Difference Between HR and Payroll Software

Nilam Oswal

Nilam Oswal

Senior editor

Parul Saxena

Chief editor

Last updated: July 6, 2021

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It’s important to understand that both HR and payroll have distinct functions. In many cases, payroll tends to overlap HR, and the same person in charge even performs both tasks.

Though these two functions may have separate roles to play, they often need to go side by side.

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In small-sized companies, organizations only opt for payroll software to manage their staff salaries. However, when the business starts to expand, you need to streamline the overall people management system of the organization. At that point, HR software brings more clarity into the tasks related to it.

As a business manager, it is your responsibility to understand the difference in their functions so that you don’t make things complex. If both HR and payroll software works in coordination, it can help improve employee productivity and result in smooth business operation.

So to know the difference between the two, we need to understand the function of each software individually. 

HR Software and Its Responsibilities

Human Resource software is a system that is designed to assist you with managing employees. It simplifies and optimizes human resource management that helps you best manage your employees’ talent, keep them happy and, thus, drive productivity.

The software also helps you find the right hires for your business and deal with your employee’s grievances or complaints if any.

Organizations such as restaurants, hospitals, and retail stores have large workforces. They usually have staff working on different shifts. HR software can be a great help as it integrates modules like scheduling and workflow management. It provides a portal whereby managers can easily manage their employees. It allows employees to take time off requests, view their schedule, and also track hours worked.

Besides, HR software plays a significant role in motivating your employees. Using the software, you can efficiently work out a reward system or develop an employee scheme that might include extra holidays, compensations, etc. It also helps in planning the company’s events, team building, and more such things.

In short, HR software ensures that all your employees work towards attaining the organizational goals while providing a chaos-free environment. 

Payroll Software and Its Responsibilities

As the name suggests, payroll software is associated with employee compensation. It assists businesses in accurately calculating the payroll of each employee, eliminating the risk of any human error.

The main responsibility of payroll software is to automate the whole payroll process. It involves processing, balancing, and reconciling payroll data with the accounting systems. Not only that, but it also takes care of processing any NI or tax correctly.

Furthermore, the software makes it easy to calculate bonuses, holiday pay, reimbursements, or overtime worked. It acts as a record-keeping for the verification of any data before and after processing.

Payroll software also automatically print and deliver payslip and helps stay compliant with tax regulations. 

So Where Do This Both Software Reconcile?

As you might notice, there are many areas where both payroll and human resources departments need to reconcile. They shared coordinated functions such as recruitment, salary, bonus payments, vacation leaves, and benefit deductions.

For instance, if HR has developed a new bonus scheme for the sales employees, the payroll department needs to be informed. They need to be continuously updated about the employees’ performance so that accordingly, they can calculate the commission for the particular staff.

Plus, if the paychecks are not timely processed, companies can face issues. Thus, the HR department needs to be time-sensitive to process salaries on time and accurately.

Besides, both the payroll and HR departments share highly confidential information, including employees’ knowledge and financial data, social security numbers, and more. Therefore, these two departments need to work together closely to ensure that the data doesn’t fall into the wrong hands or unauthorized individuals.

You must be pretty clear about how HR software and payroll software need to work in close proximity to streamline activities. Let’s now talk about the most significant difference between the two. 

How HR Software and Payroll Software Differ

Here are a few places where HR and payroll software differ, 

  • Each department requires a different skillset

Payroll plays a more finance-based role. Using the payroll system, you can easily stay adhered to the state tax law regulations. Plus, it gives you a thorough understanding of accounting processes.

Whereas, HR software is more centric towards people management. It helps to streamline activities like employee attendance and performance tracking to increase the overall productivity of the organization. 

  • The size of the organization plays an important role

A small business owner can do with just a payroll management system, even for employee management. The numbers of employees are less, and so it can handle them with ease.

Payroll software helps mitigate any risk or errors involved with the payroll processing system, and also reduces the time and efforts spent otherwise. The best part is that it can be even used by non-financial personnel. 

However, a large organization, they have a huge workforce that needs to be handled meticulously. It needs to have steady workflow management to run a business successfully. Tackling a large number of employees can be a daunting task unless you deploy an HR software system.

An HR software helps with the overall workflow process — from the recruitment process to handling employees’ grievances, and staying adhere to laborforce regulations. When the workforce of an organization increases, it can be hard to handle manually. That’s when HR software comes in handy. It can help track employees’ performance and the hours worked to enhance productivity. 

Parting Words

It is clear that both payroll software and HR software is essential. If HR software helps track the hours worked, the payroll software helps correctly calculate the compensation they deserve. Plus, HR management software is responsible for fostering communication between departments.  

Both functionalities are necessary to maintain sustainability in the organization. Together they give a 360-degree view of the organization and provide insights, which is crucial in making effective decision making.

Nilam Oswal
Nilam Oswal is a Content Marketing Head and Brand Strategiest at SoftwareSuggest. When she's not hard at work, she can be found wandering, reading, and just generally having a good time in life.

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