In this blog, we look into what exactly is meant by the term “payroll”, in which areas payroll is used, and the tasks a payroll specialist undertakes. Additionally, we explain the difference between payroll and human resources (HR).
Definition: What exactly is payroll?
Today, payroll is considered the overarching term for the salary and wage accounting of all employees in a company, encompassing all information and payments related to
- salaries,
- wages and bonuses,
- taxes,
- social and additional benefits, as well as
- the department dealing with salary and wage accounting.
Companies can outsource the remuneration accounting entirely or partially to an external service provider offering payroll services. This service provider then prepares the monthly settlements based on the data provided by the company.
By using such a payroll service, you can thus use your employee resources for core activities and benefit from the expertise and resources of payroll service providers, leading to faster, more cost-effective, and error-reduced payroll accounting.
What are the applications of payroll?
Payroll encompasses various task areas, which may differ according to the individual requirements and legal provisions of a company but can be flexibly adapted to significant requirements and regulations. Below, we have listed some of the most important applications of payroll:
Salary accounting
Salary accounting is an essential part of payroll and refers to the process of calculating and paying financial compensation to a company’s employees. This process considers various factors, including hourly wages, overtime, deductions, bonuses, and legal requirements such as taxes and social security contributions.
The aim of salary accounting is to ensure accurate and timely compensation or payment to employees, while all relevant legal regulations and internal company guidelines are observed.
Tax compliance
Tax compliance within payroll refers to adhering to legal regulations and provisions related to tax matters. This includes the correct calculation and withholding of various taxes, such as income tax and social security contributions, as well as other tax liabilities according to applicable laws.
Therefore, the payroll department is responsible, among other things, for fulfilling all tax obligations to avoid potential fines or legal consequences.
Social security and pensions
In payroll, social security and pensions involve managing and calculating contributions to various social security systems and pension plans for a company’s employees. Typically, this includes pension, health, unemployment insurance, and company pension schemes. The payroll department is thus responsible for the correct recording and payment of these contributions according to legal regulations and agreements between employer and employee.
Time and attendance management
In payroll, time and attendance management involves recording and managing work hours and attendance data of employees. This includes recording working hours, overtime, holiday days, and other time-related data.
By integrating time and attendance management functions into payroll systems, companies can guarantee accurate compensation calculation for employees and ensure that all working time regulations and company policies are adhered to.
Reporting and compliance
The payroll department is responsible for reporting and compliance in creating and maintaining accurate and comprehensive reports on wages, taxes, and benefits. These reports serve both internal and external requirements such as compliance audits, tax returns, and personnel cost analyses.
The payroll department ensures that all reports are correctly and timely prepared to avoid possible legal consequences and maintain a transparent overview of the company’s financial situation.
Management of employee benefits
The management of employee benefits in payroll is responsible for organising and processing additional benefits for a company’s employees. These include health insurance, life insurance, capital-forming benefits, and other additional benefits.
The payroll department ensures that the corresponding amounts are correctly withheld and forwarded to the respective providers.
To facilitate the administration and automation of payroll processes, you can rely on suitable software solutions and service providers.
Know more on the topic
What does a payroll specialist or payroll manager do?
A payroll specialist, also known as a payroll manager or salary and wage accountant, is responsible for carrying out various tasks related to salary and wage accounting in a company.
Here are some of the core tasks typically performed by a payroll specialist:
- Monthly execution of salary and wage settlements for employees.
- Recording and monitoring working hours and managing absences such as holiday or illness.
- Creating and processing travel expense and expense reports.
- Managing company pension programs for employees.
- Ensuring compliance with legal and contractual provisions around payroll accounting.
- Managing employee benefit programmes, such as health insurance and pension plans.
- Collaborating with external partners like insurance carriers and authorities.
- Updating and maintaining employee data.
- Creating reports and evaluations for the finance and HR departments.
- Supporting the accounting with questions related to remuneration payment.
- Accompanying payroll tax and social security audits.
- Consulting and supporting employees in matters of remuneration accounting.
What is the difference between HR and payroll?
Human Resources is responsible for managing, developing, and the interaction between companies and employees, focusing on recruitment, employee development and retention, and talent management.
In contrast, the focus of payroll is on salary and wage accounting, ensuring that a company’s employees are paid correctly while adhering to all legal regulations. Although the areas of Human Resources and payroll are intricately connected , they fulfil different task areas.
Payroll as a strategic tool for companies
Payroll presents companies with complex challenges, especially as the multitude of legal regulations and the internationalisation of business operations become increasingly complex. Therefore, choosing a suitable payroll system is a strategic decision with long-term effects for a company.
Many companies thus decide to rely at least partially on external service providers and opt for payroll outsourcing. This provides a sensible complement, as external payroll service providers possess the necessary expertise to implement payroll in compliance with laws and guidelines.
Ultimately, errors in payroll accounting can not only financially burden companies but also lead to far-reaching economic and legal consequences, which must be avoided. Ready to tackle the challenges in salary and wage accounting, and increase efficiency and optimal costs? With extensive experience in payroll services, we at Zalaris are ready to support your HR and payroll management. Get in touch with our experts today!