Accounting or HR: Who Should Handle Payroll for Your Business?

Managing payroll is one of the most important responsibilities in any business. It ensures employees are paid accurately and on time, while also ensuring compliance with tax and labor regulations. But one question that often arises for business owners is: Should payroll be handled by Accounting or HR?

Both departments have valid reasons for managing payroll, and each brings unique strengths to the table. In this post, we’ll break down the roles and responsibilities of both departments when it comes to payroll, and explore whether integration between the two might be the best solution for your business.

The Case for Accounting Handling Payroll:

1. Financial Expertise: Accounting teams are highly skilled at managing financial data, ensuring accuracy with numbers, and keeping a close eye on payroll taxes and deductions. They’re well-versed in tax compliance and can minimize the risk of payroll errors that could lead to penalties.

2. Budgeting and Cash Flow: Accountants monitor your company’s financial health, and handling payroll allows them to keep better track of cash flow, expenses, and budgeting, making it easier to ensure payroll aligns with overall financial goals.

3. Payroll Tax Compliance: Accounting is often more familiar with the intricacies of payroll taxes, such as Social Security, Medicare, and state unemployment taxes, which makes it easier for them to ensure everything is filed correctly.

The Case for HR Handling Payroll:

1. Employee Management: HR already manages employee-related data such as work hours, benefits, leave balances, and new hires. Since payroll is directly linked to this information, it makes sense for HR to handle it, ensuring that employee records and pay are aligned.

2. Focus on Employee Satisfaction: HR tends to focus more on employee experience, and timely, accurate payroll plays a huge role in employee satisfaction. Having HR handle payroll can ensure better communication with employees regarding any payroll concerns.

3. Integrated Benefits Management: HR handles benefits like health insurance, retirement plans, and bonuses. Keeping payroll under HR allows for easier management of these benefits and ensures that deductions and contributions are processed correctly.

Integration: A Collaborative Approach

While both Accounting and HR have valid reasons to handle payroll, many businesses find that the best solution is integration between the two departments. By working together, Accounting and HR can ensure that payroll is both financially accurate and aligned with employee satisfaction.

• Shared Responsibilities: HR can manage the day-to-day aspects like time tracking, benefits, and employee data, while Accounting oversees tax compliance, financial records, and budgeting.

• Improved Accuracy: With both departments collaborating, payroll errors are less likely, and the process becomes more efficient.

• Enhanced Compliance: HR ensures legal compliance from the employee side (benefits, labor laws), while Accounting handles financial and tax-related compliance.

Conclusion: Who Should Handle Payroll?

There’s no one-size-fits-all answer to this question. If your business is focused on financial accuracy and compliance, you may lean toward Accounting handling payroll. If employee satisfaction and benefits management are your top priorities, HR might be the better choice. But for many businesses, the most effective approach is integrating both departments to create a seamless, accurate, and efficient payroll system.

Want to explore more about how Accounting and HR can collaborate on payroll? Read the full blog post here for a detailed comparison and advice on how to implement the right solution for your business.