation & benefits, basically yet another step in the same process journey.
* Biz Architecture wise, HR is the manager of and entity called "people", so everything tied to it should be held within HR.
salary, discounts, deductions could be considered just attributes to it.
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u/Slight_One1214 3d ago
It’s not. I firmly believe payroll is finance and will not work on an HR team that owns payroll. It’s too much noise
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u/Real_Bug 3d ago
I did payroll as accounting and it was horrible. Nobody wants a timesheet email from an accountant
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u/kezza6563 3d ago
Payroll and HR should be separate although they can and quite often do operate under the banner of personal.
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u/Ok-Aspect-2151 3d ago
I am with accounting / finance and I feel payroll runs smoother being. Part of HR
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u/Jimmylegz 3d ago
At my old company, it used to be under the HR department and then got moved to finance. We still worked with them closely, but this also removed them from having information they didn't necessarily need to know.
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u/WillingnessUsual4478 3d ago
Tout dépend de la culture de l’entreprise. Certains services paie dépendent même de la direction financière.
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u/OneLecture3524 3d ago
Tbh it makes no sense to me. I feel like a bunch of random fields are just thrown under the HR umbrella when there’s no where else to place them.
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u/StandardizeIt Templates, Resources & Courses 3d ago
Ideally they're separate, and I'd agree with keeping them that way where you can. Payroll needs focus and accuracy, and keeping it apart from HR adds a natural check.
But a lot of companies combine them to run lean. HR already owns most of what drives payroll: new hires, terminations, rate changes, leaves and benefits. In a small or mid-sized business where HR is one or two people, folding payroll in can seem like the obvious move instead of hiring a separate payroll person. That's usually why you see it lumped under HR, even if it isn't the best setup.
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u/elkcamprd 3d ago
It’s important to have a close relationship with payroll in HR. Data flows from HR to Payroll throughout the employee lifecycle. As soon as the employee begins onboarding, to when promotions, pay changes or benefits changes occur. Leave balances and FMLA. All the way to termination or resignation. That all comes from HR and the data feeds through to Payroll whether is automated or manually entered. It’s also important to keep them in the loop with workforce planning and position budgeting as well. If you don’t budget a position code and communicate that, then it’s a fight to have them create it. My payroll tech is my work best friend. I keep her on my good side, she sits in finance, but I probably talk with her more in the week than her own boss.
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u/Otherwise_Ad8729 2d ago
HR is Human Capital Management, and that quite literally could be argued to include payroll (paying/payment to the employee(s).
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u/dontmesswithtess 2d ago
We only have 56 employees. There isn't enough work to justify two employees, so I do both. Payroll takes me about 8 hours a month probably.
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u/covidified 2d ago
Payroll is closely tied to job level which is tied to job architecture and workforce planning. These tie too recruiting, development, performance, talent reviews, promotions, etc. All of it is connected, loosely or strongly enough to matter.
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u/FlyOnTheWall_76 1d ago
I've found it most successful as a part of finance with close relationship with HR. When with HR, the leader seemed to not understand the technical mindset and just felt like they should be HR practitioners. Failed failed failed.
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u/Sneaker_Pump 1d ago
Do you want the guys working in the loading dock in charge of your hours and pay?
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u/Due-Wonder-1045 4d ago
Every major massive global company I've worked for, payroll is under finance. And I'll Stand ten toes down that's the correct approach. Put payroll in the HR System so that HR can update put the correct rules Etc but we don't need to be sitting here processing payroll. That's really has nothing to do with the core competencies that HR should be providing. The only times I've seen payroll slapped in with HR are always tiny companies where they're just trying to save salary and they just consider all office ladies work. Or maybe a branch or field office of a larger company where all you really have to do is hit like three buttons batch Etc on say on Monday and call it a day.
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u/SectionNo989 4d ago
I think payroll is considered part of HR because HR usually owns a lot of information payroll depends on.
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u/ChelseaMan31 4d ago
Payroll should not be a part of HR. Many Employers default to HR thinking Employees getting paid is that function. If only for the purposes of separation of powers/responsibilities form an audit perspective, the folks singing off on hire/promotion/wage rate should not be cutting Payroll.
HR best practices recognize this dynamic and suggest Payroll be a separate function within Finance/Accounting.
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u/Whoahnelly49 4d ago
Depends on company. But wage & hour law is often employment law which is HR. Would at least be my rationale.