There are many bigger companies out there that offer both payroll and HR services under one umbrella. While this might sound like a great idea to “bundle” these things together, it might not be in the best interest of your business. Bundles are not like the home and auto insurance incentive to get the discount. In this case, bundling these two functions is not the bang for the buck a business owner is looking for.
HR is typically aligned with the payroll department because payroll data comes from HR activities such as recruitment, terminations, promotions, unpaid leave, benefits, and deductions. HR is also responsible for many employee deliverables, including changes to pay, salary, and bonuses.
While Human resources (HR) and payroll are managing how employees are compensated they must have distinct functions. Human Resources oversees employee relations, while payroll deals with the compensation of employees. (“What Are the Functions of Payroll Services vs. Human Resources? - LinkedIn”)
HR oversees new hire onboarding and system configurations. Payroll is then responsible for ensuring that each component of their payment is correctly overseen. Both functions are important to a small business owner, but they must be correctly managed, and compliant with the current rules and regulations.
The key thing here is that Payroll and HR should work in tandem, but they have separate functions. Working together can provide business owners with an effective way to audit each other through checks and balances.
According to Coursera “HR's primary activities include recruitment, administration, compensation and benefits, training and development, and employee relations and performance management.” We agree with most of this, but we would add that your human resources department is human first. They are a point of contact that is available to your employees and the business owner whenever they have questions or concerns. Human resources should be approachable and aligned with business goals and not just there for paperwork.
Another important role of human resources is understanding benefit packages that are part of the employee offerings. Payroll really isn’t in charge of knowing what doctors are “in-network” and it isn’t there to help with adding a dependent. You really need a human resources professional that is familiar with the company’s offerings. If you need help with healthcare benefits, we highly recommend our sister company AUI for these offerings.
Human resources should also be available for substance abuse and recovery resources, along with mental health resources that are based in your community and available to anyone in your business. Local outreach is a crucial factor in managing employees in their times of need. When mental health impacts 1 in 5 people every single year it is paramount that your team has resources. We have a blog on this topic if you would like more information HERE.
In recent years there have been some larger payroll companies that have expanded their business model to include some basic HR functions. The problem with this bundle is that the solution is very cookie-cutter and does not always tailor a program to your individual needs. In addition, a business owner utilizing these services will not always have the same point of contact when they call. The person on the other end of the phone may or may not be familiar with you as the business owner or your footprint.
Another issue is that they may not have personnel that are up to speed with current regulations in your State. For instance, many small businesses have high school-aged employees, and employment law in each state can vary greatly on how many hours that employee can work, and when they can work. We have an entire blog on this if you want to read it HERE.
What happens if two of your employees have a conflict and you, the business owner, need help mitigating the situation? Payroll is not responsible for conflict resolution. There are legal reasons you as a small business owner need to do human resource-related things right. If you do them wrong, it can cost you in so many ways. Disgruntled employees are unwelcome news for any small business. Having steps in place to mitigate problems through the proper channels is essential for any business.
A well-run organization wants its team to run smoothly, payroll and human resources do work in tandem but are separate departments. Do not make the mistake of putting human resource responsibilities on a payroll person’s shoulders.
Unlike bundling your home and auto insurance, bundling payroll and HR functions together is not always a great idea. You want your employees to have a point of contact that can be knowledgeable and answer your questions. At ClarityHR our team is always available, knows your account, and we are truly an extension of your team.
The bottom line, it is always important to have someone that you can trust to answer the phone when you need something. You need the right people to coordinate the correct policies and procedures designed for your business. It is not always the right solution for small businesses to have the same cookie-cutter solution as a big corporation.
Need help navigating your human resources? Contact us today to get started.