What Does a Payroll Department Do?
When we say ‘payroll’ the responses we get are quite different. Some people think we are just a function of the HR department, while others think we make sure employees are paid on time, and some think what we do is a bit like voodoo. Your payroll department does far more than just push payments through every month, so we thought we would give you a quick run down of the roles and responsibilities within the payroll department.
One of the main parts of our job from an employer’s perspective is making sure employees are paid the right amount at the right time every month. To do that we need to go through the records for each employee and make sure the data matches the payment, and if it doesn’t we need to query and rectify it. We need to calculate and incorporate hourly rates, overtime, and regular hours worked. We then also verify any other kinds of payment earned, such as dividends, bonuses, commissions and expenses. If relevant, we add compensations such as holiday, sick or personal leave pay or even bereavement. After all that, we then factor in the deductions such as tax and NI, health insurance premiums (if applicable) pension contributions or any penalties. Once these have all been checked, added up and verified against records for each employee, payroll can then issue payslips and payments.
In the run up to pay day it’s the role of the payroll department to gather time data for all employees. This could be hours worked, times clocked in and out, overtime worked and hours missing. They consult with management on absences and timekeeping issues with staff and verify that the data is all correct before it is moved on to be processed for payment.
There are some extremely strict laws in place about what kinds of records need to be kept and for how long. Some of these laws apply to payroll data, so it is important that your records are kept organised and up to date. This job again falls to the payroll department which sort and file the documents that determine your pay calculations, records of when payments were made and the amounts involved. If timesheets, expenses forms and rotas are filled in, these are all to be kept for a minimum of two years, so they need to be sorted and filed in appropriate and locatable places.
While determining employee benefits is often a human resources function, HR and payroll often go hand in hand. Payroll keeps a track of the holiday each employee takes and liaises with HR to ensure they are not taking too much or when holiday strays into unpaid territory. The same goes for ensuring employees are not taking more sick pay or personal time than they have available. If they do, both departments need to collaborate to ensure the payments or deductions are correct. Payroll also tracks any other monetary benefits employees might have and calculates them into salaries depending on their contract, which is why payroll are often in constant conversation with HR.
The payroll department also comes into accounting territory, as they are handling money going out of the business. Through payroll accounting protocol the payroll department keeps track of wages paid, deductions and expenses and feeds them into the accounting department. Payroll will handle payment tracking, issue any stop payment notices, reconcile payroll data, file and report payroll taxes and national insurance in order to maintain accurate payroll accounting records.
So there you have it. The simple job of making sure employees are paid on time is actually far more complex than you might originally think, which is why payroll departments can range from a single person within a small business to a team of dozens for larger companies. If you don’t have a payroll department or are thinking of outsourcing, then eBOS can help.