Where does Payroll sit within a business?

Jasmine: Hi I’m Jasmine, and I’m a Payroll System’s Specialist at Employment Innovations. Today, we’ll be exploring where the payroll function sits within a business and highlight some key factors that come into play.

We can’t talk about payroll without mentioning compliance. Payroll compliance falls somewhere between HR and Finance departments, which means there is a lot to factor in when we talk about where payroll function sits within a business.

Let’s start with the finance or accounts department, in which the payroll function has traditionally been placed. Payroll and finance work hand in hand when it comes to processing payments to employees, to the Australian Tax Office to meet Pay-As-You-Go obligations on Activity Statements and also making superannuation payments. Payroll may also need to engage with finance for things like salary sacrifice payments to third parties, and state payroll tax payments.

Payroll will handle the employee side of things, like ensuring that employees are paid every pay period, being set up to have the correct amount of PAYG deducted from their wages, making sure payments are set up to attract payroll tax, and setting up pay categories to attract superannuation.

From here, the payroll department may compile reports on a periodic basis, monthly or quarterly for example depending on the due dates for a payment and provide this to the finance departments to make the payments. It could also look like the payroll initiating the payments being made in the business bank account, and finance approving the payments.

When we consider the HR side of things, we start looking at employee onboarding, collation of personal information, and record keeping. During the onboarding of an employee, there are several documents that the HR department will request from an employee. These include forms such as the Tax File Declaration and Superannuation Choice form which are then passed on to payroll. As payroll professionals, it is our responsibility to ensure that the selections made in these forms are entered correctly into our payroll software to ensure employees are paid and taxed correctly each pay period, and that their superannuation is being paid into the correct account.

The onboarding documentation should have the employee’s contract, which includes information about their salary. The contract should outline the employee’s pay rate, whether it be a salary or an hourly rate, their pay frequency, and their superannuation conditions such as whether super is part of their salary, or it is calculated on top of the salary.

An employee’s contract should also outline if they are paid according to an award or enterprise agreement, which determines how an employee is paid based on the hours they work. Payroll will need to ensure the correct pay conditions are applied to each employee, which will in turn make sure they are paid in line with compliance with Fair Work conditions.

Payroll is complex, and its compliance is governed by both the ATO and Fair Work authorities, which means that payroll responsibilities are pulled from both departments equally. So with all of this in mind, we can say that payroll sits in between both a business’ finance or accounts department and their HR department.

If you’d like to learn more about the intricacies of the HR and payroll function, or how we can help improve your current payroll processes, please get in touch and we’ll be happy to help.