Two women sitting together discussing accounts and payroll

What is the Difference Between Payroll and HR?

Have you ever wondered how payroll and HR work together in a business? Did you know there is a difference between the two? 

Often, small businesses consider giving HR responsibilities to their payroll provider without considering the different roles involved. This can result in a confused system, as payroll providers are not equipped to deal with the complexities of HR. 

In this post, we’ll take you through the key differences between payroll and HR, show you how they overlap, and explain why they must be treated as separate roles. First, let’s define what payroll and HR involve. 

What is HR?

Human resources (HR) focus on the people involved in a business, from the employees to the directors. The functions of HR include: 

  • Hiring and onboarding processes. 
  • Employee welfare, including links to payroll. 
  • Disciplinaries and employee termination. 

Usually, a business needs HR once it starts hiring employees, as the management of employee relations and their well-being can be an extensive job. Having access to HR support will be a huge benefit to the business, as it creates harmony between the needs of employees and the business. 

What is payroll?

Payroll focuses on financial compensation for employees in a business. A proper payroll system also helps businesses calculate the correct amount of tax to send to HM Revenue and Customs (HMRC). This is vital as employee wages must be recorded and the information send to HMRC at the end of every tax month. 

(In the UK, tax months run from the 6th to the 5th, e.g., the 6th of April to the 5th of May.) 

Payroll should be managed by an accountant or payroll software (or both), whether they are in-house or outsourced. 

How do payroll and HR differ?

It’s easy to combine payroll and HR under one umbrella. Despite having different roles in a business, there are times when they will cross paths.  

An example of this is the hiring and onboarding process. Part of this process includes setting up a salary or wages for a new employee under the PAYE scheme. Once a new employee is hired, HR will then pass the details to payroll to set up their payments. This is also true for other overlapping areas, such as holidays, sick leave, and maternity/paternity leave. 

As a small business, you might consider handing HR responsibilities to your payroll provider. Be careful with this, however; while payroll does overlap with some HR responsibilities, the focus of payroll should be on paying employees, rather than taking on employee relations. It is always best to treat them as two separate entities, or use a provider who offers both services. 

An accounts sheet with a pen and calculator

Key takeaway

You should now have a better understanding of the differences between HR and payroll responsibilities, and how they can both benefit your business. Here is a recap of the core differences: 

  • HR manages employee relations. 
  • Payroll manages financial compensation for employees. 

While there can be some overlap between the two, it is better to treat them as separate and not mix them, unless you use a company who specialises in both. 

Do you need HR support in addition to your payroll? Contact us to learn more about how we can help your business grow and support your employees. 

Or, if you want to stay updated with the latest information on payroll, subscribe to get exclusive updates and blog posts straight to your inbox. 

Leave a Comment

Your email address will not be published. Required fields are marked *