Payroll Compliance

What Will You Have To Report?

Congratulations – you are lucky enough to work for a company with a global footprint! Commiserations too – now you have the headache of managing payroll and related compliance across jurisdictions with different laws, languages, currencies and cultural norms!

It is important to know what you will have to report – this varies by jurisdiction. Basic salary, overtime pay, holiday pay, sickness pay, disability payments all have to be reported worldwide. The forms on which they will need to be reported will be specific to each jurisdiction but the requirement to report the amounts involved accurately will be common to all. So it is the “quirks” we need to understand.

  • Overtime regulations vary but a key for reporting purposes is to be clear which employees are exempt and which are not. This will drive not just the monthly payroll but also the monthly and annual reporting. The European Union, for example, has the Working Time Directive prescribing a working week of no more than 48 hours. However, each country has enacted the legislation differently. The UK, for example, allowed individuals to opt out of this requirement. France, on the other hand, lowered the limit to 35 hours while yet allowing senior employees to effectively be unaffected by the legislation.
  • It is important to know the specifics of what has to be paid in each location – that will naturally drive what must be reported. For example, Mexico has the requirement to pay employees a 10% profit share by May 15 each year. Compliance will involve making sure the profit is correctly calculated, split out correctly to each employee, run through payroll and then correctly reported back to the Tax Authorities.
  • Certain jurisdictions do not have an obligation to have a written contract of employment with an employee. However, numerous countries do have an obligation to register certain specifics of the terms and conditions with the relevant authority and those details are then subject to periodic audit and supervision by the local Ministry of Labour. Examples are Spain and some countries in Latin America.
  • It is important to understand regulations governing pay for sickness in the local jurisdiction and to report it under the current classification since this will impact various payments to the Government and the payments from the Government to the employee. Wrong classification can, therefore, very adversely impact the employee resulting in a very disgruntled employee not to mention the potential for fines and penalties. For example, when reporting sick leave in the Netherlands it is important to know what type of leave – it may be short term with two different payment options, short term disability or long term disability. Each has different payment and reporting requirements.
  • Numerous countries have regulations that require benefits in kind to be reported in a specific format (e.g. UK, Canada and several others). It is important to have the necessary processes in place to have the information to hand at the year end and avoid a “mad rush”
  • Many foreign operations will have employees expend money which is then expensed and claimed back. Frequently these are items that are properly remuneration e.g. life assurance or other insurance premiums, fuel that must then be set off or reconciled to car allowances or mileage due. It is important to have a procedure that highlights such items through the year to enable accurate reporting at year end.

Collective Bargaining Agreements

Many countries have these; for example, Brazil, France, Italy, Spain among others have Collective Bargaining Agreements applicable to employees. It is important to understand these as if they apply to the Company’s employees (almost always they do) then they may impose requirements to enroll employees in specific pension funds or provide annual mandatory pay increases. Compliance with these requirements is mandatory.

These are general guidelines, for more information on your specific country or situation, pleaseĀ connect with us.