A topic often raised in conversation with business owners starts with the question, “Should payroll report to HR or to Accounting?”  A flip response could be simply, Yes – or Either.


Responding more fully:

The key to deciding the question is understanding that the payroll process is much more a puzzle than a straight line.  Payroll brings accounting principles and HR knowledge together:

  • Balancing accounts
  • Wage & hour regulations
  • Knowledge of application of time off of work and other organizational practices
  • Compensation and staffing principles


Add benefit enrollment, eligibility, deductions and invoicing and the puzzle becomes truly complex.


The ability to learn “the payroll system” may not be sufficient to monitor and report critical organizational information and trends.  Strong spreadsheet, data analysis and database skills may add significant value to the payroll job. Communication skills are valuable to explain changes or errors to employees.  Vendor relationships may be important as benefit enrollments are implemented.  The ability to maintain confidentiality is critical.


The “final answer” is that payroll processing is an important function: not one to be assigned lightly or arbitrarily.  The best organizational answer is that regardless of where payroll processing fits in the organizational chart, all interested parties from all relevant functions (accounting, HR, benefits, compensation, risk management, etc) need to participate in active and frequent communication.* In this way, the payroll function can offer valued service to employees and to the organization.