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Human Resources and Payroll Function in ACCA BT

Updated 11 October 2026 · Fact-checked

The human resources (HR) function recruits, trains, appraises, rewards and supports employees. Payroll turns HR data into correct pay and deductions. HR and finance work together on staff budgets, pay, headcount and costs. To answer exam questions, identify the HR activity, then state what information passes to or from finance.

Understand Human Resources and Payroll Function

Every business needs people. The human resources (HR) function manages those people from the day the business decides it needs them until they leave. Its aim is to get the right number of staff, with the right skills, at the right cost, and keep them motivated.

The main HR activities are:

Recruitment and selection: workforce planning, job descriptions, advertising, interviews and tests, and appointment.
Training and development: induction, on-the-job and off-the-job training, and career development.
Appraisal and performance management: reviewing performance against objectives, giving feedback, and linking results to pay, promotion or training.
Reward and remuneration: designing pay scales, bonuses and benefits.
Employee relations and legal compliance: contracts, discipline, grievances, health and safety, and employment law.
Leaving the business: resignation, redundancy, retirement and dismissal.

Payroll is the process of paying employees. It calculates gross pay, deducts items such as income tax, social security and pension contributions, and works out net pay. It also pays the amounts owed to tax authorities and pension providers. Payroll may sit in HR, in finance, or be outsourced. Many exams place it in the finance function because it involves money and accounting records.

HR and finance depend on each other. HR gives finance the starting data: new joiners, leavers, pay rises, hours worked, overtime and absence. Finance gives HR the money: staff budgets, cost of recruitment and training, and the cost of pay awards. Finance also records payroll costs in the ledgers and controls cash paid out.

The link matters because staff costs are often a business's largest expense. Poor information flow causes errors. Examples are paying a leaver, missing a pay rise, or hiring above budget. Good controls reduce these risks, such as authorised starter and leaver forms and separating the person who sets up employees from the person who approves payment.

Key formulas to remember

Net pay: Net pay = Gross pay − employee deductions (tax, employee social security, employee pension, other deductions); Deductions are held by the employer and paid over to the authorities. They are a liability until paid.
Gross pay: Gross pay = basic pay + overtime + bonuses + allowances; Gross pay is what the employee earns before any deductions.
Total employment cost to employer: Employer cost = gross pay + employer's social security and pension contributions; Employer contributions are an extra cost to the business and are not deducted from the employee.
Core HR activity list: Plan → Recruit → Train → Appraise → Reward → Retain or exit; A useful order to remember when you classify an HR task in a question.

How to solve Human Resources and Payroll Function questions

Use this method for any question on HR, payroll or their links with finance.

1Read the scenario and underline the people-related event, such as a hire, a pay rise, a review or a leaver.
2Name the HR activity involved: recruitment, training, appraisal, reward, employee relations or exit.
3Decide whether it is an HR task, a payroll task or both. Payroll tasks involve calculating or paying money.
4Identify what information HR must send to finance, or what finance must send to HR.
5Link to the effect on finance: budgets, cost records, cash payments, tax and pension liabilities.
6If the question asks for a risk or control, think of errors, fraud (for example ghost employees) and legal breaches, then match a control.
7For number entry, calculate gross pay, then deductions, then net pay, and check the question asks for the right figure.
8Choose the option that matches the exact wording. Reject options that give the task to the wrong department.

Quickest way: Task-to-department matching

When to use it: Use this for multiple choice and multiple response questions where you must decide who does a task or what information flows between HR and finance.

Ask: does it concern people, skills or conduct? That points to HR.
Ask: does it concern calculating, paying or recording money? That points to payroll or finance.
If both apply, expect a link: HR supplies data, finance supplies budget or payment.
Eliminate options that swap the roles, such as finance running appraisals or HR approving cash payments.
For number entry, work gross pay, then deductions, then net pay.

Common mistakes in Human Resources and Payroll Function

Treating payroll as purely an HR task.
Payroll deals with employees, so it feels like HR.
Fix: Remember that payroll is about calculation, payment and records. Many organisations place it in finance. Say it depends on the organisation, and that HR and finance both contribute.
Confusing gross pay with net pay.
Students rush and read the wrong figure.
Fix: Gross is before deductions, net is after. Write both words next to your answer and check which one the question asks for.
Deducting employer contributions from the employee's pay.
Employer social security and pension are linked to wages, so they seem to be deductions.
Fix: Employer contributions are an additional cost to the employer. Only employee contributions reduce net pay.
Listing HR activities without linking them to finance.
Students memorise the HR list but do not read the chapter title, which is about relationships.
Fix: For each activity, add one finance link, such as recruitment costs and budgets, training costs, or appraisal results driving pay changes.
Mixing up training with appraisal.
Both relate to improving performance.
Fix: Training builds skills. Appraisal reviews performance. Appraisal can identify training needs, but it is not the training itself.
Ignoring controls in payroll scenarios.
Students focus on the calculation and miss the risk.
Fix: Think of ghost employees, unauthorised pay changes and paying leavers. Match them to controls such as authorisation, segregation of duties and regular reconciliation of payroll to HR records.

Worked examples

Example 1

An employee earns basic pay of $2,000 a month and overtime of $300. Employee deductions are tax of $380 and pension of $100. The employer also pays pension contributions of $150. What is the net pay, and what is the total cost to the employer?

Show the solution

Gross pay = $2,000 + $300 = $2,300.
Employee deductions = $380 + $100 = $480.
Net pay = $2,300 − $480 = $1,820.
Employer cost = gross pay + employer contribution = $2,300 + $150 = $2,450.

Answer: Net pay is $1,820 and the total cost to the employer is $2,450.

Example 2

A company's marketing department wants to hire three new staff. Explain which information HR and finance should exchange before and after the hires are made.

Show the solution

Before hiring: finance checks the staff budget and confirms whether the cost of the three posts is affordable. HR confirms the need through workforce planning and prepares the job descriptions.
HR gives finance the expected salary levels and recruitment costs, such as advertising and agency fees, so they can be budgeted.
After hiring: HR sends finance and payroll the new starter details, including start date, salary and bank details, on an authorised form.
Payroll adds the employees, calculates pay and deductions, and pays them. Finance records the costs and pays tax and pension amounts to the authorities.
Finance reports actual staff costs against budget, and HR uses this to plan future recruitment.

Answer: Finance supplies budget approval and cost reporting. HR supplies the need, salary details and starter data. Payroll then pays the staff and finance records the costs.

Exam tips

Read each option for the department doing the task. Many wrong options swap HR and finance roles.
For multiple response questions, select exactly the number asked. Check each option separately as true or false.
In number entry payroll questions, follow gross pay, deductions, net pay in order, and watch for employer-only costs.
Always add a finance link when you describe an HR activity. The chapter is about relationships between functions.
In scenario questions on errors or fraud, think of authorisation, segregation of duties and reconciliation as controls.

Practice questions from The relationship between accounting and other business functions

Human Resources and Payroll Function in other exams

The same ground in other exams, if you are preparing for more than one or want another angle on it.

Human Resources and Payroll Function: frequently asked questions

What are the main functions of human resource management in ACCA BT?

The main functions are workforce planning, recruitment and selection, training and development, appraisal, reward, employee relations and managing exits. Payroll is closely linked and often sits in finance. Learn each with a one-line example.

How does the HR department work with the finance department?

HR provides data on starters, leavers, pay changes and hours worked. Finance provides budgets, pays staff, records the costs and pays tax and pension amounts. They also work together on staff cost control and pay awards.

Is payroll part of HR or finance?

It depends on the organisation. Payroll may be run by HR, by finance or by an outsourced provider. In ACCA BT it is often treated as part of the finance function because it involves calculating and paying money.

Why do HR and payroll need controls?

Payroll is a large cash outflow and is open to error and fraud. Examples include ghost employees and paying leavers. Controls such as authorised forms, segregation of duties and reconciliations reduce these risks.