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Difference Between HR and Payroll: What Employers Need To Know

HR & Compliance

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Updated on:
February 28, 2024
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Updated on :

February 28, 2024
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Difference Between HR and Payroll: What Employers Need To Know


Hiring employees is can be challenging. As time goes on, you start to deal with disbursing wages, managing taxes, trade union commitments, and possibly terminating employment contracts. These responsibilities are even trickier when you have employees around the world. HR handles employee-related matters, which is why you can forgive anyone for interchangeably using the terms HR and payroll management. However, there is a clear difference between the two management practices.

Learning the differences between these two processes can be enlightening. More importantly, the knowledge can help you decide the best way to manage your international workforce in full compliance. Read on to discover the difference between payroll and HR and other crucial ways to apply their functions for your benefit.

What Is Payroll Management?

Payroll is the database of all the employees working for a company, their roles, levels, and salaries. Meanwhile, payroll management is the administration of the financial statements of a company's workforce. These include their wages, bonuses, deductions, and other vital financial records.

Errors and inconsistencies in payroll can be detrimental to your business. They may also raise concerns when reporting payroll activities to the IRS. To avoid non-compliance risks, expert payroll management is crucial.

Payroll management helps you detect loopholes in your payroll activities and develop solutions. It's a continuous process that can help you balance your financial records and comply with employment laws.

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Importance of Payroll Management

You can never overemphasize the importance of payroll management. From compliance to increased profits, proper payroll management is crucial, especially when you hire internationally. Here are reasons why this process is vital:

  • Detect loopholes in payroll activities. Repetition of simple mistakes may lead to greater offenses. If you look closely enough, you may find certain irregularities or errors in your payroll activities. Managing payroll helps you find errors. Detecting these errors early can help you find ways to resolve the mistakes before they escalate.
  • Simplify payroll processing. Payroll processing can be simple if you manage your payroll activities expertly. Nowadays, technology powers payroll management and can help you achieve incredible results. Payroll management software gives you access to your company payroll data, including all your employees, their bank details, and how much they earn. You can easily manage payroll activities from your dashboard and disburse payments quickly. When you partner with a global payroll service like Skuad, you can pay your international workforce at the same time. Skuad allows you to disburse payments in your employees' local currencies with just one click.
  • Satisfy employees. Perhaps the best way to satisfy employees, outside of maintaining a positive working environment, is consistent and timely salary disbursement. Payroll management ensures you find the best ways to pay staff regardless of location. According to a recent study, compensation and benefits are among the top five contributing factors to employee satisfaction.
  • Comply with employment and tax laws. One of the most important reasons for proper payroll management is to comply with government regulations. Non-compliance can result in fines or more severe punishments like prison sentences or company closure. When you manage your payroll processes carefully, you can quickly assess your practices to align with employment laws.

What Is HR?

There are two ways to define human resources (HR). First, HR is the general term for all humans working in an organization regardless of position, qualification, or experience. So, from gatekeepers to the CEO, HR is the umbrella term for employees.

On the other hand, HR is a unit in every organization that handles hiring, paying, training, and firing employees. The HR department also serves as the middleman between management and staff. They attend to all that concerns employees and employment. The main functions of HR include:

  • Hiring and firing
  • Training and development
  • Salary and benefits disbursements
  • Employee relations and conflict resolution
  • Labor and tax law compliance
  • Design and maintenance of company culture or policy

How Does Cross-border HR Work?

Cross-border HR means performing HR functions for an international team or a workforce in various locations. It involves forming a team of professionals across the globe and catering to their needs. Technology is crucial for efficient cross-border HR. It enables multinational companies to maintain cohesion and balance between the local and international teams.

Technology allows a business to create and manage a flexible international workforce and retain top talent. Studies show that 82 million new employees would quit after a significant issue with their first paycheck. Tech offers tools that enable cloud-based collaboration and data storage, formidable data security, and a rewarding user experience.

How to Improve Cross-border HR

Managing cross-border HR is complex and can easily fall apart without extensive planning. To get the best out of your international workforce, you must develop global HR strategies to facilitate communication.

Start by appointing HR personnel with a decent knowledge of the culture and language of specific locations. This enhances communication within and among teams and improves collaboration. It would help if you also tried to strengthen communication channels with technology. Provide internal messaging and collaboration systems with virtual meetings' voice and video call features.

As an employer, you want to monitor your workforce's progress at the end of each quarter or year-end. So, request regular HR reports for your employees. This allows you to find out where you need improvement and where you're most successful.

HR Strategies for Effective Payroll Management

Virtually every employer hiring abroad understands the importance of payroll management. However, the question on many people's minds is, "How can we effectively manage payroll?"

The following payroll management strategies will help maintain compliance for a local and international workforce:

  • Create a payroll schedule
  • Automate payroll
  • Delegate payroll duties appropriately
  • Keep an eye on payroll and tax laws
  • Keep records of payroll activities
  • Check for loopholes
  • Complete your payroll processing on time
  • Remit taxes and social security contributions
  • Report payroll activities to the IRS
  • Outsource payroll management for global employment solutions

Difference between HR and Payroll Management

There are other major differences between HR and payroll management besides their definitions. Although some use both terms interchangeably, identifying the differences can be simple. Learning what makes them unique can help you determine which functions to manage in-house or outsource. Explore the following differences between HR and payroll management:

Payroll Mainly Addresses the Payment of Employees

Payroll focuses on disbursing payments to workers when due. Processing payroll can be tricky due to the number of multilayered steps and the time it takes.

Companies must follow specific protocols and ensure global HR compliance while paying international employees. Payroll experts mainly determine an employee's working hours, make compulsory deductions, compute net earnings and disburse payments.

Payroll Is an HR Function

HR generally takes care of employee affairs. From onboarding to salary disbursements, an establishment sets the HR department to handle their employees' simple or complex needs. Payroll is an HR function as it deals with paying employees.

Until recently, the HR team handled payroll like any other function. Due to the complexity of paying a vast number of workers, especially a global workforce, setting payroll duties apart became a necessity.

HR Covers a Broader Aspect of Employee Management

While payroll focuses on paying employees, HR covers a broader scope of employee management. There are many areas of HR, and payroll is only one of them.

HR covers all that concerns employees in an organization, and companies hire more staff in HR than in payroll management. In fact, experts predict the number of HR staff in the United States to increase from 805,080 in 2021 to 840,120 by 2025. Other crucial HR functions other than payroll management include recruitment, training, compensation, workplace safety, and employment law compliance.

Different Software

These days, technology drives virtually every critical area of business. For accuracy, speed, and simplicity, companies use software to carry out HR and payroll functions. However, there are separate tools for HR and payroll management.

Human resources management software is a tool for managing employees' daily activities in a web-based network. Employers or the HR team use these tools to allot tasks, disseminate information, and track time. Like HR software, payroll software is web or cloud-based for managing employee payroll.

With these tools, the payroll team calculates the employees' earnings, deducts tax, pays wages, and keeps records of payroll activities. This software helps companies automate payroll to avoid errors and complete the payroll cycle in time.

Utilizing Payroll Management Systems

Payroll systems help you perform your payroll processing duties. They make processing cross-country payroll easier and help you achieve more accurate results. With these tools, you can complete the various payroll processing steps.

Payroll management systems save employee bank details, calculate net earnings, make statutory deductions, disburse payments, and remit taxes to the IRS. If your team is small in number, you can estimate payroll in-house with simple payroll processing tools like Excel. Larger teams will be better handled with more efficient high-end payroll processing systems like Skuad.

Skuad - An efficient payroll management platform

Payroll processing can be challenging and time-consuming, especially when you have many employees overseas. Although carrying out these activities in-house is possible, you may benefit more from partnering with a global payroll specialist like Skuad.

Skuad offers a unified payroll management platform to process and oversee payroll for all your employees abroad. We make sure that you continue to satisfy your employees with timely payments and stay 100% compliant with country-specific employment laws. Contact Skuad today to learn how we will provide world-class payroll management solutions for you today.

About the author

Catalina Wang is a Human Resource Consultant. She manages recruitment, onboarding, and contract administration staffing for many organizations and remote teams. She’s passionate about efficient HR management and the impact of tech on hiring practices.

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