Payroll is one of the major and indispensable expenses for most of the organisations. It is that department in an organisation, which requires a dedicated team of personnel to address payroll issues and rollout paychecks to employees.
So the question for many is: does payroll fall under accounts payable or HR? This ongoing debate has been on since decades. This article throws light on the what, when, where, why, who and how of this amazing nexus (payroll, HR and accounts payable).
HR and Payroll
Human resources (HR) department is accountable for managing and looking after most of the aspects of an organisation’s relationship with its people right from hire to retire and benefits, etc. HR department manages payroll by computing paychecks, writing paychecks and looking after benefit accounts of employees. Thus, payroll in a way falls under the HR department in a sense that it takes care of the ongoing operations related to paying the employees. This is the reason why many coin HR and payroll as an inevitable bond. In fact, organisations also tend to maintain separate bank accounts dedicated to paychecks only, which are managed by the HR department.
Payroll and Accounts Payable
Accounts payable is a department or a team that organizes financial data for a business and this includes all those transactions that have accrued but are yet to be paid. Since businesses don’t remunerate employees for work done every single day, payroll balances tend to accrue between the pay periods. Whether an organisation lists these amounts in its payable balance, interim payroll is always an outstanding financial liability that has to be paid off eventually. As such, accounting of payable balances ought to include payroll along with all the unpaid balances.
When the human resources department withholds amounts from the paychecks of employees for contribution for benefit programs like insurance, retirement, etc., these amounts often are not paid instantly to the concerned institution or agency that processes them. For instance, if you do insurance payments on a monthly basis, but disperse the contributions over the course of a month, then the amounts that have been withheld but not been paid become financial liabilities that can be termed as accounts payable.
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