What Is Payroll? Part 2

Payroll as the Stewart of Data

The Pre-Payroll phase has the largest impact on the quality of the input data that goes into the payroll. Let us take a closer look at some of the main sources of input data.

HR Administration: preparing contract addendums, handling occupational medicine, registering, and deregistering employees with pension plan or benefits providers, etc. These are all activities which are necessary in order for the payroll to be correct, i.e., for the employees to paid on time and correctly. However, they are not strictly payroll activities, but rather payroll-adjacent activities. In other words, these activities are performed to keep the employee’s file up to date, not to calculate their pay.

Time & Attendance: monitoring working hours, tracking absences, managing vacation balances, following up with employees on leave, etc. Some organisations elect to include time and attendance in the scope of the Payroll team due to the fact that a similar skills set is needed. While this may make sense from a practical perspective, time and attendance data remains input data. As such, it is preferable to separate it from the payroll to allow for better checks and controls.

Compensation: salary increases, periodical or annual bonuses, seniority or vacation allowances, functional allowances, etc. It is actually quite common for the Payroll team to track, and sometimes even calculate, these items. Here again, while it is understandable from a practical perspective, it remains a risky practice as there are no checks and controls in such a setup, which may be damageable to the company sooner or later. The lack of checks and balances in payroll regularly makes the headlines as opportunity makes the thief.

In essence, Payroll is responsible for correctly processing the input data that they receive from stakeholders throughout the company. However, Payroll should not be allowed to create their own input data. This lack of checks and controls creates a single person dependency which is likely to lead to errors or, in extreme cases, to compliance breaches. In short, Payroll does not own any data. Payroll is the Stewart of Data.

Payroll vs Payroll Adjacent

Finally, let us take a look at the Post-Payroll and Annual Tasks phases, how they too evolve in the grey zone, and sensible delimitations can be drawn between what is payroll and what is payroll adjacent.

Accounting: Payroll is responsible for providing Finance with all the information it needs to properly reflect the payroll costs in the company’s general ledger – nothing more and nothing less. All the steps beyond that fall within the purview of Finance, e.g., reclasses, intercompany rebilling, financial analysis, etc. Many payroll engines offer the possibility to generate a GL file, i.e., a document that transcribes payroll costs into accounting entries that can be directly uploaded into the financial system of record. In this case, Payroll is responsible for providing the file. However, Finance is responsible for providing the GL accounts and cost centres to which these expenses should be booked. The reason is simple: it is Finance who owns the chart of accounts and is ultimately responsible for the correctness of financial records, not Payroll.

Employee Queries: More often than not, employees who have questions related to their payslips will go to or, which is even worse, be automatically directed to, Payroll. However, not every payslip query is a payroll query. This may sound counterintuitive, but the payslip is not made only of payroll calculations; it is also made of compensation and time data. Let us take the concrete example of the annual bonus. If an employee has a question about whether their bonus is subject to withholding tax and social insurance contributions, then this is a payroll question and should go to the Payroll team. If, however, the employee has a question about the amount of their annual bonus, then this is a policy and/or performance question and it should go to HR and/or their line manager.

Statistics & Reporting: In some HR teams, everything that has got to do with numbers is automatically directed to Payroll. This approach is often valid – but not always. It is indeed part of Payroll’s scope to file such statutory reporting as the tax return or the social insurance declaration. However, answering a statistical survey from the Labour Office is not. Labour topics sit with HR. Payroll’s participation might be needed to answer the payroll questions in the survey. However, the owner of the survey remains HR.

Conclusion: Payroll as an Ecosystem

As we have seen, all payroll phases but one are not strictly payroll but either payroll-adjacent or a mix of payroll tasks and non-payroll tasks. All things considered; it is hardly surprising that this state of affairs is confusing for many a stakeholder and employee. Therefore, rather than referring to Payroll as a function within an organisation, it would seem more appropriate to refer to it as an ecosystem. It its core, the “pure” Payroll phase. However, it requires the involvement of many stakeholders to fulfill its mission to ensure [that] employees are paid accurately and on time, while also ensuring the company meets its legal and financial obligations.