Hot Take: Payroll is a Finance Function, not an HR function

Payroll is not a Human Resources function.  There, I said it.
It is a finance function and treating it otherwise creates unnecessary risk.

Payroll and Human Resources must work closely together, but they serve different purposes. Payroll involves wages, taxes, statutory deductions, compliance, financial controls, and the release of company funds. These are core finance responsibilities.

Human Resources is responsible for hiring, onboarding, job changes, compensation decisions, and benefits administration. HR inputs employee data and pay details into the HRIS. Finance should independently validate that information, process payroll, and authorize payment.

Organizations often place payroll under Human Resources because it operates within the Human Resources Information System (HRIS). That is a decision of convenience, not a governance one.  HR knows how to enter data into a system, doesn’t necessarily make payroll an HR responsibility.

This separation is a fundamental internal control. When the same person or department controls employee data and payroll processing, the risk of error and fraud increases. Proper segregation of duties creates checks and balances that protect the organization.

In a well-governed structure, HR provides accurate and timely data, and finance verifies, processes, and releases payroll. Each function remains accountable for its role.

Both Human Resources and Finance exist to protect the organization. Clear boundaries between them do exactly that.

It’s that time of year that Human Resources and Finance will work very closely together.  The budgets for 2026 have been written, staffing plans created, year-end bonuses determined.  Now, comes the Annual Reporting Requirements.  Time to review W2 information to send to employees for tax filing.  

Year-End W-2 Reporting Checklist for Employers

W-2 (Wage and Tax Statement) REQUIREMENTS

https://www.irs.gov/forms-pubs/about-form-w-2

Who must file?

All employers who paid wages to employees during the year.

☐ Verify Employee Information

• Confirm legal names

• Verify Social Security numbers

• Confirm current addresses

Tip: Mismatches cause SSA rejections and penalties.

☐ Review Payroll Records

• Confirm total wages, tips, and compensation

• Verify federal, state, and local taxes withheld

• Review pre-tax deductions 

• Confirm imputed income

☐ Check Benefits & Special Items

• Ensure health insurance cost is reported in Box 12, Code DD (informational only)

• Confirm retirement plan checkbox is correct

• Review third-party sick pay, bonuses, commissions

☐ Prepare & Distribute W-2s

• Deliver W-2s to employees by January 31

• File Copy A with the SSA (electronically if required)

• File state/local copies as applicable

☐ File W-3 (Transmittal Form)

https://www.irs.gov/forms-pubs/about-form-w-3

Tip for Employers

Even when using a payroll or benefits vendor, the employer is legally responsible for accuracy and compliance.

I am not an attorney and this is not legal advice.  Consult your benefits broker, payroll provider, or tax professional with any questions.