1. Global Payroll: Regional Focus
Presented by: Kira Rubiano
Date: October 2017

2. Speaker
Kira Rubiano Senior Partner Management Specialist Celergo Global Payroll
Kira Rubiano:
(847)

3. Agenda Regional Breakout Payroll Set-up Payroll Timing
Payroll Calculations
Funding Requirements
Compliance & Filings
Outsourcing & Management Trends

4. Regions for Today's Presentation

5. Regions
Middle East & Africa (MEA)
Latin America
Asia Pacific
Europe

6. Entity Employment Contracts New Hires and Terminations
Payroll Set-up
Entity
Employment Contracts
New Hires and Terminations

7. MEA: Payroll Set-up
Entity: Most countries require entity set-ups for payroll
PEOs are not common
Many try to use the contractor route initially
Entity needed for work permits
Employment Contracts: Standard/Offer letters

8. Agenda MEA: Payroll Set-up
Benefits: Few additional benefits offered New Hires: May have to be registered with local agencies

9. MEA: Payroll Set-up
Terminations: Standard, except Algeria

10. Latin America: Payroll Set-up
Entity: Most countries require entity set-ups
PEO an option for most locations
Employment Contracts: Complex, include collective agreements
Peru: register every contract with Ministry of Labor
Contract based on industry sectors

11. Latin America: Payroll Set-up
Benefits: Supplemental benefits are “topped up” – life, medical, pension (tax exempt)
Meal and transport tickets are common
New Hires: Often need to be registered with local government agencies

12. Latin America: Payroll Set-up
Terminations: Difficult.
Protect the employee – terminations with no cause are costly
Usually a labor lawyer is involved, often requires off-cycle payments

13. Asia Pacific: Payroll Set-up
Entity: Most countries require entity set-ups
PEO an option for some locations
China: Rep Office need to use PEO
Employment Contracts: Standard/Agreements

14. Asia Pacific: Payroll Set-up
Benefits: Some benefits, but mostly government sponsored or individually sourced New Hires: Passport and “booklet” copies are common request

15. Asia Pacific: Payroll Set-up
Terminations: Standard

16. Europe: Payroll Set-up
Entity: Many countries require entity set-ups
PEO an option for most locations
Do not need an entity in Netherlands, UK, France, etc.
Employment Contracts: Complex

17. Europe: Payroll Set-up
Benefits: Many benefits are included in social taxes, but often companies “top them up.”
Meal tickets are common
New Hires: Often need to be registered with local government agencies
Elements include: collective agreements, payroll timing, and termination clauses

18. Europe: Payroll Set-up
Terminations: Difficult.
Usually a labor lawyer is involved, often requires off-cycle payments

19. Pay Cycles Payroll Calendar Holidays & Work Week Year-End
Payroll Timing
Pay Cycles
Payroll Calendar
Holidays & Work Week Year-End

20. MEA: Payroll Timing Pay Cycles: typically monthly
Pay Dates: 25th – 27th
Holidays: Islamic and Christian Holidays

21. MEA: Timing Work Days: Oman, Saudi Arabia: Saturday to Wednesday
UAE, Qatar: Sunday to Thursday
Lebanon, Angola, South Africa: Monday to Friday
Work Week: 40+ hours (43 to 50)

22. MEA: Timing Year-end: Middle East:
May have none, (GOSI countries- Jan to Dec), Exceptions – Pakistan: Jul to Jun
Africa typically: Jan to Dec, South Africa: Mar to Feb

23. Latin America: Timing Pay Cycles: Typically monthly and semi-monthly
Mexico (Dependent on Overtime)
Factories may be weekly
Brazil and Argentina: Semi-monthly, with estimated pay
Pay Dates: 15th, EOM
Holidays: Christian, Carnival and Easter–10 to 15 holidays a year

24. Latin America: Timing Work Days: Monday through Friday
Work Week: 40+ hours (48 most of them)
Year-end: Jan to Dec

25. Asia Pacific: Timing Pay Cycles: Typically monthly
Australia (more variability)
Philippines/Russia: semi-monthly
Pay Dates: 25th; EOM
Holidays: Lunar New Year; Ramadan; May Day

26. Asia Pacific: Timing Bangladesh: Sun – Thurs Pakistan: Mon – Sat
Work Days: Monday through Friday
Bangladesh: Sun – Thurs
Pakistan: Mon – Sat
Work Week: 40 hours
Year-end:
Hong Kong/India: Apr-Mar, Australia: Jul-Jun, Most Jan-Dec
China: None
Japan, Korea include personal tax filings in year-end

27. Europe: Timing Pay Cycles: Typically monthly
Collective agreements determine cycles per year
Belgium: 13.92, Southern Europe: 12, 13, 14
Pay Dates: 25th, 27th/28th, EOM
Holidays: Christian Calendar; Many bank holidays

28. Europe: Timing Vacation: Taken in blocks in the summer 2 to 3 weeks
Work Days: Monday through Friday
Work Week: 37+ hours
Year-end:
Most are Jan to Dec; UK is Apr to Mar

29. Income Tax Social Tax Other
Payroll Calculations
Income Tax
Social Tax
Other

30. MEA: Calculations Income Tax:
No wage tax in the Gulf Cooperation Council (GCC)
Most of Africa – PAYE concept – withholding and remittance
Social Tax:
GOSI in GCC
Africa - Most have social tax – single digit percentages

31. MEA: Calculations Other: (Benefit programs, expats, taxable events)
EOSB – end of service following statutory guidelines
Meal allowance, housing, transport allowance, Company cars

32. Latin America: Calculations
Income Tax:
Scaled like US – No state concept
Social Tax:
Include: Pension, education, welfare
Appear on the register combined into a schema – similar to FICA
Cost: 10 to 15% - usually has a cap, EE and ER contribution, ER is higher

33. Latin America: Calculations
Other: (Benefit programs, expats, taxable events)
Meal Tickets/Allowance
Holidays: Special Treatment depending on location

34. Asia Pacific: Calculations
Income Tax:
Many countries do not withhold wage taxes, these are paid by the individual (Hong Kong, Singapore)
Others have sophisticated schemes like Korea and Japan
Social Tax: Common – pension, health, unemployment

35. Asia Pacific: Calculations
Other: (Benefit programs, expats, taxable events)
Australia has a fringe benefit tax
Housing in Hong Kong and India
Transportation

36. Europe: Calculations
Income Tax: Wage tax – usually payable following month
Social Tax:
High: up to 35%
Includes: pension, disability, medical, unemployment, church tax, training, and supplemental taxes depending on income

37. Europe: Calculations
Other: (Benefit programs, expats, taxable events, accruals, days off)
Meal tickets
Holidays: Paid more for holidays and more days than standard
PTO based on accruals and collective agreements

38. Bank Accounts Funding Practices Money Movement Timing
Funding Requirements
Bank Accounts
Funding Practices
Money Movement Timing

39. MEA: Payroll Funding Bank Accounts:
Some countries do not require local bank accounts for payroll (UAE, Egypt, Israel)
Entities are required to open a bank account

40. MEA: Payroll Funding Funding Practices:
Some currencies are not traded and need to send USD (Nigeria Naira)
Most employees are paid electronically
UAE, Saudi Arabia and Qatar have WPS requirement
Discussion of Middle east currency similar to the EURO
Test transactions fully, as they are often complicated and do not have all elements of a normal transfer (some countries do not use addresses)
Have full IBAN and/or SWIFT in case the need to enact BCP is required

41. MEA: Payroll Funding Timing:
May take several days to send money into Africa, third party bank required
Payments in country take 2 to 3 days or in some case up to 6 days

42. Latin America: Funding
Bank Accounts:
Many countries do not require local bank accounts
Entities are required to open a bank account
Brazil and Argentina need a local account to pay local taxes

43. Latin America: Funding
Funding Practices:
Some currencies are considered exotic “COP, BRL”
May have to send USD and reconcile
Have full IBAN and/or SWIFT incase the need to enact BCP is required
Most employees are paid electronically

44. Latin America: Funding
Timing:
Complex funding with third party banks involved
Normal international wire timing is 2 to 3 days
In country transfers typically take 24 hours

45. Asia Pacific: Funding Bank Accounts:
Many countries do not require local bank accounts for payroll funding but highly encouraged
Entities are required to open a bank account
Russia needs a local account to pay local taxes

46. Asia Pacific: Funding Funding Practices:
Some currencies are considered exotic “KRW, TWD”
Some currencies are pegged or floating fixed to USD – HKD, CNY
Have full IBAN and/or SWIFT in case need to enact BCP is required
Most employees are paid electronically

47. Asia Pacific: Funding Timing:
May take several days to send money into Asia (5 days for Korea, up to 10 for Taiwan)
Internal transfers may several days - Japan

48. Europe: Funding Bank Accounts:
Many countries do not require local bank accounts
May have bank accounts in one country service many countries
Some cases need in country bank account for refunds - Switzerland

49. Europe: Funding Funding Practices:
Relatively stable currencies, with high trade volumes
SEPA (Singe Euro Payment Area) fully implemented as of 2014
Have full IBAN and/or SWIFT in case the need to enact BCP is required

50. Europe: Funding Timing:
Move funds within 48 hours from outside SEPA zone
Local transfer can still take up to hours
Most bank to bank relationships, so transfers are relatively simple
Same day transfers are available

51. Tax Filings Compliance Risk
Compliance & Filings
Tax Filings
Compliance
Risk

52. MEA: Compliance Tax Filings:
Middle East: GCC countries have GOSI/SS filings (UAE, Qatar, Oman, Kuwait, Saudi Arabia, Bahrain) - GOSI: Compulsory in Saudi Arabia
Optional by employee in other countries and across the region
Africa: Filings are often manual and may be required to be submitted in person

53. MEA: Compliance Compliance:
Middle East: GCC, very minimal – Lebanon, Pakistan, Jordan: Complex
Africa: Difficult to keep up to date on taxes. Often retroactive and local payroll systems have limited capability
Compliance: Filings are manual & many countries have poor record keeping
Tax law is open to interpretation and may vary by industry (oil & gas, financial)

54. MEA: Compliance
Risk: Work permits are based on compliance, which is poorly maintained locally
Filings can be very difficult; Government is continually changing its requirements
Low level of compliance with data standards

55. Latin America: Compliance
Tax Filings:
Are often manual and require in person submission and online
Brazil – Move to E-social
Submissions for each social program (Income and social)
Pay slips need employee signatures (Mexico)

56. Latin America: Compliance
Based on collective agreements and industry
Complex and often changing as the political environments are changing

57. Latin America: Compliance
Risk:
Latin America has challenges with changing political environments
Currency restrictions, money movement restrictions
Tax law changes are often open to interpretation
Countries are watching contractors to ensure benefits

58. Asia Pacific: Compliance
Tax Filings:
Many are still manual
Require a company seal, stamp, signature
Need to be kept for audit purposes
May be simple, mainly year-end and Pension programs (MPF, CPF)

59. Asia Pacific: Compliance
Not significant change in types of taxes, programs (rates change often)
Well documented requirements
Japan complicated – need special employees to confirm social calculations

60. Asia Pacific: Compliance
Risk:
As a region, Asia Pacific is low risk on compliance and has high transparency
China and Russia pose some risk related to data and data privacy

61. Europe: Compliance Tax Filings:
From simple to complex (Switzerland, UK simple – Italy, France – complex)
Several countries have different timings for different forms
Generally do not have the concept of “state filings”, often split by type (social insurance, tax, etc.)
Shift to Automated Filing System (UK RTI, France DSN)

62. Europe: Compliance Compliance:
Not significant change in types of taxes, programs - Standard forms, process for compliance
Some ambiguity on what is required to be taxed or not
Also includes employment contracts, work place, and other ancillary administration related to payroll

63. Europe: Compliance
Risk: As a region, Europe is low risk on compliance and transparency
General Data Protection Regulation (GDPR) - Data security and privacy is very key - Risk is in employment practices versus payroll

64. Payroll Trends

65. MEA: Payroll Trends Outsourcing:
Payroll is often outsourced for the Middle East
African payroll is often outsourced by companies with smaller local populations, when the HQ is international
South African companies outsource, but in the rest of the region the outsourcing concept is not as mature

66. MEA: Payroll Trends Management:
Payroll Best Practice: Manage in Region
Need Sunday to Thursday or Saturday to Wednesday support
Time zone support
More oversight is needed for pay calculation auditing
May need tax consulting support

67. Latin America: Payroll Trends
Outsourcing:
Payroll is outsourced some of the time, more now than in the past
Latin American payroll is often outsourced by companies with smaller local populations, especially when the HQ is international
Payroll outsourcing by Latin American not as mature
HR Admin components are often outsourced with payroll as part of the package (Medical exams, archiving of payroll and HR documents, registering employment contracts, probation period)
Increased size of expatriate populations – LATAM international trade agreements – fueling expat population growth

68. Latin America: Payroll Trends
Management: Payroll Best Practice-Manage in Region
Need local language support
More oversight is needed for HRO administration
May need tax consulting support for tax law change

69. Asia Pacific: Payroll Trends
Outsourcing:
Payroll is often outsourced for Australia, New Zealand, and some countries on a local basis
Cost is very low to managing payroll in-house, so many companies will only outsource for visibility and compliance, but not for cost
Asian payroll is often outsourced by companies with smaller local populations, when the HQ is international

70. Asia Pacific: Payroll Trends
Management:
Payroll Best Practice: Manage in Region, Can be Global
Small Asian payrolls can be managed remotely, as English is typically good and payroll is transparent
Larger Asian payrolls are often managed in region for time zone support or managed in-house

71. Europe: Payroll Trends
Outsourcing:
Payroll is often outsourced in Europe, it is a maturing market - Both European and global companies outsource
Generally companies outsource because of the complexity and prefer to keep their headcount in non-core areas low
The cost of outsourcing is high (typically not a cost play, but an expertise, technology, or visibility requirement)
Also, try to streamline the process across the region

72. Europe: Payroll Trends
Management:
Payroll Best Practice: Manage in Region, Can be Global
If populations are small, can manage globally
Language can be an issue,
Payrolls are more complex from an employment perspective, lending to regional support being preferred
Very large populations need in-house local expertise

73. Thank You!