Ed Llarena, Jr.
Owner/ Managing Partner
Swastik73
Human Resource And Industrial Relations
Govardhan
Senior Hr Manager
Kamadana Pradeep
Hr Professional
Godchild78
Recruiter
Seshaiah
Consultant
+5 Others

Dear members,
I have a query...what is a payroll and how does it come under HR functions. Why can't it solely be handled by the finance department? I don't know, if I'm asking the question right.
Can anyone, help me with this query.
regards,
Jennifer
5th September 2006 From India, Pune
Dear Godchild,

Payroll in India was once upon a time (before 10 - 15 years) considered to be part of Accounts Department. Those are the days when payroll was seen as a mere compliance function and also as finance/accounting function as money was involved. Performance appraisal was more a ritual done once in a year and performance was not adequately related to pay. Moreover, Accounts personnel were the only people considered to be fit for doing statutory compliance realted jobs such as PF and ESI jobs in an organization.

In countries like US, even before 15 years Payroll was treated as part of the Compensation & Benefits Management, which is basically HR function. Payroll, as you can see, is only an event, which is happening at a frequency as may be stipulated by the country/company rules, and is guided by the policy on Compensation & Benefits Management program of any company. Other countries gradually adopted the concept.

Payroll is also a sensitive matter as employees may have queries when they receive their payslips. Not to generalise, Accounts personnel are not very much the right persons to have the kind of human relations skills to answer such queries with empathy and patience. So, Payroll also became a matter of human relations over years when employees mattered.

Another reason is the salaries have become more and more linked with employee performance and retention with a substantial part of salary paid as performance-linked incentive. Performance Management being the HR function, payroll management in a performance-oriented reward system has become HR function.

Accounts department mainly performs a control function and is therefore made as bottleneck. A bottleneck approach is not the right approach when you need to reward people's performace in a dynamic business environment. So, the payroll function has been transferred to HR to make it stay nearer to the people of the organization so as to respond quickly to the employees' queries and performance. Of course, Accounts will ultimately monitor the expenses and give their advice regarding any lapse in controls through audit and other tools.

If HR is not handling payroll with a difference and with what purpose it should handle this function, then it does not matter if Accounts handles it or HR handles it.

I think I have answered you to the extent I can. There could be different views/reasons to be put forth by other members.

Govardhan
5th September 2006 From India, Madras
Dear Jennifer,
Govardhan have given you an excellent reply, I have nothing more to add except the following:
1) It is necessary for HR to check and authorise Salary Details before processing. This is done with the view to check that the person has been given all his variables, attendance has been properly calculated and necessary statutory deductions had been made. This is done because in case of any Salary Discrepancies it is HR to whom a person approaches and HR has to deal with them.
For example; Leave availed not recorded, special sanctions of leave or special payments; person has been marked absent while he was on Out Door duty (Happens in case of Marketing), increments and there are countless others.
2) Various Data needs to be generated for MIS from the Employee Payments to calculated various indicators like Labour productive, Labour Cost.
3) Proper Statutory Records must be maintained and it is the responsibility of the HR to keep all Statutory Records in Order.
Regards,
SC
2)
5th September 2006 From India, Thane
Hi Jennifer, Goverdhan & Swastik,
Pay roll is the prerogative of HR. As rightly mentioned by Goverdhan, in fact the Accounts personnel used to contribute only in processing of the payroll. With the advent of ERP packages in recent times, there is nothing either Accounts or HR can do. Everything is being taken care of this ERP once we give the inputs. Ultimately when it comes to inputs, it is HR only - to provide the inputs that are essential to process the payroll. As HR play a pivotal role in salary fixations and finalization of other monetary things to the employees, it is always better to handle the payroll by HR only. Accounts personnel have to act as a watch dog in case of any deviations and audit accordingly in case of discrepancies and to ensure that proper approvals are there.
Regards,
PRADEEP
5th September 2006 From India, Hyderabad
Dear member, HR has 4 important wings. One recruitment, second training and establishment, third administraton and fourth finance and accounting. While the recruitment wing selects the right candidates for the organization the training and establishment wing train them in particular line and post them. The administration wing monitor his pay& allowances, leave, performance. The he accounts wing has to claim the pay as well the other monitory benefits to the employee with the coordination of the administration wing. Without the support from the administration wing it is not possible to claim the salaries or perks.The Fundamental rules of Govt. of India are guide lines for all such activities.
6th September 2006 From India, Hyderabad
Hi!

There is much sense in the explanation provided above relative to the reasons or rationale for HR's right to handle payroll. What seems to have been overlooked (which are closely tied-up with payroll and essentially integral to HR) are "timekeeping" and "salary administration".

But I have seen organizations with payroll still in the hands of Finance and/ or Accounting. There are even organizations that put payroll in the hands of the MIS Department.

Indeed, functions (and locations of such functions) are essentially the prerogative and/ or discretion of an organization's top management. There are no "fix or hard-and-fast rules" in this area. Hence, for people like us who implements JE projects, the need for open-mindedness is essential. Nowadays, the integration of two (2) to three (3) functions under one (1) position is very common (e.g. Receptionist doing both Receptionist & Telephone Operator functions; Security Guard doing both Receptionist and Entry Guard functions; HR Manager doing both HR and Administration functions).

The real reason behind organizational "innovations" or "flexibility" relative to functions and their location is "organization size" and "cost consciousness". Indeed, a one (1) man HR department will find it impossible to handle payroll in addition to the many other functions of HR. On the other hand, a small business organization will never be in a position to hire separate managers for Recruitment & Training, Compensation & Benefits, Labor Relations. Although this is a reality for big multinational companies, these are only images for those who belong to very small companies.

Best wishes.

Ed Llarena, Jr.
Managing Partner
Emilla Consulting

(landline)
(mobile)

1st October 2008 From Philippines, Parañaque
Dear Jennifer,

I could get your doubt. Every function linked with Human Resource (Not Employee/Personnel as these are narrow terms) has to be considered as responsibility of HR Dept.. The HR Dept. will decide their compensation package & responsible for ensurance of remittance. The Finance Dept. has to check whether they are having sufficient funds are not. Simply they are responsible for physical transformation. PF,ESI,PT,IT of Human Resource should be handled by HR Dept. only. Ex : PF is linked with Financial Funds. But enroling them,Statutory Forms,Statutory Returns,Liason, A/c. wise bifurcation of PF Challan are not financial activities. Simply Finance Dept. will release the Bank/Cash funds for remittance of challan. But HR Dept. will look whether the amount has been transferred to exact A/c.s or not. This is simple description. Dear Jenny if I could clarify your doubt clearly, you can send your voice to 91-9885700350 or send the waves to

Bai Jennifer,
Sathish


25th April 2009 From India, Jaipur
Hi Jennifer, Goverdhan,pradeep & Swastik,
Thank you for your valuable information...but i have small request i am interested in payrolls, can any body suggest me how to handle payroll...i am completely fresher to payroll.
Regards.
Anil Kumar
7th August 2009 From India, Hyderabad
Hi! HR fuctions are realted to Human resoures to extract the talent from them. Payroll is done for human being in the organsations So finally payroll is part of HR Function
7th August 2009 From India, Hyderabad
I wouldn't say that it necessarily has to be an HR function--in many cases payroll is a completely separate department. However, in smaller companies HR and payroll tasks are sometimes taken on by one person. HRIS software <link updated to site home> ( Search On Cite | Search On Google ) is closely connected to and often includes payroll software <link updated to site home> ( Search On Cite | Search On Google ) so they are connected. I would argue that it is best to keep the HR and payroll functions separate because you can have issues in an audit when the person who gives the raises is the same person who pays those raises--checks and balances is always positive.

Thanks,

Dave

HRIS Systems Selection Resource | HR Software
17th January 2013 From United States, Orlando
I agree with Dave that Payroll function is not necessarily a HR function.
Salary structure of an employee is also his/her tax tool. Some Benefits, Allowances and Re-imbursements (Fringe Benefits) are not taxable as per income tax rules which can be better interpreted by the finance department or a payroll expert. Employees will try to reduce his/her tax burden and increase savings/take home salary. So from tax perspective, which is the main concern for employee, finance department is in a better position to help/advice the employee.
Secondly, as already mentioned in this thread, from payroll audit perspective finance people are more competent in record keeping and in handling auditors/audit quiries.
So, I feel, ideal situation would be HR giving attendance inputs and finance processing the payroll.
4th July 2013 From India, Bangalore
Hello Goverdhan ji.
You have given an excellent and clear cut answer sir. We are very glad and pleasure to have you in this community to help fresher like me. Thank you sir and this would help me in my studies
22nd June 2015 From India, Hyderabad
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