Author: Sara M. Wincek

Summary

  • Over the past several years, an increasing number of employers have decided to include payroll operations within the HR department rather than within the finance or accounting department. The primary reason is a heightened concern for and awareness of employee confidentiality issues. See Relationship Between HR and Payroll.
  • Now more than ever HR managers need to understand all the issues involved in payroll tax law compliance in order to effectively oversee and manage payroll operations. When payroll is part of an employer's HR department, the HR manager is ultimately responsible for ensuring the employer's compliance with federal, state and local payroll tax laws and regulations. See Managing Payroll.
  • HR and payroll professionals must work together to ensure the proper classification of workers as either employees or independent contractors. While this is primarily an HR function, ensuring that it is done properly and that payroll is notified of a new hire's employment status is key to payroll tax compliance. Serious penalties may be imposed on an employer by both the Internal Revenue Service (IRS) and the Department of Labor (DOL) for misclassifying workers. Therefore, HR and payroll professionals must be familiar with the various laws and tests applicable to proper worker classification. See Classification of Workers.