Why Your Company Needs a Payroll Accountant and How Much Is Paid

updated on 16 May 2024

In the fast-paced world of startup accounting, where innovation and agility are prized, maintaining control over the financial landscape is a constant struggle. Amid the rush to secure funding, develop groundbreaking products, and navigate market fluctuations, one often-neglected area emerges as a clandestine threat to your company's success: payroll chaos.

Picture this: talented employees demotivated due to paycheck errors, penalties piling up from tax filing mishaps, and valuable hours wasted on payroll troubleshooting rather than strategic growth. In such a turbulent environment, the need for a payroll accountant becomes paramount.

Is Payroll Accounting or HR?

One of the common questions that arises when it comes to payroll accounting is whether it falls under the human resources (HR) or the finance department of a company. The answer is not clear-cut, as different companies may have different organizational structures and preferences.

However, some general factors that may influence this decision are:

The size of the company

Smaller companies, often lean and agile, with fewer employees and relatively straightforward payroll requirements, sometimes opt for streamlined solutions. In such cases, payroll accounting duties may be assigned to the HR department or outsourced to a third-party service provider.

On the other hand, larger companies, with a greater number of employees and increasingly intricate payroll demands, face a different set of challenges. Managing payroll for a substantial workforce, especially when they includes remote employees or offshore teams subject to different labor laws and compliance standards, can become a labyrinthine task. To tackle this complexity head-on, many larger companies choose to establish a dedicated payroll accounting department or delegate these responsibilities to their finance department.

The increasing trend toward remote work and global expansion has added an extra layer of intricacy to payroll management. Remote employees or offshore teams often operate under varying tax regulations and labor laws, needing a keen understanding of international payroll nuances. This complexity underscores the importance of having a proficient payroll accountant who can navigate the intricacies of cross-border payroll and ensure compliance with local laws, no matter where your employees are located.

The expertise of the staff

Effective payroll accounting is a multifaceted endeavor that demands a blend of HR and accounting expertise. It necessitates a comprehensive understanding of HR policies, encompassing areas like employee benefits, leave management, and performance appraisal, while also requiring proficiency in accounting principles and practices, such as journal entries, reconciliations, and audits.

Given this dual requirement, it's highly recommended to have a dedicated payroll accountant on your team. This specialist can bridge the gap between HR and finance, ensuring seamless collaboration and compliance. The role of a payroll accountant doesn't need to be confined solely to one department; instead, it can be framed within a horizontal collaboration structure where they work closely with both HR and accounting teams.

Having a payroll accountant with a foot in both departments can be an invaluable asset. They can leverage their HR knowledge to accurately process payroll, incorporating employee-specific information, benefits, and deductions, all while adhering to relevant labor laws and company policies. Simultaneously, their accounting acumen enables them to maintain precise financial records, conduct audits, and handle tax-related matters with finesse.

The segregation of duties

Payroll accounting involves handling sensitive and confidential information, such as employee salaries, bank accounts, tax IDs, and social security numbers. It also involves dealing with large amounts of money that need to be transferred to employees and tax authorities. 

Therefore, it is important to have proper internal controls and segregation of duties to prevent fraud, errors, and misuse of funds. Depending on the existing internal controls and segregation of duties in each department, the company may decide to assign payroll accounting to either HR or finance.

Ultimately, there is no definitive answer to whether payroll accounting is HR or finance. The best option for each company depends on its specific needs, goals, resources, and preferences. However, regardless of which department handles payroll accounting, it is essential to have clear roles and responsibilities, effective communication and coordination, and regular monitoring and evaluation of the payroll process.

What Do Payroll Accountants Do?

Payroll accountants are responsible for managing all the aspects of payroll accounting for a company. They typically perform the following tasks:

Calculate net salaries

Payroll accountants use various formulas and software tools to calculate the net salaries of employees based on their gross wages, hours worked, overtime pay, commissions, bonuses, deductions (such as health insurance premiums), withholdings (such as income tax), and other adjustments (such as garnishments).

Process paychecks

Payroll accountants issue paychecks to employees either electronically (through direct deposit) or physically (through paper checks). They also ensure that the paychecks are delivered on time and in accordance with the company’s pay schedule.

Update payroll files and general ledger

Payroll accountants update the payroll files with the latest employee information (such as new hires, terminations, promotions) and ensure that they are accurate and complete. They also record the payroll transactions in the general ledger (the main accounting record) using appropriate journal entries.

Resolve payroll issues

Payroll accountants handle any issues or inquiries related to payroll from employees (such as missing or incorrect paychecks), managers (such as budget variances), or external parties (such as tax authorities). They also correct any errors or discrepancies in the payroll records or reports.

Generate payroll reports

Payroll accountants create various reports that summarize the payroll data for different purposes. For example, they may generate reports on payroll expenses for budgeting and forecasting; reports on tax liabilities for filing and remitting; reports on employee benefits for compliance and administration; or reports on payroll trends for analysis and decision-making.

Why Your Company Needs a Payroll Accountant and How Much Is Paid

Comply with payroll laws and regulations

Payroll accountants ensure that the company follows all the relevant payroll laws and regulations at the federal, state, and local levels. They keep up to date with the changes and updates in the payroll legislation and implement them accordingly. They also prepare and file the required payroll tax forms and returns, such as Form W-2, Form 941, Form 940, and Form 1099.

Optimize payroll processes and systems

Payroll accountants evaluate and improve the efficiency and effectiveness of the payroll processes and systems. They identify and eliminate any waste, errors, or risks in the payroll operations. They also recommend and implement best practices, policies, and procedures for payroll accounting. They may also research and adopt new technologies or software solutions that can enhance the payroll function.

Saving time and money

Payroll accounting can be a tedious and time-consuming task that can distract you from your core business activities. By hiring a payroll accountant, you can delegate this task to a professional who can handle it faster and more efficiently. This can save you time and money that you can invest in other areas of your business.

Reducing errors and penalties

Payroll accounting can be a complex and error-prone task that can result in costly mistakes and penalties if not done correctly. For example, if you miscalculate or underpay your payroll taxes, you may face fines, interest charges, or audits from the IRS. By hiring a payroll accountant, you can avoid these errors and penalties by ensuring that your payroll is accurate and compliant with all the applicable laws and regulations.

Improving employee satisfaction and retention

Payroll accounting can affect your employee satisfaction and retention. If you pay your employees late, incorrectly, or inconsistently, you may damage their morale, trust, and loyalty. This can lead to lower productivity, higher turnover, or legal disputes. By hiring a payroll accountant, you can improve your employee satisfaction and retention by ensuring that your employees are paid on time, correctly, and consistently.

Enhancing business performance and growth

Payroll accounting can also impact your business performance and growth. If you have accurate and timely payroll data, you can use it to analyze your labor costs, profitability, cash flow, and budgeting. This can help you make informed decisions that can improve your business performance and growth. By hiring a payroll accountant, you can access this valuable data and use it to your advantage.

How Much Is Paid for a Payroll Accountant

The salary of a payroll accountant depends on various factors, such as:

  • The education level.
  • The experience.
  • The industry sector.
  • The geographic location.

According to data from Glassdoor, the estimated total pay for this role in the United States area averages around $61,746 per year, with an average base salary of approximately $57,874 per year. These figures are derived from a median calculation, which represents the midpoint of the salary ranges reported on the platform.

Source: Grassdoor.com and PayScale.com
Source: Grassdoor.com and PayScale.com

However, it's worth noting that compensation figures can vary slightly depending on the data source. Payscale, for instance, reports an average salary of $60,884 per year for Accounting and Payroll Specialists.

These figures provide a baseline for what you might expect to pay for this role. It's important to consider that several factors can influence salary variations, including geographic location, years of experience, education level, and the specific responsibilities associated with the position.

In addition to these base salary figures, it's essential to recognize that there are various options available for managing payroll costs more efficiently:

Fractional Positions: Instead of hiring a full-time Accounting and Payroll Specialist, some companies opt for fractional positions. This means bringing in a part-time or contract specialist who can handle payroll responsibilities as needed, reducing the overall cost.

Part-Time Roles: Part-time roles are another option to explore. By hiring a part-time specialist, you can manage payroll efficiently without the commitment of a full-time salary and benefits package.

Outsourced Staffing: Many companies choose to outsource their payroll accounting to third-party service providers. This approach can be cost-effective because it allows you to access specialized expertise without the overhead of hiring an in-house specialist.

Hybrid Solutions: Some organizations combine in-house expertise with outsourcing for more complex payroll needs. This hybrid approach provides flexibility and cost-effectiveness.

Incorporating these options into your payroll strategy can help you find a balance between cost management and ensuring that your payroll processes run smoothly. The choice you make will depend on your company's specific needs, budget constraints, and long-term goals.

Navigating Payroll Accounting for Optimal Results

In the intricate landscape of startups accounting, payroll management stands as a critical pillar of financial stability and employee satisfaction. As we've explored, the role of an Accounting and Payroll Specialist is instrumental in ensuring that your payroll processes run smoothly, with precision and compliance.

However, it's essential to recognize that there is no one-size-fits-all solution when it comes to payroll accounting. Different factors, including location, experience, and the scope of responsibilities, can influence compensation figures. Therefore, flexibility in structuring your payroll accounting team is key.

   🔗 Kevin Mitchell | LinkedIn
   🔗 Kevin Mitchell | LinkedIn

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