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Tips On Managing Regional Payroll Compliance

With globalisation, organisations today are finding value in expanding their operations beyond their local and neighbouring markets. Besides allowing companies to find lower-cost alternatives to produce products and services, it also increases global competition and creates a wide variety of options for consumers.

Globalisation also provides a platform for employees to gain exposure in working in a completely different culture and environment. It offers greater mobility and promotes flexible working arrangements.

However, for an organisation with global operations, managing payroll can be a stressful situation. Timely payroll processing is often impeded by changing payroll legislations and tax laws locally. Given the need to ensure that payroll is compliant with local legislations in each country that the organisation has operations in, this requires both accuracy and awareness of HR’s part.

To mitigate the risk of non-compliance when managing regional payroll operations, here are some tips when processing regional payroll:

Build a local HR team

Having a local HR team in place allows you to leverage on their expertise in the local payroll regulations and statutory requirements. If your organisation outsources the payroll process, it may be helpful to get the local HR team to review the payroll reports as they are likely to be familiar with the local salary items such as allowances and tax deductions, as well as compliance matters.

Similarly, having a local HR team facilitates communication with local authorities in terms of statutory reporting requirements and employees’ payroll queries. This could be particularly crucial in countries such as China and Thailand whereby English is not their first language.

Understand local payroll regulations

Regardless of whether you have a local HR team in place or not, it is still imperative to have a good understanding of each country’s labour laws and payroll regulations. For instance, being aware of the deadlines for statutory filing in each country as well as the salary items that are eligible for tax deductions.

While payroll software can be programmed to handle regional tax calculations and filing, what happens if there is an error in the calculations or salary item is incorrectly included during the calculation?

As tax legislations and filling platforms vary from country to country, understanding local payroll regulations allow you to better prepare for each payroll period beforehand. For instance, some countries may require you to file employee’s tax manually through paper forms. Other countries may require additional details such as employees’ tax and social insurance details. For example, the recent new guideline issued by the Singapore Central Provident Funds Board (CPFB), organisations will not be allowed to submit CPF manually through cheque and payment advice(s) with effect from 01 January 2020. Employers are encourage to submit their CPF payments electronically such as through CPF E-Submissions, AXS Machines, third party softwares such as Crimson Logic etc.

Being aware of these nuances allows you to better plan your monthly payroll schedule to account for the longer payroll processing time in certain countries.

Plan for an earlier payroll schedule whenever there are regulatory changes

Labour laws, payroll regulations and tax legislations change from time to time. While most payroll software would automatically be updated to reflect these changes in regulations, that does not mean that you automatically assume the calculations and deductions are correct.

After the payroll software update, it is always good to conduct a test run to verify the accuracy of the payroll calculations. Plan your payroll schedule to ensure that there is sufficient time for testing and rectifications. This helps to minimise the risk of payroll errors while ensuring compliance with updated payroll and tax regulations.

Stay abreast with changes in payroll legislations

Besides setting aside time to ensure that your payroll software complies with ongoing legislative changes, it is crucial to ensure that you thoroughly understand and are aware of these changes as well.

Keep abreast with ongoing changes in labour laws and payroll legislations for the countries that you are managing by following news and announcements on the respective regulatory bodies’’ websites. Alternatively, you may opt to receive regular email communications so that you do not miss out on any important changes in terms of labour laws.

By keeping yourself updated with ongoing changes, this allows you to allocate time and resources to reorganise internal processes and partner with external vendors in ensuring payroll compliance with the updated changes.

Managing regional payroll while ensuring compliance with each country’s statutory requirements is certainly no easy feat. In i-Admin, we have a team of experienced payroll professionals that is based across Asia Pacific including Singapore, Hong Kong, Japan, Malaysia, and China. Our team is well-positioned to support your payroll needs and provide you expert knowledge to ensure payroll compliance.

Talk to us today to find out more about our payroll services.

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