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.

The Asia-Pacific region consists of countries located along the Western Pacific Ocean. It is an umbrella term that includes East Asia, Southeast Asia, South Asia, and Oceania. Countries in the region feature well-developed corporate infrastructures, densely populated markets, and world-class technology.

With rapid GDP growth, Asia-Pacific economies are quickly outstripping the growth of western markets. For instance, China is now a top source of international direct investment in the world, while New Zealand, Singapore, and Hong Kong have secured the top three spots in World Bank’s Doing Business 2020 index.

This article covers the top 10 Asia-Pacific countries that are worth it for expanding your business. It is intended to provide an overview of each country’s most common employment law concerns and significant aspects that need to be kept in mind from a business perspective.

As soon as your company is set up in a new country and hires the very first employee, it becomes crucial to maintain certain records, including:

  • Personal details such as name, passport number, identity card, marital status, and address
  • Nature of employment
  • Designation in your company
  • Remuneration details
  • Period of employment
  • Non-cash and fringe benefits employees are entitled to

1.   Hong Kong

Hong Kong’s economy is well-known for its low tax rates and minimum government intervention. As it is heavily dependent on international trade, the country has become an attractive option for entrepreneurs, businesspeople, and fresh graduates.

The Employment Ordinance of Hong Kong covers full-time, part-time, and temporary employees. Here are some key aspects:

  • The employment contract is required to satisfy the minimum clauses of the Ordinance such as statutory holidays, sick and maternity leaves, mandatory provident fund payments, and severance and long-service payments.
  • The Ordinance does not specify a legal probationary period limit. However, Hong Kong’s Labor Department suggests a maximum duration of three months.
  • When hiring a new worker, your firm must inform the Inland Revenue Department within six months.
  • Businesses need to report remuneration given to employees on an annual basis.

2.   New Zealand

Other than its breathtaking landscapes, New Zealand is also known for its high-income and progressive economy. The country has become rapidly industrialized in the past few years, within the information technology, banking, and other service sectors.

New Zealand has emerged as the very top of World Bank’s Doing Business 2020 rankings, which implies that the government regulations substantially facilitate operations for companies seeking to expand to New Zealand. Here are some key employment concerns you need to keep in mind:

  • It is mandatory to have employment contracts for each employee that clearly states the responsibilities of employers and employees.
  • A regular working week in New Zealand comprises 40 hours and is divided into five working days.
  • Income taxes are typically withheld by the company and paid to the Inland Revenue on a Pay-As-You-Earn (PAYE) basis.
  • Workers in New Zealand can avail themselves of a four-week paid leave every year. The leave period can be provided gradually throughout the year, or allocated annually on the anniversary of an employee joining your organization.

3.   Singapore

Singapore has emerged as a rapidly progressing technological and financial hub in the Asia-Pacific region. Due to its free market economy and policies conducive for trade, the country has become one of the easiest places to operate a business, for both local and foreign companies.

Some of the largest industries in Singapore include finance, business, manufacturing, and tech exports. Here is what companies in Singapore need to know when hiring staff for the first time:

  • The Employment Act contains the basic rules about employment terms and the roles and responsibilities of the employers and employees.
  • Employees can work for a maximum of 44 hours a week (or 8 hours a day).
  • Salaries must be paid to employees at least once a month within seven days following the end of the salary period.
  • Employees are entitled to paid annual leave if they have worked with a company for a minimum of three months.
  • The legal age for employment in Singapore is 17 years and above. Children between 13 and 16 years can be employed, but there are limits on the type of work they are allowed to do.

4.   Australia

The presence of natural resources along with a favorable climate make Australia a great place to invest. It has the advantage of an open-market economy with bare minimum restrictions on the flow of goods and services.

Australia has a well-educated workforce benefiting any business. The education system in the country is internationally recognized and specialized training services are available for further skills development. Here are some employment law concerns that you need to know about when expanding to Australia:

  • The primary sources of employment law in the country are legislation, industrial instruments, and common law.
  • Full-time employees in Australia are allowed to work for a maximum of 38 hours per week.
  • The number of public holidays granted depends on the state where your company operates.
  • Both full-time and part-time employees are entitled to 4 weeks of paid annual leave, but it is common to avail six weeks.
  • Employees in Australia are eligible for up to 12 months of unpaid maternity leave for childbirth or adoption of a child under 16.

5.   Taiwan

Taiwan has witnessed rapid economic growth ever since the second half of the past century. Its main income is derived from the industrial manufacturing sector, especially by exports of machinery, electronics, and petrochemicals.

In the recent past, several government-owned banks and industrial businesses in Taiwan were privatized, which encouraged many businesses to relocate there. Here are general employment considerations to keep in mind when considering expansion to Taiwan:

  • Employment laws are generally contained in Taiwan’s Labor Standards Act (TSA) by the Ministry of Labor.
  • Working hours for employees in Taiwan are limited to 40 hours per week (8 hours per day).
  • Workers are entitled to two off days out of every seven. One rest day is mandatory, while the employees can choose to work overtime during the other.
  • Salaries to workers are usually paid monthly. Like in most Asian countries, workers are entitled to a 13th month bonus of a month’s wages, which is usually given out at the time of the Lunar New Year.
  • Notice periods for termination depend on the period of service. It begins from 10 days for those with a minimum of three months of service, increases to 20 days after a year, and rises up to 30 days after three years.

6.   South Korea

South Korea is known to have rapidly developed since the 20th century. It has emerged into a globally connected and technologically advanced country due to effective state-led urbanization projects.

A notable reason for South Korea’s success is heavy government investment towards education, which propelled the country as a technological hub with a skilled workforce. If South Korea is your dream destination for investment, consider the following aspects while planning your venture:

  • According to law, employees in businesses with 50 or more permanent workers are not permitted to work more than 52 hours a week.
  • A termination notice to a worker in South Korea must be served at least 30 days in advance.
  • It is mandatory for companies in South Korea to register their employees for payroll by the 15th day of the initial month of operations.
  • Employers are supposed to withhold income tax when giving out salaries to workers.
  • Paid leave is provided to employees based on the period of service. Employees get one day per month worked in their first year, which increases to 15 days per year from the second year. After that, one day of annual entitlement is added every two years of service.

7.   Japan

Japan is home to the third-largest economy in the world, after the US and China. It features an advanced marketplace and a robust work ethic across all sectors.

Some of the largest brands around the world, such as Honda, Toyota, Nissan, and Sony were founded in Japan, strengthening its place as a hub for those interested in a career in tech, business, or media. If you wish to expand to Japan, here are some of the important employment law concerns to consider:

  • Japan’s Labor Standards Laws contain the crux of the employment rules and regulations in the country.
  • Employment contracts are renewed yearly. However, fixed-term contracts of more than three years are not allowed.
  • Employees are legally permitted to work 40 hours a week.
  • Salaries are generally given out to employees near the 25th of each month. They can either be paid directly or transferred to the employee’s bank account.
  • Workers are entitled to paid leave after six months of service, with the leaves increasing every 12 months thereafter.

8.   Malaysia

Malaysia’s multi-cultural and multi-ethnic culture can be a big advantage if you are planning to expand your business to the country. The country initially had a state-oriented economic structure, which helped it become one of the most competitive markets in the world today.

Business, tourism, tech, manufacturing, and healthcare services are some of the most prosperous sectors in Malaysia. Starting out as an employer in Malaysia, here are some of the important aspects to take into account:

  • Employment and labor laws of Malaysia are enshrined in the Employment Act 1955.
  • Maximum working week in the country is 48-hours long and divided into six eight-hour days.
  • For employees with less than two years of service, the termination notice period must be four weeks, increasing to six weeks at two years and eight weeks at five years.
  • Businesses in Malaysia are required to withhold income tax payments from workers as per a Pay-As-You-Earn (PAYE) system.
  • Employees in Malaysia are entitled to 11 public holidays every year.

9.   Thailand

Thailand is known for its pristine beaches, scenic islands, and majestic temples. In recent years, the country’s economy has progressed rapidly, making it more than just a fancy tourist spot.

Thailand has a free-market system and pro-investment policies, which makes it easy for foreign companies to move there. Here are some of the common employment law concerns you must know about:

  • There is a legal requirement for drawing up written employment contracts in Thailand, but they are still highly recommended.
  • Employees are required to work 8 hours a day from Monday to Friday. However, some businesses also work half-days on Saturdays.
  • Thai workers are usually paid monthly, either directly in cash or by bank transfer.
  • While it is not mandatory, employees generally expect a 30-day notice period in case of termination.
  • Minimum leave entitlement in Thailand is six working days in a year after the initial year of service, but it is common for companies to offer 10-15 days.

10.                 Indonesia

Not only is Indonesia the world’s largest island country, it also has the largest economy in Southeast Asia. It is a mixed economy, with both, a government-led public sector and private businesses playing an important role in economic progress.

Indonesia has a large population, providing you with a big market for your products or services. If you want to relocate to Indonesia, here are some employment law concerns to keep in mind:

  • Workers are supposed to work no more than 40 hours each week.
  • There is no national minimum wage in Indonesia. Minimum wage requirements are different in every province.
  • Collective bargaining is becoming popular, so having discussions with trade unions is becoming important when it comes to wage discussions.
  • Employees who have worked with a company for a full year are usually entitled to a bonus (religious allowance). This is equal to a month’s salary and must be paid at least a week prior to the Eid-ul-Fitr public holiday.
  • Notice period in case of termination of an employee is usually 30 days.

Final Thoughts

The Asia-Pacific region presents a wide range of opportunities for startups, entrepreneurs, and established companies. It is popular for its fast-growing economies and technological advancements. Moreover, these countries are generally heavily populated, providing massive markets for your products and services. For further insight on expanding to different markets around the globe, click here to explore our website.