Human Resources (HR) and payroll provide two very distinct services within a business, but there are times when they overlap and, especially in smaller companies, payroll often sits within the HR department or indeed, both roles are performed by one person. 

What is the difference between HR and Payroll? 

As stated above, HR and payroll are two different roles. While they may overlap at times and can sometimes be performed by the same person, they have very important differences and integrating the two can sometimes cause problems. 
The main difference between the two is that HR deals with people, whereas payroll deals with finances. The skillset for each, while able to be executed by a single individual in theory, are very different from one another. 

What does Human Resources do? 

To be successful in HR, one would need to have excellent organisation, communication, and people management skills. HR deals with people, policies and employment legislation. It is charged with getting the most out of a workforce whilst ensuring the company abides by employment law and meets their responsibilities to its people and vice versa. HR personnel must have the necessary training and skills to be able to discuss grievances and work-related issues with staff using appropriate language and without breaching HR rules and regulations. If not, there is an increased risk of employment tribunal claims against the company. 

What does payroll do? 

Payroll, on the other hand, involves several activities that are also vital to an organisation. Payroll must ensure that employees are paid on time and receive their payslip when they should. Part of this includes making sure that all necessary deductions are made from employees’ pay, such as tax, NI and pension contributions. If applicable, payroll will also calculate bonuses, statutory pay, and overtime. Staff wages are often the largest expense that a business has, so ensuring they are handled correctly, abiding by HMRC’s tax rules and regulations, is vital to a business’ financial health. 
Payroll requires much more financial and accounting knowledge than HR, whereas HR requires more knowledge of company policy, employment law and people management. 
Despite clear differences, communication between the two roles must be strong, clear, and appropriate, and both need to be able to collaborate well, especially considering the confidential and sensitive nature of the information that both departments work with. Many things will occur that will affect both roles such as the hiring, rewarding or sadly laying off and in some cases firing of staff. HR will typically add or remove employees onto a people management system for payroll to then ensure they are paid correctly, for example. 

What are payroll services? 

We’ve briefly outlined (and very oversimplified) what both HR and payroll cover. Obviously, there is much more to both roles, and they are vastly more complex than the brief descriptions above, with a variety of specialist training and qualifications available for each. 
But what is a payroll service? And what does it encompass? 
A payroll service is an external, third-party service provider that helps with your business’ payroll requirements. Just as you may employ an external marketing agency to handle your marketing efforts, or an accountancy firm to handle your accounts and tax returns, you can do the same for payroll. 

A payroll service provider (often called a payroll bureau) can help with: 

keeping accurate payroll records 
calculating wages 
calculating deductions from salaries (i.e., NI & pension contributions, and taxes) 
preparing and sending employee payslips and tax forms 
ensuring HMRC guidelines, regulations, and rules are adhered to 
Management reports 
Pensions enrolment 

How to do payroll in the UK? 

To meet all your obligations to HMRC as an employer, there are certain things you must do if you decide to run payroll yourself. If you employ a payroll bureau to do it for you, they will know what needs to be done and have the experience and knowledge to simplify the process and do it all for you. 
If you decide to keep payroll in-house you’ll need to register as an employer with HMRC and sign up to PAYE online. Once signed up to the HMRC PAYE online system, you’ll need to ensure you have the correct HMRC-recognised software with which to run payroll. This is so that the information you enter into the software gets reported to HMRC and correctly calculates how much you owe them, otherwise your PAYE bill may end up getting calculated incorrectly. 
You’ll then need to keep accurate records of: 
Payments made to employees 
All deductions from salaries and wages 
All reports made to HMRC 
All payments made to HMRC 
All leave and sickness absences from employees 
All tax code notices made to employees 
All taxable benefits and expenses 
All payroll giving scheme documents – including all contracts and authorisation forms 
You must follow all data protection rules regarding any employee information. 
You’ll also need to keep all your records for three years after the tax year they relate to, as HMRC can perform an audit at any point to check you have paid the correct amount of tax. 
If you’re just signing up to do payroll yourself, you will need to tell HMRC about any new (and existing) employees to check they need paying via PAYE, use the correct tax code for them, find out if there is a student loan to repay from their wages, and to get the correct details to set them up on your payroll software. 
Once you have registered with HMRC, purchased the correct payroll software, signed up to PAYE online, and started to accurately record everything, you can work out all the deductions, overtime, and wages required for your employees and begin to run payroll! 
As you can see, payroll is not as straightforward as handing over cash to your staff for the hours they’ve worked. There is a lot more to it and it all needs to be done correctly and by the book, otherwise there can be hefty penalties involved. It is also beneficial to get it right for accounting purposes so that you have a good understanding of your company’s financial health and in particular its cash flow. 

What are the benefits of a payroll service? 

Contracting a payroll bureau service to run payroll for you will not only save you time (and often money), but it will ensure that your payroll responsibilities are met properly and accurately and all your obligations to HMRC are fulfilled. 
Paying a payroll bureau to run your payroll is normally less costly than employing a full time Payroll Manager or Officer, depending on the size of your business and the number of staff you need to pay. It can also be more beneficial to outsource your payroll to an external agency as they will have the experience and expertise to handle your payroll efficiently whilst ensuring you are compliant. They will stay up to date with any regulation or system changes implemented by HMRC and, as such, so will your payroll. 
By outsourcing payroll, you free up either your own time, or that of the staff member that would be performing the role, to focus on other areas of the business that may be more suited to your expertise. 
Using an impartial third-party for your payroll requirements can sometimes help you reduce your expenses and can even help you find hidden costs that you were unaware of. Having trained professionals handling your payroll responsibilities can also minimise any chances of errors or omissions that can end up being rather costly. 
Using an external agency that has the knowledge, experience, and expertise to manage your payroll efficiently and effectively can save you money, time, and, most importantly, give you peace of mind that it is being done correctly. 
If you’d like any assistance with your payroll and would like to discuss the payroll bureau services we offer here at Abaqus, get in touch. 
Tagged as: Human Resources, Payroll
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