While we all live and work in an increasingly globalized business world, there are still substantial variations from one region to the next, especially when it comes to payroll and employment arrangements. This can make payroll very complicated for organizations that operate and employ staff in many different territories around the world.
The list of types of rules and regulations that vary is a long one: minimum wage rates, tax and social security withholding, benefits entitlements, paid leave and maternity leave, sick pay, overtime, and even how regularly payroll cycles are generally run. It’s a big part of the reason why we have a library of country payroll guides that cover all the key requirements on a country-by-country basis.
This complexity isn’t likely to ease up any time soon, especially with social and cultural considerations increasingly playing a bigger part in the payroll conversation. For example, equal pay is now a standard reporting requirement within Environmental, Social and Governance (ESG) reporting. At the same time, tightening regulations around the use and security of sensitive data means the penalties for non-compliance in payroll are increasingly severe.
So what makes modern global payroll management so complicated, and how do regional variations influence that complexity? Here, we use the findings from this year’s Global Payroll Efficiency Index Report to break this down:
Why is international payroll so complicated?
Well… how long is a piece of string? Every country, industry, workforce and business is different, and so areas of payroll that are very straightforward for some can be a real thorn in the side for others. But from our extensive experience, there are five major areas of complexity that crop up time and again:
- Mandatory deductions: not only does every country have its own tax and social security regime, but these deductions are liable to change regularly, especially if there are changes in government. Keeping on top of the latest requirements can be a time-consuming task.
- Social security calculations: connected to the previous point, calculating all the right benefits and deductions for each employee in each territory can be a long, drawn-out affair. For example, Switzerland has four different languages and very different rules for each of its 26 cantons.
- Reporting requirements: some countries have a large number of reporting requirements, and/or demand updates on a very regular basis. It’s often also a legal requirement to keep records for a certain period of time (up to 20 years in France, for example).
- Data confidentiality: it is critical to understand all the data protection and data security requirements in every territory, such as the General Data Protection Regulation (GDPR) in Europe, and the CCPA in California, especially with regard to employees’ bank and social security details.
- Lack of standardization: all of the above makes it more difficult to standardize data, when so many different countries vary in their requirements.
The biggest regional payroll trends in 2024
CloudPay’s annual Global Payroll Efficiency Index report takes a detailed look at payroll performance across three regions: the Americas (AMER); Asia-Pacific (APAC); and Europe, the Middle East and Africa (EMEA). The 2024 report, which explores payroll data from the 2023 calendar year, has highlighted some interesting differences between the three regions, which multinational organizations should be aware of:
AMER
The calendar length of payroll cycles has substantially increased this year, from 4.1 days to 5.8 on average. This is likely due to many countries in the region moving towards monthly pay cycles, instead of weekly or bi-weekly cycles.
With more time to conduct checks and validations properly, this is also helping the region improve its performance in other key metrics, such as issues per 1000 payslips, where it has previously struggled. However, supplemental impact remains especially high in South American countries, although this may improve in the years to come.
EMEA
This region continues to stand out for having the lowest rates of data input issues and supplemental impact of the three regions, while its number of issues per 1000 payslips continues to improve. Much of this is down to the fact that the adoption of payroll technology is much greater in this region than in the Americas or Asia-Pacific, which is enabling organizations to leverage new levels of accuracy and efficiency.
When automation and technology can take care of many repetitive processes, payroll teams and providers have even more time to conduct detailed checks and validations properly.
APAC
Many countries in this region have large populations, and also have major variations from one area to another within individual countries: for example, India has 36 territories, all of which have their own regulations and public holidays.
These disparities perhaps explain why data input issue rates in the region are so unstable: a drop of 2.5% last year was followed by a 3% increase this year. Similarly, supplemental impact increased by 2.29% this year, as more complex payroll can often lead to more errors and special circumstances that need accommodating.
In summary: Effectively navigating international payroll
The strong performance of EMEA in many of our metrics underlines the value of innovation and technology in dealing with payroll complexity. Many organizations in that region have turned to systems integration and unified pay solutions, consolidating HCM systems, global payroll and payments across all territories. Now is the time for other businesses around the world to follow their lead.
Automation and unification is ideal for delivering consistent, compliant and employee-friendly pay experiences for workforces all over the globe. That’s because they bring together real-time data and local expertise to ensure that payroll processes and data are always handled correctly, with any changes in requirements adapted to straight away. And with a greater level of visibility and transparency, it becomes far easier to handle complex payroll at scale, and understand where further efficiencies can be found in the future.
Explore regional and local payroll performance in full, and discover how your organization compares, by downloading the 2024 CloudPay Global Payroll Efficiency Index report.
Get in touch with us to discuss your specific payroll circumstances.