Singapore payroll guidelines and regulations are relatively transparent when compared with that of neighboring countries. However, managing and understanding Singapore payroll can still be difficult, especially for small to mid-sized Singapore companies trying to process payroll in-house when there is limited manpower.

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The phrase “you don’t know what you don’t know” is usually not used in global payroll conversations – but what if “what you don’t know” is hurting your business and bottom line?

Payroll reporting in the US is pretty straightforward – you can easily view what you’ve paid employees and it’s all in US dollars. But what happens when you are managing employees in multiple countries and currencies?

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If you look at all of the components of managing a global business at once, you can quickly be overwhelmed with the logistics, plans, and compliance issues. With the right research and tools, your global operations can easily run smoothly within the local in-country requirements.

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For many employees, the three magical words that make their world a little bit more beautiful are, “Today is payday.”  Of course, a payday is a joyous event for almost every worker, but what about the people at the other end of the spectrum? They need to ensure that the payroll goes as smoothly as possible. However, that does not always happen.

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Following the August 2020 elections in Belarus, protests began in opposition to the election of Lukashenko, who has been president since 1994. Worker strikes and protests due to the election are impacting the country’s labor and economic outlook. Amnesty International reports that the government is pushing back against private trade unions through arrests and other means.

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As more economies around the world open up and companies bring employees back to the office, global expansion plans that may have been put on hold last year are now taking shape. It can be challenging to know where to start, but here are some key factors to consider when expanding your operations into new countries.

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Europe tends to take the top spot when it comes to “regions” or “continents” with the most complex payrolls. Thanks to the complexities of navigating multiple layers of European Union regulations and financial landscape, several European countries tend to be where it is most difficult to run a payroll, especially for a foreign business expanding to those countries.

It’s important to appreciate these complexities and account for them when you are planning to expand into another country. It will help you run a more comprehensive cost-benefit analysis of establishing an international entity and give you a more realistic idea of your entity setup timeline.

5 Countries with Some of The Most Complex Payroll Requirements

Several different factors can make navigating payroll in different countries complex and challenging, including cultural differences, local labor laws, unions, union-driven contracts, shared benefit responsibilities of corporate entity and government, employee taxation, etc.

However, not all countries necessarily have all the challenges. In fact, each country has its own set of challenges. So even if you have experience running an international payroll, you might not be able to translate that knowledge and expertise accurately for another country. This is where professional global expansion services can help you out.

Let’s take a look at five countries with unusually complex payroll requirements.

1.     Belgium

Belgium is considered one of the most complex countries for running a global payroll, thanks to its unique payroll and HR requirements. Some complexities include:

  • The country is one of the few (eight, if you consider the EMEA ones with that rule) where employees receive mandatory pay raises.
  • Even temporary employees or contractors receive a 13-month salary (one month’s additional salary as a bonus) in a year.
  • A holiday bonus on top of holiday pay, which is equal to 92% of an employee’s monthly salary.
  • Payroll needs to be submitted in multiple countries.

While heavily in favor of employees and people working in Belgium, these stipulations can be a bit challenging for the employers expanding there. Another secondary complexity that might arise from this payroll structure is compensation disparity for your employees in Belgium and other countries. And if you try and lower the base pay in Belgium to cover the additional perks the government is getting for them, you might have trouble attracting and retaining the top talent.

2.     France

France, the third-largest economy in Europe (After Germany and the UK), is quite near the top when it comes to payroll complexity. France takes data protection very seriously, and it even affects payroll processing legislation. But that’s not the entirety of the problem. The main challenge is that France’s payroll rules and regulations change quite abruptly, and employers need to keep up.

Some of the challenges include:

  • A complex pay-slip with around 40 lines and it’s accompanied by several other documents
  • Gross compensation, which is a crucial variable in compensation management and calculation, is open for interpretation.
  • The labor code (even if you discount the language difference and subtleties of legal language) can be difficult to navigate.

Another factor that makes payrolls in France unusually difficult to process and navigate is that labor laws allow unions to negotiate with employers. This doesn’t just make it extremely difficult for employers to fire anyone; it also means that employers have to take into account the compensations and benefits that they are supposed to offer to their employees, in addition to what they must pay under local laws.

3.     Brazil

In South America, Brazil used to have one of the most complex payroll requirements and regulations about two or three years ago, when the country was transitioning to eSocial. Now the shift is complete, but the complexity still exists, thanks to two main factors:

  • Involvement of labor unions which are present in each and every industry and are regulated by the ministry of labor (at least for taxation)
  • Frequent changes to the labor laws

Unions make things a bit costlier and more complex for foreign employers as they need to pay union dues tax, even if they are not in the union. Another challenge is the social security contributions, which are not uniform and determined by the pay scale but by the industry and risk. However, the ministry of labor provides proper guidance. One thing to note about Brazil’s eSocial is that any change you make in your payroll must be reported to the government right away (through the eSocial portal).

4.     China

Despite a laser focus on commerce and business, China is a difficult country to expand to and run payroll in. Some payroll challenges in China include:

  • The different minimum wages for permanent (monthly) and temporary employees(hourly)
  • Minimum wage changes every year and can also change on a semi-annual basis
  • Local governments can impose specific income and social taxes on payroll based on local requirements (like heating, cooling, cleaning requirements, etc.)
  • Overtime is different for weekdays and holidays.
  • Some weekends can be converted to working weekdays if employees take additional days off during two designated holiday periods.

In China, any policies (including payroll) are changed and enforced swiftly, and as an employer, your duty is to stay on top of such changes.

 

5.     Japan

Despite the fact that over 2.5 million tourists visit Japan each year, attracted by its natural beauty and unique culture, it’s a difficult country to navigate both socially and from a business perspective. It also offers numerous payroll challenges. It has a complex year-end tax adjustment system that can be challenging for a foreign company. Benefit taxation is also relatively difficult. The payroll slip also contains over 70 different categories, making it very difficult for foreign entities not familiar with local compensation practices and intricacies of the labor laws.

Conclusion

It’s important to note that most challenges are challenges only because you don’t have the right information and assistance to surmount them. The seemingly complex payroll requirements of certain countries will become a breeze if you expand with the right professionals and leverage the corporate maintenance services of a business that has experience and resources in navigating payrolls in over a hundred countries.

As the end of the year approaches, companies need to prepare for payroll and tax reporting requirements in each country. If you are managing payroll in multiple countries, this is no easy task – there are varying tax years, different reporting requirements in each country, and payroll and compliance regulations to factor into your plans. So how can you prepare your teams across the world for year-end global payroll reporting?

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You’ve had success in the US market, but now it’s time to reach new clients, increase growth and profits, and diversify. What are some key factors to consider before you make a move to another country? Many companies want to expand, but they don’t understand the complexity of moving operations into a new country and things can quickly get out of control if you’re not prepared. Here are some global expansion considerations for global business expansion.

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Companies that manage global employees and payroll sometimes believe that the status quo is better than making any changes. But when you’re talking about global operations and payroll, what you don’t change could be hurting your organization. Evolving regulations and in-country requirements not only put your company at risk for fines and penalties but mismanaging global operations could also make your employees leave due to inaccurate payroll or benefits.

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