HR professionals are playing increasingly strategic roles in their organisations, especially as talent management becomes a key business imperative. As priorities shift to things like employee engagement, succession planning, and technological integration, many companies are choosing to outsource transactional tasks, including Payroll.
But there’s one more reason APAC companies are outsourcing Payroll: compliance. The APAC region includes more than 20 nations, each of which has their own laws and regulations regarding Payroll. As if negotiating those regulations weren’t complex enough, compliance becomes even more difficult in certain situations, as in the example of an employee who lives in one country but works in another. And the frequency with which all of those rules change adds yet another layer of complexity.
For those reasons and more, Payroll can no longer be an afterthought, handled by various HR employees as time allows. Payroll has become its own specialty, requiring not only an in-depth knowledge of multitude of regulations, but also a fail-proof process for keeping up with regulatory changes.
Here are just a few of the ways in which a Payroll outsourcing partner can help organisations in the APAC region maintain compliance:
Different countries have different laws about how long employees may be expected to work as well as how those employees must be compensated if required to work longer. In China, for example, employees who work more than eight hours in one day or 44 hours in one week must be paid at 150% of their usual rate. If those same employees work on a “rest” day, the rate goes up to 200%. For employees who work on legal holidays, it’s 300%.
So for each employee, compliance regarding pay rates requires not only correctly documenting hours worked, but also correctly calculating which hours should be paid at an overtime rate and what that rate should be. And there’s no overarching rule, as the requirements vary by country.
Policies on employee leave also vary widely from country to country. In Australia, for example, permanent employees are entitled to four weeks of paid leave per year, plus an additional 10 paid days of personal leave – with an option for two more unpaid days. Shift workers accrue additional days based on a calculation of hours worked over a twelve-month period. Contrast that to China, where employees have to work for 10 years before they’re entitled to more than five days of paid leave annually. And, in countries like Bangladesh, leave for adolescents is calculated differently than leave for adults.
Compliance with employee leave regulations is even more complex than it is for pay rates. Doing it correctly requires careful documentation and calculation of things like how much leave an employee has accrued, when that leave may be taken, when it will be forfeited if not used, etc.
Calculating the amount of taxes that should be withheld from each employee’s paycheck can be challenging even when there’s only one set of tax laws involved. Juggling multinational sets of tax laws requires both carefully documented processes as well as automated systems for incorporating changes to those laws.
Payroll compliance in APAC is challenging, tedious…and extremely important. Many countries have found a great deal of value in outsourcing payroll processes to specialists while maintaining more strategic initiatives in-house.