Difference Between Salary & Payroll

There exist many differences between salary and payroll. Salary refers to the amount of pay -- or remuneration -- an employee earns. Payroll refers to the system employers use to process salary payments. Notwithstanding the differences between actual pay and process, they are also connected. Payroll is a necessary workplace function for employees to receive their earned compensation.

Payroll is a process that includes calculating wages, withholding appropriate income and payroll taxes, and deducting employee-authorized amounts. The final step in the payroll process is distributing paychecks to employees in a timely manner. In fact, some states have laws that govern the dates by which employers must distribute employee pay as well as guidance on how many days comprise a pay period. It’s an administrative function that combines human resources and accounting procedures. Automated payroll processes enable employers to manage both timekeeping and pay. The technology stores employee records for vacation accruals and benefits calculations, as well as payroll calculations based on stored data for tax withholding, deductions and benefits contributions.

Salary is a condition of employment, not a process. Remuneration, as it’s sometimes called, is the amount of wages paid to employees for performing their work. The term “salary” can include wages that are paid on a salary basis or an hourly basis. For many employers, it’s simply easier to refer to all employee pay as salary. Many human resources practitioners differentiate salary from wages. Salary is a term often used for employees who receive compensation based on a fixed rate for a fixed number of hours. For example, human resources might refer to a compensation manager who's paid $75,000 a year, instead of a compensation manager who is paid $36.05 an hour. On the other hand, the term "wages" is used when describing pay rates for employees in positions that are classified as hourly, non-exempt roles. For instance, it's common to see a job posting that states a production operator makes $12.75 an hour, instead of a production employee who makes $26,520 a year.

Titles for employees who process wage payments include payroll specialist, payroll coordinator or payroll clerk. Employees who process payroll must have knowledge of compensation and benefits, income and payroll tax regulations, and legal procedures, such as court orders for garnishments and child support. In addition, payroll specialists must be familiar with technology that supports proper withholding for taxes, benefits and payroll deductions on an aggregate basis, as well as for payroll scenarios on an individual employee basis. Many payroll specialists are involved in the coordination of human resource management systems that are specifically configured for complex payroll processing.

Generally speaking, specialists who work in the compensation area of human resources should have some knowledge of payroll processes. However, compensation specialists are more familiar with wage-setting, compensation trends and the effect labor market trends have on compensation practices. They also ensure coordination between the company’s performance management system and salary or wage adjustments based on employee performance ratings. Compensation specialists also may be involved in discussions about employee bonus programs and other forms of employee compensation, such as cash incentives and employee rewards.