Topic: Review of the company requirement and legal responsibilities for global reporting with a focus on strategic and legal responsibilities.
tutorthammy
Module_7_Section_4_Globalised_payroll_and_pension_process.pdf
Master of Science in Business and Reward Management
Module 7 V 1 01.01.15
In Partnership with
The University of Derby Corporate
Managing International or Global Remuneration Practice
UNIT 4 – Global payroll or pension system
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 2
Copyright CIPP
April 2015
All rights reserved. No part of this document may be reproduced, stored in a retrieval system, or transmitted, in any form or by other means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the copyright holder.
This booklet may not be sold, lent, hired out or otherwise dealt with in the course of trade or supply in any form of binding or cover other than that in which it is published without the prior permission of the publisher.
This booklet contains public sector information licensed under the Open Government Licence v3.0.
Whilst every effort has been made to ensure the information included complies with current legislation neither CIPP nor the tutors can be held responsible for any errors or omissions
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 3
TABLE OF CONTENTS
LEARNING OUTCOMES 5
INTRODUCTION 6
BUSINESS PROCESS REENGINEERING 7
IDENTIFYING THE ROLE OF GLOBAL PAYROLL 10
Considering cultural differences 12
Payroll involvement in employee workforce management 13
Work force planning 13
Strategic focus on workforce need 14
Operational focus on workforce need 15
Internal talent planning 16
Workforce key competencies 16
Knowing the payroll staff skills. 17
Virtual payroll team work 19
Payroll support on global mobility 19
IDENTIFYING PAYROLL ADMINISTRATION PROCEDURES 20
Defined payroll scope 21
PROCESS STYLE DRIVERS. 23
Culture power focus 25
Regional grouping 26
Internal/external control 27
Process requirement needs 27
Specific international considerations 31
Approach to time 31
Payroll processing 32
Banking and funding 34
Pay methods 35
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 4
Centralised or de-centralised processing 40
Choices for centralisation 43
Decentralised (host based) payroll function 44
Decentralized placement of staff 45
PLANNING PROCESS 46
Organisation strategic alignment 46
Risk analysis (assessment) 47
The mapping process 48
Planning emotive response 49
Analysing steps 50
BUSINESS CASE REVIEW 52
OPTIONS FOR PAYROLL PROCESSING 53
Global Payroll Systems 55
System support options 57
Application provider 57
Service provider 58
Outsourcing the payroll function 61
Assessing the benefit of payroll outsourcing 63
Information before considering outsourcing payroll 64
Choosing the outsource supplier 67
Global payroll authorisation 68
PAYROLL EFFECTIVENESS MEASUREMENT 70
Working with ISO 900 72
PAYROLL REPORTING REQUIREMENTS 74
SUMMARY 76
Summary of learning 78
Additional learning 80
Appendix Global Forms / Documents 81
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 5
Learning outcomes
On completion of the module learners will be able to:
Appraise the cultural impacts of developing and implementing
global remuneration systems
Critically review a strategic approach to integrated reporting and
processes, reflecting on the implications for performance
management and financial control
Design and create an implementation plan for a remuneration
process for overseas employees, critically evaluating the
strategic and operational opportunities and risks
Aims of this paper
On completing this section of the module you should have an understanding of
key issues related to
The design and selection of a global payroll or pension system.
To consider the issues related to global reporting.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 6
Introduction
It is well established that the core function of the payroll department is to pay
employees accurately and on time. This requires being able to comply with
both statutory and contractual responsibility. The need to understand and
appreciate the specific obligations of a combination of host and home country
statutory requirements will serve to extend the amount of complexity and
integration of information required.
It should also be recognised that where there are multiple cultural influences
this will also make communication and interaction more complicated.
The payroll function has to establish:
The extent of its role inside a global organisation, including
strategic focus.
The strategy and profile of its administration procedures to meet
that international role.
The level of business resource and the nature of culture that will
exist, which has influence on the choice of managing working
processes.
To be effective payroll has to create a process to meet the responsibilities:
“A last pillar of co-ordination in the transnational firm is global or
regional process management. This builds on and complements all
other faces of organisational technology. What is a process? It is
fundamentally a methodology that links together a series of activities
so as to add value” (Evans, Pucik & Barsoux 2002, p201).
The payroll process is the methodology chosen to provide all its duties in each
of the different locations, allowing connection to all the contacts and clients it is
providing service to.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 7
Business Process Reengineering
The development of new information technology has meant organisations have
been able to radically alter their processes with major cutting of design cycles.
Before the technological explosion major restructuring was complicated to map
or to communicate and the extent of relearning and redesign was extremely
difficult.
New technology meant improved system development, with greater flexibility
even within the most unsophisticated software. Of course, it depended on the
size and extent of change as to the implication on cost but the new faster
communication links meant multi cultural organisations could face the logistics
of cross border change.
The result was a business management strategy tool called business process
reengineering (BPR) which means entities have been inclined to completely
review their structures and approaches to business management in an holistic
way. The intention was to be world-class competitors, with a focus on providing
the ultimate customer service at the same time cutting operational costs.
The business process redesigning cycle is very much an holistic exercise – with
key principles that exist in central product review but taking the whole business
entity not one function in isolation.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 8
Part of the holistic review will be the decision where functionality of process
should be best placed – internal or external. This could be the start of placing
an emphasis on looking for third party partnership in the form of service support.
The idea is that instead of just continually repeating sub processes that provide
functional support, there should be a period of full review that asks are these
processes necessary, is there a better way of doing things, is the focus on
achieving the right aims.
It offers the following path for working consideration:
Identify processes
Review, update, analyse as-is
Design to be
Test and design to be
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 9
In understanding the inter-relationship of the key platforms for a process it helps
identify why the rapid evolvement of technology has led to changed
expectations from business areas such as payroll.
The business area of process starts with the mission. This sets out the
definition for the working processes which, when enacted, will support the
achievement of the mission.
In order to execute the working processes there will be a requirement for the
enactment of decisions and when made they will in turn act as the guide to
control the work process.
In order to make decisions it is necessary to consider information, but of course
that makes information very important in order to support the ability to make
decisions.
The fact that there is a dependency on information means there is an increased
dependency on effective technology – whose functionality is chiefly the
processing of information.
Mission
Work process
Decisions
Information
Technology
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 10
So at each stage of development the relationship between stages shows
interactive dependency. It identifies why change in technology can be a key
influencer on not just how things are done such as processing information but
the identified mission itself.
A simple example is how faster technology has mean information can be
processed and analysed in more sophisticated ways. This has led to change in
the way decisions are processed, making working practises different –so the
focus on the department has altered because of the change in skills and time to
do things.
Another way to view this is to compare the ‘office’ with a ‘person’ writing with a
quill and then to that of a person with a computer. It is not hard to recognise
how this has changed the fundamental nature of work.
Identifying the role of global payroll
Hill (2008) says “...managing an international business is different from
managing a purely domestic business for at least four reasons:
Countries are different.
The range of problems confronted by a manager in an
international business is wider and the problems are more
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 11
complex than those confronted by a manager in a domestic
business.
An international business must find ways to work within the
limits imposed by government intervention in the international
trade and investment system.
International transactions involve converting money into
different currencies”
(Hill, 2008, p53)
When appreciating the requirements of international payroll, the issues are as
much about what is not known as what is understood.
The scope of role for a global or international payroll department will vary
depending on the size and strategic intent of the organisation.
Besides the important duty of payment and taxation the department could also
be closely involved with the planning and control of remuneration reward
development. It will also depend on the extent of support and role allocation
given to the HR department.
Questions that need to be considered include:
What are the organisations key strategic objectives and where
does payroll fit in meeting them?
What are the specific requirements for doing business in the
country?
What are the requirements for registering the business in the
country?
What are the regulations for work and payment in the country
and how must they be administered?
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 12
What are the rules in the home country when employing people
overseas; Are there home regulations that would be
transferable to host situations?
What reporting requirements are there for the business and for
statutory bodies for each country?
The payroll department may have a key role in supporting remuneration design
cross international boundaries as it is likely to be closely aware of both taxation
and cultural expectation. Its involvement in working with HR and line managers
will help contribute towards appreciating the impact of payment practises.
The approach to planning remuneration will impact on the nature of pay
processing that will be required. The more complex and varied the nature of
payment scales the more flexibility will be required from any elected software
system. It is bad enough facing the differing nature of statutory deduction
requirements – when payments are also varied location to location there
requires another range of coding capability. If the process is centralised it can
help the administration requirements – but will never completely eradicate the
influence of local requirements.
Considering cultural differences
As with any international management, it is very important to considered cultural
differences and the potential impact on the working relationship between host
and home activity.
The decision makers have to ensure they do not just use their own perceptions
to consider new situations. Such use of personal perception (sometimes called
self-reference criterion) can result in misreading the situation that exists for the
host country.
The need for appreciation of the difference and implication of possible
behaviour due to cultural influence has been discussed earlier. It is called
‘acculturation’ – the state where the home country is able to recognise and
adapt their behaviour to maximise an effective relationship with a host country.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 13
Payroll involvement in employee workforce management
The payroll department supports HR in employment statistics but in a global
situation it often provides a wider monitoring role.
Particular focus areas involved include:
Cross location comparison of pay statistics with translation of
values
Monitoring service length – particularly for mobile staff
Review of skill needs for the function of payroll duty
Work force planning
A key part of the organisations resource is its employees. Whilst the planning
and training of employees is normally associated with the HR department, the
payroll function is critical in working to support the administration of service to
all these individuals. It is also necessary to ensure the correct resource is
available for the provision of the payroll process.
Such review would be looking at talent management for:
Manpower availability,
Skill and knowledge levels,
Staff motivation and inclination to support activity,
Leadership and responsibility ability.
Planning involves ensuring adequate availability of manpower to undertake
tasks both now and in the future. This does not mean just adding employees,
but to also assess potential availability from contract labour, whether self-
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 14
employed or third party organisations. It would also identify how to adjust
existing work assignments to refocus internal talent pool.
There is a distinction between decisions that relate to strategic choice to
operational need.
Strategic focus on workforce need
Strategic focus provides the framework for planning and developing resources.
It should involve a long-term perspective of what is required. As such it should
be considering the long term corporate plans for development. There should be
concern over the potential loss of skills and knowledge as staff leave and the
requirement for the organisation including any new roles.
Managing resource use
Assess existing roles
effectiveness
Identify need for roles
Forecasting need
Identify resource availability
Fill role vacancies
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 15
Operational focus on workforce need
This is different to operational workforce planning which focuses on the types of
systems and processes that can be used to monitor workforce matters.
The needs for different localities will vary depending on the business
requirements and local situation. There may be different rules about working
hours and control over overtime conditions. Entitlement to leave particularly
holiday will impact on the manpower value as assessed as a full time operative.
The skills and knowledge levels of individuals will also impact on assessed
effectiveness.
Identify essential
talent needs
identify needs and timing
identify current
capabaility - skills and location
Identify alternative
sourcing options
Assess preferred sourcing
options and locations
Consider seasonal
trends and location
requirements
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 16
Internal talent planning
Maximising the use of internal talent is very important. Staff are bound to leave
if only through retirement or sadly death. How an organisation co-ordinate the
use of the internal staff resource is very important, as recruitment is an
expensive administration activity. Planning for ensuring adequate resource of
skill involves both motivating staff to want to provide the types of work effort
needed and to help them through ensuring timely training in the skill sets
needed.
The areas that need to be monitored and built include technical knowledge, and
key competencies in behaviours and attitudes to perform. Without established
standards in these areas the individual will be challenged to perform alone or in
team activities.
Workforce key competencies
There are several different skills and abilities, which will drive the capabilities of
individuals. The balance and degree of need will depend on the functionality
required in the roles allocated. On assessing the functionality and process
required so the type of work force competencies will be established.
The challenge in a multi cultural situation will be assessing the existing level of
availability within the pool of resource.
There are varying estimates as to how many payroll officers are needed to
perform calculations of employees pays. The challenge of course is that the
needs can differ so much – the requirements for running a payroll in one
country will vary so much from another locality. Besides the differences in
statutory requirements, there are also complications of gaps between their
cultures e.g. each localities language, attitude and expectations concerning pay
remuneration and amount of control based in each work base.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 17
Knowing the payroll staff skills.
Most employees want opportunities for advancement within a company. An
effective global payroll manager will need to consider advanced planning in
order to ensure the right manpower skills exist. It will also provide the payroll
with motivation as they see there are opportunities either within the global
payroll department or other parts of the organisation.
It is prudent to use planning, rather than a coincidence to ensure this exists and
will give both the employer and the employee a sense of control.
Planning and development should be an on-going process. It is unlikely that an
employer will find that a person they have hired will have all the skills they want
– but even if they do then the relationship will change as time continues. The
role will evolve and the needs of the organisation will change and it is important
to ensure that the existing staff skill base is encouraged to be developed as
well. It is also important to plan for the future and part of that is to consider how
to develop the careers and skills of employees in the team.
The employees can help by taking responsibility for personal development
through self-assessment of their current skills and identify themselves what their
career intent involves. It is a balance of ensuring they maintain their existing
strengths and skills as well as identifying the areas of weakness that needs
specific development.
Such considerations take effort to assess and the development and training
may not be a quick fix. It may require a period of training that will need the
commitment of the employee and the support of the employer to be fully
effective. For example, professional qualifications may take a period of months
and possibly years for study and assessment.
The requirement will be to map the employees’ strengths and weaknesses for
the following critical areas:
Technical knowledge — in global situations this may span more
than one locality, including tax and labour regulations
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 18
Planning — ability to design and allocate duties and working
timetables
Problem solving — the ability to identify, assess and select a
solution in situations
Administration — to follow process, communicate and
document
Adaptability — capable to perform in non-normal situation
Communication —verbal and written ability to express
Organisation — can sequence, identify order and prioritise
Language skills – in multinational situation can mean dual
fluency
Leadership — to motivate and inspire action in others
By identifying employee’s strongest skills and helping them to use them, the
working relationship can motivate the employee to find satisfaction in their role
and encourage them to give commitment to their duties. It is also important to
identify where they are not using those skills and in an inspiring way encourage
them to make the most of them without it meaning the employee leaves. What
is desired is a win win situation – the employee is motivated to commit to
maximise the use of all their abilities and the employer is benefiting from having
the effective resource as part of their work team.
Of course, maximising ability can mean recognising the need for transfer to a
more effective role in the organisation – but in doing so the manager is working
to the remit of total quality management, seeking benefit for the organisation as
a whole.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 19
Virtual payroll team work
The nature of payroll liaison with multi locations leads naturally to the
development of a virtual team structure. A virtual team can be described as
“groups of geographically and/or organizationally dispersed co-workers that are
assembled using a combination of telecommunications and information
technologies to accomplish an organizational task”. Townsend & Demarie
(1998) pg 7-29
Francesco & Gold (2005) explain there are different sorts of virtual team
working, including:
Distributed time – working on one time schedules
Real time – working all at the same moment for shared
interaction
Boundary spanning cross organizational and cultural
boundaries
Life cycle – team members for a specific period
Member role – multiple responsibilities not duties for this team
They suggest that the more complex the task, the more they are distributed and
the more culturally diverse the members are then the more difficult it is to
manage a virtual team. The level of cultural diversity in particular adds to the
complexity because of the range of different values, customs and traditions that
will require leadership, particularly as the nature of virtual placement reduces
the ability to use direct leadership skills.
Payroll support on global mobility
The payroll function has an important role in supporting the organisation in the
control of its mobile workforce. Their duties and expertise will be useful in:
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 20
Helping to identify and maintain a mobility policy that will
support the organisations strategic objectives.
Contribute towards the control and recognition of taxation
compliance particularly where double taxation issues exist.
Help support the necessary tracking of the mobile workforce – key to both
maximizing the use of people resource and ensuring compliance on issues
related to service. For example, longer term planned assignments may impact
on the employees tax position in the respective country the employee is hired in
or where an employees is working across multiple territories there may be a
requirement for specialist tax advice.
Identifying payroll administration procedures
“A first role is building the commitment…to utilize a process …as a key tool in
achieving business objectives. The development work needs to be undertaken
with senior line managers so as to define a global process that is appropriate to
the strategic vision, values and culture of the firm.” (Evans, Pucik & Barsoux
2002, P49)
To be able to assess whether existing processes are effective or to select new
working approaches it is essential to establish what is required. To have a
critically successful global plan and strategy it is essential to know what truly
exists now and what the objectives of the process may be.
The identification should start by assessing the existing situation and then to
recognise the ‘if only I could’ aspect. It is only then that it would be effective to
assess the options for finding a suitable method to perform the processing in
order to achieve the ideal results.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 21
The comparison between what is now and where one would like to be will also
help designate the level for change and movement which will be required to
existing practises.
Defined payroll scope
It is important to build a clear picture of information about all the various
processes involved – particularly identifying the critical differences between the
various countries that might be in the scope of cover.
Recognising the differences include:
Currency – local nature and payment requirements
Calendar – fiscal, tax and religious time periods
Global contacts – internal and external contacts including their
roles and level of authority
Government – key legislative and regulatory bodies
Stakeholders – experts, legal support, human resources, labour
relations (e.g. works council and collective bargaining)
Benefits – additional compensation to the pay including cultural
expectations
Finance/Treasury – banking requirements and associated legal
registration
Accounting – regulatory control of money movement to meet
audit needs
Accounts payable – processing of payment of liabilities
Immigration – regulations and requirements for staff movement
Technology – cost, availability and resource support
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 22
Training – resources, ability and availability
Governorship – senior management culture and expectation for
interaction
Quality program/strategic focus – Lean/six sigma, TQM, control
There are critical areas that need to be understood so the payroll administration
requirements can be identified. This includes:
Assessing the organisation’s strategic objectives for the
company and for each host area
To identify the statutory and contractual requirements for home
and host areas
To assess the focus for integration and power control to identify
how much centralisation of systems will be required
Assess the technological capabilities and options for systems in
order to meet procedure requirements
Identify skill and ability of team members
The focus for the payroll may be to pay accurately and on time but it also has a
responsibility to support the organisations strategic objectives.
This will mean helping to reach the commitment of quality assurance for the
organisations clients, any ethical objectives that have been recognised as part
of the business aim and to follow any financial plan – such as minimising
overhead cost.
Specific areas of strategic interest would include:
Focus on quality management
Approach to business review
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 23
Power control and management structure
When assessing payroll procedures, undertaking a full review should include
asking:
Does the departments mission need to be redefined?
Are the strategic goals aligned with the department’s mission?
Who are the department’s customers?
Process style drivers.
There are three key areas for consideration when assessing the type of
practical approach to procedures.
Strategic and cultural focus can influence these areas. This is no difference
whether in a single or global situation.
Resources (technology, manpower
skills)
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 24
An organisation’s strategic culture will decide on whether it wants to control its
processes inside or have a preference to outsource. There can be a variety of
options as to whether to outsource by the whole organisation, by region or just
at single local areas. The control of supervision and control can also vary.
When considering change, it is necessary to identify what system and skill
resource the organisation will need in place to perform the activities needed to
achieve the strategic aim of the organisation. The resources will include
assessing the sophistication of technology within the organisation.
Any business process will need to appreciate the management structure – who
does what, who decides what, who is responsible for whom. The style of
management is driven by the governance style selected by the organisation.
This reflects the difference between a shared service and a decentralised style
of company management.
Internal
Organisation
Regional
Individual host country
External vendor
Global
Regional
Individual host country
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 25
Culture power focus
The design of process is influenced both by the nature of available resources
but also by the organisations strategic and cultural preference. The corporate
culture will also decide on the attitude towards expectations on work and
remuneration.
The culture of an organisation will be partly driven by the expectation for power
as it influences the placement of control. The requirement of decision making to
be in the hands of the senior board leads to greater emphasis on control in the
home office rather than satellite sites whether or not this is in other countries.
INDIVIDUAL - HOST CENTRALISE - HOME
The more centralised the process the more resources would be placed in the
home office with the various host entities feeding into that area.
Having power based centrally impacts on all the participating bodies. It pulls the
focus for process to the head office. In a multi-cultural situation there is a
danger of having the ‘power base’ in the home or head office the various host
sites might feel undervalued even alienated.
SHARED SERVICE
DECENTRALISED
POWER FOCUS
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 26
The more decentralised the process the more responsibility exists at local
areas, which means empowering and ensuring skill base exists in those
environments.
The decision-making and control structure of the organisation influences the
profile of payroll function. It will impact on the level of centralisation that can be
strategically important.
Decisions and control can be driven at the level of central control, regionally or
by individual country. This can be strategically authorised by department as well
as country.
For example, it could be that HR and Payroll will be centralised as an
administration supportive function, whereas sales and marketing could be
placed at the control of each localised country or perhaps on a regional basis.
Regional grouping
The organisation that is working in multiple countries will by default group them
in regional groupings. The United Nations groups countries as follows:
African group
Asian-pacific group
Eastern European group
Latin American and Caribbean group
Western European and others group
North-UN state or territory
In other situations, on the grounds of proximity, the mixture of countries have
been collected together as follows:
EMEA – Europe, Middle East and Africa
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 27
Americas – North America (US, Canada), Mexico and South
America
Asia/Pacific – Australia, China, Japan, India and other Asian
nations
Internal/external control
An organisation, when designing its strategic intention, will have an individual
opinion towards the way it wants its processes to be practised, including:
Choosing to manage and support internal control of work
process
Use third party to support such effort.
The move away from internal management is often described as having a core
focus. Any activity that is not central to the actual production or enactment of
service that is being offered to the organisations’ customers will be deemed as
being non core – and therefore relevant for outsourcing to a third party.
Process requirement needs
There are many aspects that have to be considered when deciding on what
administration process, including software, the payroll will use.
It involves understanding:
What will be needed to compliment an organisations global
strategy for employee treatment, reporting expectation and
system use?
Is there is a need for other systems to be integrated, e.g.
absence management software?
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 28
Is there are country specialisation requirements; time zone,
language and specially localised pay agreements?
What functionality will be required?
What are the reporting requirements, particularly in house
rather than statutory?
Recognising what resources are available internally both at host
and home locations.
What would company budget expectations be?
What is the position with relationship to work councils, unions
and statutory needs?
Whilst these are the requirements that can be assessed as expected benefits,
any decision to adjust practice or change focus can lead to indirect benefits.
These are things which the organisation may not have specifically set out to
achieve but will appreciate receiving the benefit from – including:
Reduction in dependency on local knowledge
Using the system itself to recognise cultural differences
Using information technology to communicate with internal and
external stakeholders
Enhance system functionality to exceed stake holders needs
Low maintenance system
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 29
Activity. In Module 4, Section 2 you were asked to consider as many
challenges as you could think of which potentially apply when considering
implementation of global and cross-border systems – particularly that of data.
Reflect on your thoughts at that time.
Hopefully you will have remembered challenges such as:
Translation and standardisation of language of ‘home’ and
‘host’ nations
Need for conformity of presentation on information such as
dates and currency (including policy on conversion rates)
Data protection regulations in the ‘home’ or ‘host’ nation
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 30
These areas of concern should not be undervalued. The integration of
information will be viewed as an essential aspect of group reporting but the
individuals themselves may be entrenched in a cultural approach for
performance. It is a particular issue; the wider the gap between styles in
location, the broader the spread of people involved.
Take the issue of self-service, when the interaction could involve all employees.
It might be a reasonably easy process to acclimatise one person to a different
approach for presenting information but when spread to every individual, there
is much more likely to be situations where errors or delays will occur as
information does not process as required.
Assumptions of understanding cannot be made and any ‘standard’ or ‘fixed’
presentation style will need to be properly explained and taught, taking cultural
and regional differences into consideration.
The alternative is to allow for specialisation to be included in development and
for translation activity to be built into the centralisation links. For example, dates
could be entered in as per the normal approach for each location and then
when information is linked to a central report, the information could run through
an adjustment program to convert some areas to the required ‘norm’. This
removes then need for local control but requires system protocols to ensure the
data is properly connected.
The weakness is that any manual collation of information will not enjoy the
benefit of the technical merge and require awareness of the divide in
presentation style.
Data protection issues are not so easily technically adjusted. Each locations
regulation will need to be assessed and the information handled in a suitably
compliant way – or a business assessment taken on the level of risk and liability
for not following statutory duty.
In some situations the employees could be approached for agreement for data
exchange if it is an issue of cross border transfer. In other cases the
requirement will be to establish security processes that meet the restrictions of
the regulations.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 31
Fortunately, in many locations the data protection requirements are minimal and
as long as the information is required for internal use, will commonly be
resolvable.
Specific international considerations
Individual countries and cultures create a slightly different emphasis on the way
payroll would be expected to approach its work, particularly related to time.
Approach to time
Payroll processing is governed by deadlines and when processing International
payrolls it will soon be discovered that some countries might need longer to
complete the process than others. It may also be recognised that some
countries, despite published payroll timetables / deadlines, will leave everything
until the very last minute and then expect the payroll to be turned around almost
immediately.
It is important when designing a process schedule to allow more time for
international payrolls, even if the numbers are small, as it must factor in the
length of time needed for making payment from one country to another or
reimbursing the in-country payroll service provider before local payment can be
made.
International time lines and specific regulations can influence the nature and
timing of payments – the same rules may not be allowed in one country that are
allowed in another. For example, leavers may require immediate payment on
the day of leaving rather than processing the payment through the next payroll,
requirements for ‘special’ pay days and handling shut down dates where
country ‘state’ holidays may also vary.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 32
Payroll processing
Payroll processing is the activity involved in order to calculate and complete
payroll department activities.
One of the major challenges is that there is often only a short time available to
identifying a suitable global payroll process when a new situation occurs. The
existence of tight timetables can mean there is insufficient time for a full review
and analysis of need and choice.
There are different causes for the tight time limitations, for example the
organisation many have moved rapidly into an expansion program perhaps by
acquisition in a new country or a desire to reduce costs. The sudden need to
provide a payroll service will create pressure on sorting the administration
needs. Whatever the reason for the sudden requirement, payroll will still
identify that the key objective for them must be to ensure payment of employees
on time.
It is recognised different organisations will have individual requirements for their
payroll team. The mix of duties will be influenced by the nature of the countries
involved, size and frequency of payrolls and the additional tasks to pure pay
function e.g. the level of involvement with benefits, expenses, and reporting.
Whatever the global payroll requirements may be, it is important that the
function is considered in a strategic way. If there is not attention in this area the
department could not provide the support on the organisation strategic focus as
a whole.
It is also important that the global payroll function operates to its full potential
and to be truly effective the payroll team experts should be involved in the
selection of administration process from the beginning.
The groups of people involved in any development plan will follow the same
scope.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 33
The choice for process means first identifying what is needed, not just for now
but also for the short and long term.
The decision of what will be the best working process requires investigation and
appreciation of the scope of the role. To move forward there has to be a
process of review before just adopting new technology. If care is not taken to
understand what is needed the implementation of new technology is just an
expensive way of repeating existing problems.
The effective agenda for selecting and introducing a process would be to:
Assess the needs
Compare to existing process
Identify what is missing
Recognise changed future needs
Identify a business request plan to get agreement for project
and supportive resources
Create a project team for implementation
Steering committee-
decison makers
Stakeholders - identifiers of need
and missing services
Project team - implmenters of new processes and training
development
Experts, users and clients - the supporters and users of project activity
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 34
Perform project activity including documentation and training
Review and move on to next activity.
Banking and funding
How and who is to be paid is key to any payroll activity. Each country will have
specific banking regulations – and with the interest in fraud and money
laundering, some countries have introduced strict regimes about transfer of
money internationally.
There will be a need to create a bank placement in the locality to ensure the
transfer moneys.
The principle of electronic exchange requires the bank to formally agree to be
involved and honour their code of exchange conduct. In the USA the federal
exchange uses SWIFT for payment notification but CHIPS or FEDWIRE to
process the actual payment. The movement of value has to pass through a
clearance house – which in USA is called ACH.
There will also be different processes in other countries for example the
clearance house for UK is commonly referred to as BACs and Mexico it is
SICAM
Banks work differently even within what would appear to be similar types of
countries. In France if a married woman wants to open a bank account she will
be asked to get written approval from her husband before they will open an
account. In the UK, the bank account for each person regardless of sex is
strictly under their control – unless they are under eighteen when it requires the
supervision of a guardian or trustee.
To identify a bank account each has its own clearing number. In the USA this is
referred to as the route number, in UK it is the sort code and in Germany it is
known as the Bankleitzahl.
Moving funds internationally will require being aware of that countries BIC
number.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 35
Pay methods
There are numerous payment options to consider and these could well be
different for the payment of Net Salaries and for the payment of any Tax that is
withheld and Social Security payments. It may be that in some countries the
payment in respect of Taxes and Social Security collected cannot be processed
from an international bank account.
International payments via UK internet banking
Local BACS equivalent type services in local countries initiated
by local In Country Providers (ICP’s), these are present in
several countries. Examples are Australia, Belgium, Canada,
India, and the USA but be aware that you may need to seek
permission in that Country for them to operate this service for
you
Payments by local in country offices from local bank accounts
International payments files using a specialist provider
International payment providers
There are specialists service providers on the market now that will handle all
your international payments (local regulations permitting) from a single
payments file from your international payroll software. Not only can this simplify
and streamline your international payment process, it can if used wisely save
the organisation money in terms of foreign currency exchange costs.
Using a specialist provider can deliver the following benefits:
Simplified internal process eliminating manual processes
Fully auditable and tracked payment process
Faster international payments
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 36
Lower foreign currency exchange rates that negates the need
for idle foreign currency balances.
Enhanced security
Reduces the risk of manual error/omission
Enhances global financial governance and control and reduces
the risk of fraud.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 37
Global payment providers
Name Country of origin
Western Union USA
Equiniti Paymaster UK
WorldLink (Citibank)
Note - The DWP use WorldLink to make state pension payments to UK employees who live abroad
Global
IBAN
IBAN is an internationally agreed means of identifying bank accounts across
national borders with a reduced risk of transcription errors. It was first adopted
by the European Committee for Banking Standards (ECBS) and later as an
international standard under ISO 13616:1997. Initially developed to facilitate
payments within the European Union, it has been implemented by most
European countries and many countries in the developing world, especially in
the Middle East and in the Caribbean. International Bank Account Number’s
(IBAN) are essential if you want to make speedy payments to employee’s bank
accounts in the EEA region. This unique number can vary in length from
between 16 to 34 alphanumeric characters and must be reported in one single
string. It starts with a two-digit country code and consists of a number of check
digits (between 2 and 4), a bank code, in some cases a branch number and an
account number.
Here are some examples of a valid IBAN’s where:
C = Check digits
B = Bank code / branch code
A = Account number
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 38
Country Country
code
Check
digits
Bank code /
branch number
Account number Check
digits
Belgium BE CC BBB AAAAAAA CC
France FR CC BBBBBBBBBB AAAAAAAAAAA CC
Germany DE CC BBBBBBBB AAAAAAAAAA
Italy IT CCC BBBBBBBBBB AAAAAAAAAAAA
Portugal PT CC BBBBBBBB AAAAAAAAAAAAA CC
Sweden SE CC BBBB AAAAAAAAAAAAAAAA
UAE AE CC BBB AAAAAAAAAAAAAAAA
SWIFT / BIC codes *
A SWIFT code is a standard format of “Business Identifier Codes” or as it is
sometimes known “Bank Identifier Code” (BIC). Approved by the International
Organisation for Standardisation (ISO), it is unique identification code for a
particular bank. The acronym SWIFT stands for the “Society for Worldwide
Interbank Financial Telecommunication”. These codes are used when
transferring money between banks, particularly for international Non EEA wire
transfers. Banks also used the codes for exchanging other messages between
them.
The SWIFT code consists of 8 or 11 characters. When 8-digits code is given, it
refers to the primary office:
First 4 characters - bank code (only letters)
Next 2 characters - ISO 3166-1 alpha-2 country code (only
letters)
Next 2 characters - location code (letters and digits) (passive
participant will have "1" in the second character)
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 39
Last 3 characters - branch code, optional ('XXX' for primary
office) (letters and digits)
The SWIFT network does not require a specific format for the transaction so the
identification of accounts and transaction types is left to agreements of the
transaction partners. Currently, there are over 7,500 “live” SWIFT codes. The
live codes are for the partners who are actively connected to the SWIFT
network. On top of that, there are more than 10,000 additional codes, which are
used for manual transactions. These additional codes are for the passive
participants.
The registrations of SWIFT Codes are handled by the Society for Worldwide
Interbank Financial Telecommunication (SWIFT) and their headquarters is
located in La Hulpe, Belgium.
Here are some examples of SWIFT / BIC codes:
Bank details Bank
code
Country
code
Location
code
Branch code
Bank of Scotland Plc. (All
UK Offices)
BOFS GB 2S
Bank of Nova Scotia in
Montreal, Canada
NOSC CA TT MTL
Agricultural Bank of
China in Beijing, China
ABOC CN BJ Q10
ANZ National Bank
Limited Wellington, New
Zealand
ANZB NZ 22 058
Goldman Sachs, Zurich, GOLD CH ZZ XXX
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 40
Switzerland
Routing or transit numbers
Some countries also implement domestic bank codes or clearing systems to
transfer money within their own borders. Examples are:
Routing Number in USA
Routing Number or Transit Number in Canada,
Sort Codes in UK
National Sort Codes (NSC) in Ireland,
Bankleitzahl (BLZ Codes) in Germany,
Bankenclearing-Nummer (BC) & SIX Interbank Clearing Codes
(SIC) in Switzerland,
Code Banque & Code Guichet in France,
Codice ABI (ABI) & Codice di Avviamento Bancario (CAB
Code) in Italy,
Registreringsnummer (Reg. nr.) in Denmark,
Bank State Branch (BSB number) in Australia,
Bank State Branch (BSB number) in New Zealand
Indian Financial System Code (IFSC) in India.
Centralised or de-centralised processing
Assessing the ability to perform a function or working process includes
understanding what are the issues related to resources (manpower and skill),
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 41
attitude for partnership working i.e. the principle of outsourcing, and the existing
business structure as to who is responsible for what.
An organisation’s strategic culture will decide on whether it wants to control its
processes inside or have a preference to outsource. There can be varying
decisions whether to outsource by the whole organisation, by region or just at
single local areas. The control of supervision and control can also vary.
This can lead to a complicated option pattern – intensified when the
organisation involves multiple sites, particularly international and regional mix.
A centralised process places decision and control of the function under the
direct management structure of one department, which will mainly be found
located in the home location. Decentralised processing involves a level of
autonomy at each area, which allows them to adapt to the specific climate of
their location.
Each organisation that is involved in multi locations has to decide how much it
wants to centralise both the control and the administration of processes for
supporting activities.
With a constant drive to keep costs down, many companies are looking to
centralise their administration functions. Payroll has generally been seen as a
good model for this strategic approach.
Many companies begin projects for centralisation but then reverse their decision
when they realise the practical difficulties. These can include:
Complexity of legislative requirements
Language
Communication
Delivery timescales
Choosing between levels of centralisation is a reflection of the nature of the
organisation. Where an organisation is inclined to centralise decisions at the
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 42
top of a management hierarchy, the business culture is recognised as
centralised and typically leads to the business functions following a similar
processing style.
There have been differences in support for centralisation of processes.
One argument is that it gives business visibility and control – a belief that by
processing activity through one resource that it will be easier and more accurate
to overview of what is happening. New technology and the capability to work on
a software platform throughout the world has led to expectation that there can
be one system for the payroll and other functions – a global platform.
However, it has also been seen that organisations have become more open to
a less centralised approach by the use of integration of findings rather than
trying to use a core process.
Centralising the payroll does allow for decisions to be seen to be simplified in
that one ‘power base’ oversees coordinates the management structure. The
choice is whether to make the various units work in a set procedural manner to
simplify the process for decision making or to allow variable working patterns
and then integrate the data to a central processing system.
Claiming the status of centralised processing still means deciding where the
supporting work will be undertaken. The claim that work is being performed
centrally does not necessarily mean all the team involved are sitting in the home
office. It can mean the process is being performed by individuals located in
different offices but that the functional work is being performed on a single
controlled platform. The definition would relate to the level of separate control
in each host location.
A centralised system has its dangers, a key one being whether the central
platform and management team have the skills and capability to handle the
spread of difference that will influence each separate location.
The decision has to be made how much authority and control will be left in each
location. There are different arguments for assessing the benefit for placing the
decision authority to one area.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 43
If however the support work is performed in different locations, consideration
must be give to the requirement to combine information from the spread.
Different locations could well be subject to different presentation cultural styles
or compliance needs. These variations have to be brought together and
combined if the organisation wants to present one uniform report that can be
used to cross verify and compare.
Unifying information (the translation into an acceptable format and style) can be
costly and this can be a consideration when selecting suitable administration
systems for use over various sites.
By using a centralised based system there can be disciplines established which
would force reporting to be the same across all sites.
A concern of a centralised system is that the staff at host locations may feel
undervalued and suffer demotivation as a result.
Choices for centralisation
To achieve centralisation there are various available system process choice
A fully integrated global module. All business units use the
same product and procedures. Data is fully interfaced on the
same system so integrated.
A fully integrated regional module. Each region uses the same
product and procedures. Region to region needs integration for
global reporting.
A fully integrated country module. Each country uses the same
product and procedures. Country to country needs integration
for global reporting.
A fully integrated payroll system. All payments are processed
through a centralised payroll system. Payroll is fully integrated
globally for reporting and payment.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 44
Outsource the payroll process to a third party supplier. This
can be in entirety or on a region by region, country by country –
but the more variety the more integration will be required.
So the decision is how far centralisation is to occur – across a specialism such
as payroll or maximum system requirements to support business process. The
other choice is how much is wanted to be completed by internally controlled
management i.e. what level of outsourcing would be sought.
Decentralised (host based) payroll function
Instead of choosing to centralise activity some organisations elect to allow each
region or country to host its own payroll functionality.
There are different reasons for choosing this approach to follow payroll.
It could be the number of people being paid in the host country is so small it is
not considered cost effective to try and learn the necessary technical
knowledge to incorporate onto a centralised system.
There are many factors of human resource management that we all take for
granted in our own countries. Working with them on a daily basis means we do
not need to give them special attention. We understand them so we therefore
deal with them automatically within our work environment – they become
second nature.
However, areas such as political, economic, religious and cultural will need to
be given special attention when working with human resources in other
countries or when developing local policies and practices relating to employees.
Assumptions should not be made that these areas will operate in the same way
as those of the organisation’s home country.
Bennett (1999) covers many of these areas in his discussion of criticisms of
multinational companies. He suggests consideration should include the political
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 45
structure and influence, the nature and style of legal requirements, the local
cultural standards of behaviour, as well as language, financial stability and skill
availability.
The decision of whether to allow a payroll office to exist within the host section
of the organisation will depend on many factors:
If there an existing suitable arrangement?
Are there enough employees on the payroll that would be cost
effective to run internally?
What security risks and control issues will exist i.e. who will
audit and authorise activity?
Are there resources that would allow for in-house processing,
computer capacity and skilled payroll staff?
The host payroll could be outsourced but if the investment is for a country that is
not one that has regular links for global organisation or where the size of payroll
is small it might not be cost effective to use the larger service suppliers. It may
be more effective to use a local supplier such as a local accountant. The
obvious considerations are:
Getting a secure service
That results and information can be successfully integrated to
global reporting requirements
Regional placement of payroll staff.
Decentralized placement of staff
There are always considerations of whether to centralise or regionalise payroll
processing, but there are specific issues in relation to that of having at least
some regional placement.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 46
By having someone in the host environment it will allow 24 hour service or
sufficient to meet the timing of normal working hours in all host countries
involved. Without local support it could mean employees having to wait for
support from the home country to respond to enquiries. Such delay can give
the impression of disregard and could be de-motivational to the employee. The
act of having support from the local area implies support and value of the staff.
Also having local technical awareness, cultural understanding and regional
experience it can contribute towards the likelihood for success in setting up
payroll procedures, especially where there is intention to centralise material and
communication.
Planning process
The planning process involves identification of existing position – the as-is
state, recognising where the preferred situation place would be – the to-be
state.
Because each organisation is different, there is no right or wrong way for doing
things, there is also no clear template for what changes should be taken to
standardised process actions.
The important focus will be to ensure the most effective process should be
identified.
Organisation strategic alignment
It is essential when planning a project activity that the focus must be to meet the
organisations strategic objectives. Having a passion for a new idea is not
enough – the introduction of a new process or practise must have benefit to the
organisation.
The fact that such a project is going to need financing to support to the activity
means pressure on the organisations resources. It will mean needing support
for planning, research and execution of change practises and this will mean the
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 47
allocation of staff to support the work. To get this support the project would
need to evidence an appreciation of the organisations
Values
Vision
Mission
Objectives and key commitments
Risk analysis (assessment)
Any proposed change should include clear documentation of what is going to
happen before the work starts. This allows for preparation of activity and to
identify what type and level of resources will be needed to implement the
change. Such preparation is often called a project plan.
Part of the plan should include a careful review of risk elements. It is important
to try to anticipate the potential problems of the organisation. The concern
covers three areas:
Is there a risk that implementing this change could cause harm
to the organisation?
Is there a risk of something preventing the change being
implemented?
Is there a risk that this change will not meet its suggested
benefit?
The level of risk could be small or large and could involve cost or damage to
image. It could lead to project failure, or worse, organisation damage.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 48
It is clearly important to pre-assess the risk to avoid falling into traps or wasting
resources. It also allows for the preparation of contingency steps to handle
issues that are not in the control of the organisations management team.
This is called a risk analysis or assessment. It involves looking at all the actions
and decision points and challenging the situation by asking:
What are the barriers or chances of a problem at this point?
How likely could this happen?
What would be the impact if this happened?
What steps can be taken to mitigate the risk or be taken in
response to the situation?
Depending on the answer it could change the plans of the project, introduce
extra working procedures or even influence a change in working requirements
to reduce exposure to risk.
Obviously any serious risk could lead to the project being withdrawn – it has to
be assessed case by case.
The mapping process
Organisations often find there are documentation of procedures which when
examined do not meet the actual activity.
Business managers also may think they are aware of what is going on but can
find day to day actions are taking place that whilst acceptable are unauthorised.
It is even true that we carry perceptions of both what is happening and what we
think others require from us as a service.
When planning to make decisions about how working practises are to be
followed (for example when considering new software or reallocation of
responsibilities) to take that opportunity to ensure there is full awareness of
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 49
what is needed, what resources are available and what risks and business
restraints exist for making any change.
The documentation of processes and procedures is normally referred to as
mapping. It reflects the image of the journey involved from working from point A
to get to point B.
The purpose of providing a clear map of a process would be to:
Understand the existing process – how and why things are
being done
Understand the resources and costs of existing process
Be able to clearly communicate process requirements to
management
Identify and report benefits of change
Use the map for training and to provide a document on process
requirements and scope of roles
Act as a benchmark for identifying change and adjustment for
enhanced processes
Identify duplication and poor use of resources allowing change
to improve process function.
Planning emotive response
The purpose of redesign is to improve the existing situation to achieve a future
objective. It is quite normal during the discussion and introduction of a new
situation that there will be a reaction from participants – not always positive.
This includes:
Feeling uncertain – there can be concern about the validity of
change and by association there can be a level of concern that
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 50
the proposal devalues the adequacy of the present situation.
The impact of such reaction will depend on the level or scope of
change being proposed. The idea that change is necessary
makes the existing process seem inadequate
Desire to experiment – the wish to explore and use new
approaches and systems because they look more interesting
and effective than existing practise.
Stress through pressure – working through a change project,
especially when expected to hold down the normal duties, can
be very stressful balancing all deadlines. This can lead to high
pressure and stress situations.
Trust issues – the knowledge that new procedures are being
introduced can create mistrust between the individual and their
employer as they have concerns about their long term future –
will the role they do now be lost and will their job be at risk. If
involved in the project team some individuals feel nervous
about capability of meeting their duties when such emphasis is
being placed on success. If not directly on the team but
impacted by the change there can be fear that they are not of
value and at high.
Analysing steps
In order to assess what is needed and what type of pay process would be the
most effective there has to be a clear appreciation of the needs.
It begins with a project of analysis looking at:
What is the current situation?
What factors should be considered for the future?
Identifying specific problems or challenges
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 51
The current situation has to reflect the activities that are done presently, which
of these are essential and which are actually redundant.
When considering the future, an effort should be made to anticipate the
implications of strategic plans, for example where expansion or retraction is
likely to take place, where restructuring or changes in governance is likely.
Specific problems should include the issue of cultural specific challenges,
understanding actual skill dependencies and availability and, of course,
inevitably any restrictions on financial resources for making change.
•Starting point •Ending
point
Determine boundaries
•Describe task •Report
detail or high level
Identify steps
•Identify the tasks •Sequence
the tasks
Order activity
• Use symbols for type action
• Link who does what when
Draw symbols
• Lable chart for easy reference
• Consider adding appendix on stats
Check complete
• Check process effectiveness
• Consult all parties for confirmation
Finalise detail
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 52
Business case review
The payroll process, as with any other business activity, will go through phases
of review and change. The added technological and legal issues as well as the
differences in cultural perception and focus complicate International or global
functions.
To ensure the best of working processes, it is important that those that have
knowledge and authority assess what change would be necessary to introduce
the best of working practise.
The decision of what would be the best way to work is not one to be taken
lightly and one of the biggest challenges is getting sufficient time and resources
to do this important research.
What is also important is that any ideas for new working processes should be
assessed and formally reviewed before resources are used. Most organisations
now work to carefully planned budgets. To want to expend unplanned
resources are therefore not usually accepted without consideration. All
organisations are required to ensure:
Any activities undertaking will not place the business at risk
That it is protecting both the information and confidentiality of
company and employee information,
The organisations security and viability is not put in jeopardy
That proposed changes would not lead to statutory
noncompliance or financial risk
That changes would not make the organisation at risk from
fraud
Therefore, it is normal for any proposed change (whether restructuring or
introducing new software) should be documented to create a business case
review.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 53
In effect this document is a request for permission to implement an activity and
ask for the relevant authorisation department to allocate resources.
The key content of the document would be to include a clear definition of:
Purpose and objective of activity
Definition of scope of activity
A specific plan of the intended change including an outline of
management structure for the activity and how it will impact on
resource needs in the future
A cost benefit analysis – what the activity will cost and what
savings/costs will be needed on going
A risk analysis – what are the potential issues and what
mitigating action would be required.
The work that goes into the business case is not wasted – it might take time to
prepare but the information found to argue the case of the project to be
supported will help formulated the scope and plan for the actual activities itself
when working on the more detailed project plan.
Options for payroll processing
Whatever the global payroll requirements are, it is important for the payroll
function to look at the areas strategically.
For the global payroll function to operate to its full potential, it is important the
payroll function is involved in the process from the beginning.
The options for process consist of:
In-house using employees within the host country
In-house using regional or head office employees
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 54
Outsource to a local bureau of the host country
Outsource to an international or global provider for company
integrated payroll
Outsource to local service provider – home country
Or a selected mix of the above options
As with any international management, it is very important the team involved
ensure they have considered cultural differences and the potential impact on
the working relationship between host and home activity.
The decision makers have to ensure they do not just use their own perceptions
to consider new situations. Such use of personal perception (sometimes called
self-reference criterion) can result in misreading the situation that exists for the
host country.
Appreciating the difference and implication of possible behaviour due to cultural
influence been discussed earlier in this module.
Activity. Take this opportunity to reflect on previous discussion
concerning cultural differences and the assimilation of other cultural attitudes.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 55
It is hoped you will have identified this area as related to acculturation.
Global Payroll Systems
Legislation relating to payroll is usually complex and country specific. This
results in there being many systems to cope with different legislative needs.
Activity. Review Module 2 - Unit 3. Planning a global Strategy. Consider
the key issues raised about the focus of a global process.
It is hoped you will have recalled the difficulties organisations face with the
differences between various countries. The complexity of the legislation of
individual countries creates challenges for software developers to include more
than one country’s legislation on a single payroll system.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 56
In recent years, many more of the smaller software houses have developed
products that cover two or more countries, for example UK based products
often offer a bolt on module to handle Irish payroll.
Throughout Europe there are many products that deal with other European
countries, particularly those that have close borders and a constant traffic of
workers living in one country and working in another, for example France-Spain
or Switzerland/France/Germany.
It could be argued that the UK is less advanced than its European counterparts
in this area, is it has only one direct border with another country and so has not
experienced the same historical volume of cross border interactivity.
Although there are products that claim to offer a ‘global payroll’ solution, there is
no payroll product on the market that is 100% global. One just has to consider
the number of actual countries in the world and that legislation is ever changing.
Surely this makes it impossible or cost effective for any software company to be
capable of developing and maintaining an 'off the shelf' solution for every
country.
Those organisations that claim to have a global product are soon identified as
having only a limited number of countries – normally those that are
commercially viable, for example, the US, the UK, Asia, and Australia. They
cover the claim for global support by arranging partnership relationship in other
countries.
A key driver for a global product in many organisations is generally the
accounting and finance aspect. This can lead Payroll and Human Resources
(HR) being forced to move to a software package for their specific business
need that may not be fit for purpose.
There is also a trend towards using a computer system that has ‘multiple
functionality’, where a system covers all areas of business activity; finance,
purchasing, distribution, human resource, payroll and marketing tools.
With the advances in the use of the Internet, many more payroll software
companies are making their global products available online. This allows a
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 57
payroll department in one country to have direct access via the Internet to
payroll software that may be held on a server in another country.
This has been seen to work efficiently in countries where the language is the
same. In addition, as the Internet does not 'close', the system availability can be
24 hours - 7 days a week, avoiding any issues with time zones.
System support options
Whatever working process selected there is a need for system support and the
majority of organisations will see that processing capability by using an
application or service provided by a third party.
Application provider
An alternative to a service provider is an application service provider. An
application provider provides the client with an application in order to run the
payroll functions internally. In this situation it is the process and software that
is made available not the manual resources for running the payroll system.
When it is a technology based provision, often the IT department would be the
main advisor – which of course may not be the most sensible solution as the
service requirements needed for payroll are very complicated without the added
dimension of cultural differences when dealing with multicultural influence. This
normally involves using the client’s own hardware.
Depending on the nature of the software and system it could mean the data file
and record is being held by the suppliers own web infrastructure – with the
client keying information through terminals they own but the software and data
file being held on the software suppliers processes.
One issue is the software may not have the level of design to handle the
specialist requirements wanted by the client.
Key relationship issues are clarity of communication, agreement of strict rules
and timetable for exchange of information and appreciation of responsibility
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 58
boundaries. Whilst the service provider is doing the work, care must be taken in
thinking who has the legal duty to ensure compliance and accuracy.
Typically an organisation will be looking for the best software for performing a
set function. Any product that is superior to others in the same market is
referred to as ‘best of breed’. In some situations an organisation will source
technology from different suppliers to order to maximise the best of breed for
each area of business. However there has been a move to use one business
process outsourcer to help make integration of technical aspect of business
structures without needing to patch them together.
However, the challenge is that, whilst a single business provider may have
advantages, it does not follow they are best of breed in every area. So it could
be the business process operator’s software would be very effective for HR
needs but be weaker in supplying the necessary processing requirement for
payroll. The organisation will be looking at the total picture for integrated
communication – but it still means the department with the less developed
working areas has to handle the frustration of poor functionality.
The same challenge exists for intercultural working. There may be a software
system that is very effective in one country but not have the same technical
sophistication in another. The organisation will need to look at the needs of the
whole business whether to opt for best of breed country to country and then
integration activity or to elect to use a global system that has weaknesses in
some situations. It is about risk assessment and the balance of benefit.
Service provider
The choice for payroll provision includes using in house running of a program or
placing the work in the hands of a service provider – but what exactly does this
mean?
A service provider is an independent organisation that will provide the running
of processes, which will provide the whole or part of a client payroll. The client
and service provider form a contract together, which is a formal and binding
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 59
legal agreement that the client will pay an agreed fee in exchange for a set
activity.
The service provided involves the acceptance of data, calculating the due
payment and deduction and identifying the level of payment due to the
individual. The level of service provided at the edge of the core of this activity
establishes whether this is a core service or anything up to fully management.
The equipment and labour are under the jurisdiction of the service provider.
The relationship has to be clearly documented so the client and the service
provider are clear about their roles and responsibilities. In some situations the
payment data is fed directly from source areas such as the clock cards or
timesheets and reports from the employee and site managers. In other
situations, the client will collect the data from multiple resources and pass a file
of payment requirements.
Whatever situation is used, it is important the data has to be processed using
an acceptable authorisation line so the service provider actions information that
has been approved by the client.
collection and preparation of data
calculation of payment
calculation of deductions
payment and reporting
support and advise to client
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 60
The service provider then manages the process of payment and deduction. It is
the using of their expertise in this area that makes the use of an outsourced
process attractive to the client. But using a service provider reduces the need to
maintain technical skills within an organisations infrastructure.
In some relationships, the decision is for the service provider to report the
required payments due to employees and a report on the various collected
sums for third party payment. The client then completes the process by
creating payslips and making the necessary reports to employees, third party
and internal departments.
Other organisations elect to take a fully managed service from the provider –
they process the payment, produce and print the relevant pay statements and
provide full reports and payment requests for the third party agents.
Obviously the more extensive the service being offered the higher the cost will
be to the client.
Data sent to the service provider could be by submitting paper or an electronic
file. In return the service provider may send electronic or paper reports as
required by the client.
The cost of service will therefore reflect the level and extent of service being
offered as well as assessment due to volume and complexity of records that
have to be handled. In some situations the charge will be based on a rate per
payslip produced.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 61
Outsourcing the payroll function
The outsourcing of payroll as a function is not new. Some major payroll
providers also offer HR outsourcing. That can cover not just HR administration
but support in areas such as recruitment and training.
Activity. Review Module 2, Section 3 – reflect on areas concerning
payroll processing options particularly outsourcing and fully managed
processes. Make notes on your observations below.
There are typically three reasons why a desire for a global outsource system
has occurred:
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 62
The organisations who at present outsource their home
systems seek to extend this to host environments.
There is an anticipation that outsourcing would be easier than
learning the host payroll needs.
The existing host payroll service is outsourced at present or the
need is for a short term /experimental period.
There are many different types of outsourcing models and providers, which
means there is something to suit all types of organisations. This can mean
having suppliers who can conduct payroll calculation and production of pay
slips, to ones that offer full end-to-end payroll management for a global
organisation.
It can mean partial use of their system with integration of information back into
the organisation systems or taking advantage of a suppliers own pre-configured
platform (this then removes the need for any internal hosting or technical
support).
The identification of a truly global outsource supplier is challenging but there are
companies that will offer an extensive service. The fact that many organisations
have established outsourcing as a working practice has led to an increased
acceptance of payroll outsourcing and offshoring among staff, unions and works
councils.
Having established the format, organisations are able to identify solutions as
pre-configured systems with available template processes. This can help speed
implementation and reduce risk – but it does require the organisation to
consider adapting processes to meet the template system – often referred to as
a ‘vanilla process’.
Many of the major providers can offer solutions which are suitable for both large
and smaller operations whatever type of dispersal, may be needed, but the
proposal will depend on the countries involved and the size of the support
needed.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 63
The intention will be that an organisation can hand over its payroll to a single
provider. However, it is important to note that this does not mean that the
provider are doing LL the work – when the size or location calls for it the
provider may, behind the scenes, be working with a local country partner to
facilitate the actual work – subcontracting the work. It is advisable to include
something within a contract with a service provider so that the organisation is made
aware of any sub-contracting situations.
It is difficult to establish statistics on how extensive outsourcing is – most
information available is provided from organisations that are providing the
outsourced service and of course this leads to a need for market spin.
The professional network implies there are cycles of popularity about
organisations selecting in-house or outsourcing, but research indicates that in
European terms, the UK continues to lead the way for payroll outsourcing.
Countries such as France and Germany are seeing an increasing amount of
outsourcing and are typically now included in the scope of pan-European deals.
Public sector payroll outsourcing is predicted to grow by 10-15% in the coming
years. Marketing information suggest that Pan-European payroll outsourcing
deals have typically taken 18 months to get from strategy decision to contract.
However, recent reports indicate such work is speeding up – partly due to
experience and partly because of new communication enhancements.
Average contract terms are seven to eight years with break points at three to
five years and the average European contract suggest a value of €35m.
Assessing the benefit of payroll outsourcing
There are a number of different reasons for outsourcing, the main ones being:
To help ease compliance by using a supplier’s expertise dealing
with complex and frequently changing payroll rules and laws;
To remove both expense and risk of retaining in-house payroll
system expertise;
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 64
To allow a focus on more value-added activities and also to
save costs.
As suggested, many suppliers have developed implementation programs and
designed pre-configured platforms. Using these will reduced the cost and
probably time for implementation, making payroll outsourcing cost effective for
much smaller organisations than was once previously the case. However, it also
means accepting disciplines and avoiding customisation where possible. The
more change and adjustment needed the more time will be necessary to set up
and test reconfigured structures.
Information before considering outsourcing payroll
There are many aspects that have to be considered when deciding on what
administration process, including software, the payroll will use.
To consider whether outsourcing is an option for payroll there are specific
questions that need answering internally by the payroll department.
Does the organisation have an outsourcing culture or a history
of successful outsourcing processes?
Does the company’s management leaders support outsourcing
strategy?
Will outsourcing Payroll work with the organisations HR strategy
– critically what will be the impact for integration of employee
data and authorisation of pay instruction?
What are the skills and resources for maintaining in-house
payroll processes?
Is outsourcing aimed for pure payroll to pay process or for other
associated elements including employee self-service, absence
management, time management, benefits and expenses?
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 65
What are the restrictions on budget, requirements for cost
savings, policy for expenditure authorisation? What are cost
implications for outsourcing including what will be needed to
remain for in-house administration?
What is available in the market to meet service needs – which
suppliers have the right level of cultural mix to match the
organisations style and provide the service elements required?
What can be done to simplify and standardize existing payroll
procedures to reduce complexity e.g. simplify dates, payments,
calculation requirements, communication and authorisation
policies?
There are practical questions that must be reviewed when moving forward with
the idea of outsourcing the payroll process. The extent of the work will depend
on the amount of the process that is being placed in a third party service
provider and the nature of the on-going relationship.
It involves understanding:
What will be needed to compliment an organisations global
strategy for employee treatment, reporting expectation and
system use?
Is there a need for other systems to be integrated e.g. absence
management software?
Is there any country specialisation requirements; time zone,
language and specially localised pay agreements?
What functionality will be required?
What are the reporting requirements, particularly in-house
rather than statutory?
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 66
What resources are available internally both at host and home
locations?
What would company budget expectations be?
What is the position with relationship to work councils, unions,
and statutory needs?
Those are specific considerations that would be anticipated but hopefully part of
the movement to outsourcing should be the identification of indirect benefits.
Examples of these could include the achievement of the following:
Reduction in dependency on local knowledge
Using the system to recognise cultural differences
Using information technology to communicate with internal and
external stakeholders
Enhance system functionality to exceed stake holders needs
Low maintenance system
Consideration of the practical administration requirements in order to implement
the project would include:
Ensure adequate time to prepare
Ensure processes are correctly defined
Establish the current position and project objectives
Define both global and local requirements
Identify essential requirements e.g. ‘must haves’ while
considering global consistency
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 67
Assess cost benefit analysis to measure return on investment
(ROI)
Identify areas for organisation change and associated
communication issues
Set realistic goals, timelines and budgets
Identify and document roles and responsibilities
Involve everyone, but focus on the big picture
Choosing the outsource supplier
There are a number of solutions available for an organisation to select. There is
a need to carefully assess the options to ensure the right selection is made.
Payroll is no different to any other business outsourcing activity.
The right questions and the right investigations have to be made to assess
whether the promises and descriptions being offered meet the reality of what
will be the real working relationship.
The exact activity needed is a topic in its own right but the key areas to consider
include
Checking the organisations objective
Review existing practise and simplify where possible
Consider the organisations future needs
Set clear scope guidelines of needs and wishes to the
prospective supplier
Carry out risk analysis
Listen and challenge their answers about capability to meet
those needs
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 68
Seek references and investigate to confirm performance
Credit check their viability
Use expert for contract agreement
Global payroll authorisation
When considering the design of an approval process for global payroll it may
involve approval at a local level before approval at a regional or global level.
The approval process deployed will be dependent on where the expertise lies
within the organisation or externally with the outsourcer.
Whatever process is adopted it is important to ensure the roles and
responsibilities are documented and agreed for each approval level,
consideration also needs to be given to cultural differences. In India for example
it is often particularly important that they have the final sign off on payroll.
Below are two examples of a global approval process, the first in a large global
organisation where input is centralised, the second in a small organisation with
small international payrolls where the in-country expert is the local payroll
service provider:
Approval Level Type of Check Role Responsibility
Local HR Changes Local HR Check local changes in
the global HR system
have been reflected on
the local payroll
Local Statutory
Compliance
Local Accountant Check payslip accuracy
and statutory
deductions are at the
appropriate rates
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 69
Regional Headcount Regional Manager Agree headcount totals
Global Sign Off for
Payment
Global Payroll
Manager
Check variances
compared to previous
period.
Approval Level Type of Check Role Responsibility
Local Statutory
Compliance
Local Payroll
Service Provider
Check payslip
accuracy and
statutory deductions
are at the appropriate
rates
Global Sign Off for
Payment
Global Payroll
Manager
Check input sent has
been actually been
processed. Check
variances compared
to previous period.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 70
Payroll effectiveness measurement
Whatever process is undertaken it is necessary to monitor how well the
business activity is being performed. It is not best practise to just wait for errors
to become a problem before there is self-analysis of how the work is being
performed.
There are many different ways for monitoring business effectiveness.
Research and then reflect on the different opportunities for assessment
of effective performance that an organisation may instigate for either a specific
department or company process.
Make note of your thoughts below
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 71
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 72
Suggested approaches would be:
Employee or client surveys – to assess statements and reaction
to service.
Performance indicator assessment – comparing costs,
accuracy, errors, productive timing, response rates and any
other statistics that allow assessment of past to present
performance standards.
Benchmarking – comparison to other parties – internal or
external – to identify values of effectiveness and activity noting
these then need assessing indications of benefit.
Quality standards – formal assessment against business
standards – involves testing against comparable structure of the
International Organisation of Standardisation publish standards.
Working with ISO 900
The quality standards created by the IOS contain two levels: ISO 9000 explains
the eight principles for quality management systems. ISO 9001 looks at the
requirements of the organisation that wish to achieve the ISO 9000 certification
and involves third party confirming the effectiveness of the organisation. The
standards are measured and assessed – and if an organisation elects to take
part in assessment they will be awarded certification of ISO 9000 as an
indicator that they follow procedures that mean a quality approach.
Being awarded the status of ISO 9001 has become important as purchasers
look to suppliers to show they have this accreditation. Some organisations
claim they have seen marked improvement in sales having achieved the
accreditation and it may be one of the criteria an organisation would look for
when seeking a payroll system or outsource supplier.
The eight aspects of business that will be reviewed include
Section 1: Scope
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 73
Section 2: Normative Reference
Section 3: Terms and definitions
Section 4: Quality Management System
Section 5: Management Responsibility
Section 6: Resource Management
Section 7: Product Realization
Section 8: Measurement, analysis and improvement
For each area the organisation must show that there has been full assessment,
definition and documentation of activity linked to that aspect.
If there are no major nonconformities, the certification body will issue a
certificate. Where major nonconformities are identified, the organisation will
present an improvement plan to the certification body (e.g. corrective action
reports showing how the problems will be resolved); once the certification body
is satisfied that the organisation has carried out sufficient corrective action, it will
issue a certificate.
Areas that will be investigated include:
Control of Documents
Control of Records
Internal Audits
Control of Nonconforming Product / Service
Corrective Action
Preventive Action
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 74
The organisation must create a quality policy and a quality manual. This might
include full documentation of working practices and procedures.
If the organisation has decided to aim to achieve ISO 9001, the payroll
department will need to co-operate. This will be a global requirement not just
for the host environment. The ISO is an international recognised quality
program.
Payroll reporting requirements
In order to identify what level of global reporting is required for a business when
considering its global remuneration practices, it can be very difficult to get all
data in one report. The considerations of a single country payroll system may
run to many hundreds of pay elements and deductions. Multiply this by the
number of countries that may then be involved in the overall delivery model.
Standardisation helps to ensure consistency across the use of codes for the
same reason. This will then allow consistency in reporting. Applying a control
structure to the rigour of creating coding names and reviewing those globally is
important. Therefore interpreting local language and ensuring its translation is
consistent with the meaning is important for overall control disciplines.
Taking a high level view of the reporting requirements would certainly start with
a determination of all of the divisions to be reported upon and the employee
types within those divisions. Does the reporting limit itself to full time equivalent
workers or would you consider temporary and contract based staff within the
overall view? Often local practices of bringing in contract staff or temporary
resource, may mask an overall need in the business for additional permanent
support.
For a report to contain financial data that can be analysed regarding
remuneration packages then key elements should be considered.
Salary, bonuses, allowances, whether specific to a country or not, should be
defined as well as potential additional elements of salary (or salary sacrifice if
that is an offering within country that may differ).
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 75
Are additional benefits consistent across the company? Such as:
Holiday pay entitlement
Sick pay entitlement
Life assurance
Pension rights
Medical benefits
Dental benefits
Childcare and so on…
Benchmarking roles and the packages provided across those roles is important
to be able to source talent locally. It may be an expectation that whilst a host
country is going through development then an individual from another country
may fill a position temporarily. Once the transition period, to build and stabilise,
is complete then it would be expected that if the role is to be a permanent
feature of the operating model, then it may be filled with local talent and what is
the appropriate reward package that should be offered.
Assessment of role and pay can be important for establishing pay banding for
staff in transfer. To be able to balance an offer made to an individual that may
be considering a move from a home to a host country, is there a commensurate
current position already in place within that country – i.e. would a peer review
reveal another individual already performing the role?
Report preparation is not just content but also language – taking care over
using data structure and time lines that have clarity on an international basis.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 76
Summary
The payroll function and its processing is made more complicated by
international and cultural differences – but this should be seen as a challenge
rather than an issue.
With change management any department, particularly in the case of
international payroll, has particular steps to establish.
Multinational businesses increasingly want to focus on an HR Strategy that
supports the entire infrastructure of the business. An ever-increasing focus is on
compliance as the ISO and SAE standards look for commitments to standards
and rigour, and then the Multinational will look to de-risk any exposure wherever
possible.
Process standardisation allows for the business to maximise efficiency in and to
eradicate business non-compliance.
Mandating version control and data integration is essential to a global payroll or
pensions system. Well deployed, it also allows greater employee engagement
through the use of self-service.
Factors such as technology and compliance have to be taken into account.
The operational benefits to the business of improved productivity and strategic
gain have to be weighed up with the costs to be considered for people,
technology and compliance. The overall change programme involved in
deploying the new system may well be met with resistance to change, so a
communication, training and deployment plan need to be developed to support
its deployment.
To function effectively the payroll management needs to fully appreciate:
The role and scope of purpose in order to identify what it needs
to achieve to meet the organisations requirements.
How it interacts and supports the organisations strategic
objectives.
11/02/2013 Module 7 Section 4 Global payroll and pension process Page 77
What are statutory and employment legal compliance
requirements.
What are the cultural influences and resource available
(including in technical and people skills).
Understand existing procedures and identify gaps between
what is possible and what is required in functionality.
Where gaps are identified, prepare a business case to request
the necessary resources in order introduce change in technical
and procedure activity.
Ensure activity looks for cost management and risk limitation.
Commit to resource management, including ensuring workforce
skills are sufficient to meet payroll duties.
Always look for better, smarter and more efficient ways to meet
duties, whilst promoting ethical and professional standards.
Whilst technology can provide the infrastructure for system support to influence
business process it is the payroll staff who will ensure activity is compliant and
effective. Their involvement has the benefit of helping cultural support and
integration.
With any activity the payroll function undertakes, it has to remember both its
main duty of paying accurately and on time along with the intention to adhere to
the organisations strategic objectives and reacting sympathetically to the
cultural influence of all working location.
Module7 Unit 4 Global payroll or pension system Page 78
Summary of learning
The Module 7 is a clear example of how a subject cannot be reviewed in
isolation to other learning. The material you have reviewed in this paper are
closely linked to information you have already considered inside Module 2 and
Module 3. The process of global payroll management by its very nature is
dependent on both organisations strategic focus and its approach to reward and
management of its workforce.
During the review of previous material you should now have built a deeper
awareness for appreciating:
An organisations cultural influence on the way payroll
processes are designed.
The global payroll function to integrate diverse cultural
expectations.
The legal complexity faced by the payroll activity – both for
calculation and taxation, handling of information as well as
interaction with employees and third party.
The aspiration for centralised analysis of pay challenged by the
pressure of data control, technical communication and ethical
compliance.
You have been introduced to theory on areas such as cultural shock, global
leadership and communication diversification and should now be able to:
Appraise the cultural impacts of developing and implementing
global remuneration systems.
Critically review a strategic approach to integrated reporting and
processes, reflecting on the implications for performance
management and financial control.
Module7 Unit 4 Global payroll or pension system Page 79
Design and create an implementation plan for a remuneration
process for overseas employees, critically evaluating the
strategic and operational opportunities and risks.
Module7 Unit 4 Global payroll or pension system Page 80
Additional learning
In order to build on the information provided within this module it is
recommended that you undertake additional independent research and learning
activities.
The material offered in this module is a guide of areas of interest – but it is only
the base. You should now look out to other sources to investigate further views
on related areas. For example, how technology continues to enhance
interaction, the impact of regional economy on the ability to manage a
centralised process and how cultural differences are being influenced by global
business interaction.
These should include, but not be limited to the following:
Theoretical research
Personal reflection and critique
Observation of others
Discussion with managers, colleagues, mentors and peers
Action Point
Once you have completed this unit, log on to the members’ area of the CIPP
website and update your CPD log. Think about what you have learned so far,
how you will apply it in context within your job role and your organisation, and
discuss any additional learning required from the gaps you have identified.
Module7 Unit 4 Global payroll or pension system Page 81
Appendix Global Forms / Documents
EMEA
New Hires
Countries Employee Based Forms
New Joiners
Unique Identifier
Information Required Employee Tax Forms Employee Social Security Forms
Right to Work Forms
Other Forms / Tasks
Belgium ID Number Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job. Personal details to enable the Employer to complete DIMONA
Provide Passport or if Non-EU National a Work Permit. Provide ID Number
Register the New Starter with the External Service for Health & Safety (IDEWE)
Cyprus Income Tax Identity Number Social Security Number "SI"
Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job, Income Tax Identity Number, Social Insurance Number, and IR59 fully completed by the Employee
IR59 (tax form) fully completed
Provide Passport or if Non-EU National a Work Permit.
Provide Income Tax Identity Number Provide Social Insurance Number (SI)
Module7 Unit 4 Global payroll or pension system Page 82
Countries Employee Based Forms
New Joiners
Unique Identifier
Information Required Employee Tax Forms Employee Social Security Forms
Right to Work Forms
Other Forms / Tasks
France Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job. Personal details to enable the registration with "URSSAF" to be completed prior to New Employee starting.
Provide Passport or if Non-EU National a Work Permit.
Provide Social Security Number
Germany SV-Nummer Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job, Tax Details and Tax Cards and confirm Net Deductions. Provide any monetary values of Company Cars
Provide Tax Card which determines the category of Tax and the Employees Tax Free allowance
Provide Passport or if Non-EU National a Work Permit.
Employees who work Part Time (Less than 15 Hours) need to Register with a Health Insurance Company if RICS are not providing Private Medical Insurance
Hungary Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job, Copy of Contract, Tax Card, Social Security Card, Pension Registration, Certificate of Earnings from Previous Employer, Status and
Provide Tax Card Provide Certificate of Earnings from Previous Employer
Provide Social Security Card
Provide Passport or if Non-EU National a Work Permit.
Provide Pension Registration
Module7 Unit 4 Global payroll or pension system Page 83
Countries Employee Based Forms
New Joiners
Unique Identifier
Information Required Employee Tax Forms Employee Social Security Forms
Right to Work Forms
Other Forms / Tasks
Dependant Details
Italy Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job and a copy of the Employment Contract.
Provide Fiscal Code Provide Passport or if Non-EU National a Work Permit.
Provide Former Employment Income from the same Fiscal year
Netherlands Social Security Number (SOFI Number)
Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job, SOFI Number, Health Insurance details and Employee Pension Contributions
New starters need to sign a Salary Tax Declaration or "Model" Opgaaf gegevens voor de loonheffingen, a form detailing name, address, "SOFI" or BSN number (Social Security Number), Date of Birth and if the employee wants to use the Tax Discount
Provide Passport or if Non-EU National a Work Permit.
Provide SOFI Number
Module7 Unit 4 Global payroll or pension system Page 84
Countries Employee Based Forms
New Joiners
Unique Identifier
Information Required Employee Tax Forms Employee Social Security Forms
Right to Work Forms
Other Forms / Tasks
Poland Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job, PIT- 2 Form, Work Certificate, and if applicable Employee statement on joint taxation, statement of higher costs of obtaining income, and statement on Disability and Retirement Funds paid to date
Provide PIT-2 Form Provide Statement on Disability (if applicable)
Provide Work Certificate from Previous Employer
Employee Statement on Joint Taxation (if applicable). Statement of Higher Costs of Obtaining Income (if applicable) Retirement Funds paid to date by the Employee in a given year (if applicable)
Portugal Tax Payer Number
Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job. Personal details MUST include, Address, Birth date, Male/Female, Nationality, Marital Status, Educational level (Habilitação Literaria), ID number
Provide Tax Code and Location and Taxpayer Number
Social Security Code and Place, Social Security Beneficiary Number and any Special treatment for Social Security,
Provide Passport or if Non-EU National a Work Permit.
Arrange for the Starters Declaration Form (RV1009-DGRSS) to be signed on behalf of both the Employer and Employee at Least 1 Day Prior to the Employee Starting
Module7 Unit 4 Global payroll or pension system Page 85
Countries Employee Based Forms
New Joiners
Unique Identifier
Information Required Employee Tax Forms Employee Social Security Forms
Right to Work Forms
Other Forms / Tasks
Russia Employee Tax Identification Number (INN)
Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job, INN Number, Copies of Registration Certificates (Tax, State, Social Funds), copy of Employment Agreement, copy of the Passport, copy of the Employee's Pension Contribution Certificate, copy of Taxpayer Certificate
Provide Registration Certificates Provide Taxpayer Certificate
Provide Registration Certificates
Provide Passport or if Non-EU National a Work Permit.
Provide INN Provide a copy of Pension Contribution Certificate
South Africa Tax Number Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job and Tax Number. Personal details MUST include physical address and contact numbers
Copy of Identity Document
Provide Tax Number. It is the Employee's responsibility to register with the Receiver of Revenue to obtain a Tax Number.
Sweden Provide HR / Payroll with Personal details of the new Employee and the Tax Sheet
Provide Tax Sheet Provide Passport or if Non-EU National a Work Permit.
Each employee will need a secure "A-Tax" card, and will be required to sign an addendum to their employment agreement with language similar to the following: "The Employer and the Employee have agreed that the Employee shall be solely responsible for
Module7 Unit 4 Global payroll or pension system Page 86
Countries Employee Based Forms
New Joiners
Unique Identifier
Information Required Employee Tax Forms Employee Social Security Forms
Right to Work Forms
Other Forms / Tasks
payment of Swedish statutory social security fees (Sw: socialavgifter). The Employee herby agrees to apply to the Swedish tax authority for a special "A-tax card, which should be presented to the Employer". They will be responsible for their own statutory social contributions, and typically the Employer may pay the employees accordingly a higher base pay to assist with this.
United Arab Emirates
Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job
Notify the Labour Department in writing within 15 days from the Recruitment Date. Such notification shall specify the employee’s name and age, the date of employment, the specified wage, the type of work assigned to him, and the number of his registration certificate. (Article 12 of UAE Labour Law)
Module7 Unit 4 Global payroll or pension system Page 87
Terminations
Countries
Employee Based Forms Employer Filing Responsibilities
Leaver
Other Information Employee Tax Forms
Employee Social Security Forms
Employment References
Other Forms / Tasks
In Year
Leavers Only
Belgium Provide the Leaving Date and Leaving Reason to HR / Payroll including the Calculation (where applicable) of any Severance Payment
Issue a Statement of Employment / Earnings To Date
Issue "Attestation de Vacance" for the Employee to submit to their new Employer Produce a C4 Leavers document for Unemployment Benefit
Complete any Additional Relevant Questions on Form C4 produced by Ceridian before passing to the Employee
Report departure of Employee to DIMONA (OUT),
Cyprus Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due
Issue Certificate of Earnings IR63 for the Employee
Module7 Unit 4 Global payroll or pension system Page 88
Countries
Employee Based Forms Employer Filing Responsibilities
Leaver
Other Information Employee Tax Forms
Employee Social Security Forms
Employment References
Other Forms / Tasks
In Year
Leavers Only
France Provide the Leaving Date and Leaving Reason to HR / Payroll, Holiday Entitlement not Taken, Overtime and any Recuperation de Temp de Travail (RTT).
Provide: a Letter to be signed by Employee as receipt of all monies due before leaving = “Reçu pour solde de tout compte” (STC). Final payslip = “Bulletin de paie”
Provide a Certificate for Unemployment Registration = “Attestation Assedic” – This must be given to the Employee on the final working day and a copy must also be sent to the Unemployment Office.
Provide a Reference = “ Certificat de Travail”
Where the Employment is terminated by RICS, issue a written statement in the local language indicating the Reason(s) for Leaving. Valid reasons to use are - Resignation, Constructive Dismissal, Termination by Mutual Agreement, Dismissal without Notice, Dismissal for Professional reasons
Module7 Unit 4 Global payroll or pension system Page 89
Countries
Employee Based Forms Employer Filing Responsibilities
Leaver
Other Information Employee Tax Forms
Employee Social Security Forms
Employment References
Other Forms / Tasks
In Year
Leavers Only
Germany Provide the Leaving Date and Leaving Reason to HR / Payroll including any payments due and Holiday taken
Provide Leavers Statements (Arbeitsbescheinigung)
From July 2010 on Employers have to provide more detailed information regarding reasons for termination or dismissal etc. due to the extended ELENA requirements
Hungary Provide the Leaving Date and Leaving Reason to HR / Payroll including any payments due and Holiday taken
Produce Leaving Statement of Earnings
Return Tax / Social Security Cards to Employee
De-register record at the Tax Authorities
Module7 Unit 4 Global payroll or pension system Page 90
Countries
Employee Based Forms Employer Filing Responsibilities
Leaver
Other Information Employee Tax Forms
Employee Social Security Forms
Employment References
Other Forms / Tasks
In Year
Leavers Only
Italy Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments / incentives due
Provide a copy of the Employee's Income Tax Declaration
It is a Legal requirement that all employees are entitled to a Termination Payment (TFR payment) when, and for whatever reason, the contract of employment ends, including resignation. Payment is based on length of service and in general employees receive one month’s pay for each year of service plus unused vacation, plus 13
th and 14
th
pay on a prorate basis
Submit the mandatory communication to the Local Employment Office within 5 days of leave date. Submit the mandatory communication to the National Social Insurance Institute on the date of leaving Notify the relevant Sickness Benefit Fund
Module7 Unit 4 Global payroll or pension system Page 91
Countries
Employee Based Forms Employer Filing Responsibilities
Leaver
Other Information Employee Tax Forms
Employee Social Security Forms
Employment References
Other Forms / Tasks
In Year
Leavers Only
Netherlands Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due. NB. No dismissal can take place without approval from the Regional Employment offices (Centrum voor werk a inkomen (CWI)).
Report all Leavers to the Tax and Social Security
Poland Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due
Issue PIT-11 Issue ZWUA Forms (De- registration)
Issue Work Certificate
De-register the Employee with the Social Security office
Module7 Unit 4 Global payroll or pension system Page 92
Countries
Employee Based Forms Employer Filing Responsibilities
Leaver
Other Information Employee Tax Forms
Employee Social Security Forms
Employment References
Other Forms / Tasks
In Year
Leavers Only
Portugal Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due
Issue Declaração de Situação de Desemprego to the Employee
Inform the Social Security of the Leaver and the Leaving Reason
Russia Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due
Copy of Pension Certificate, Copy of Personal Tax Identification Number, Copy of Labour Contract, Copy of Military Registration document (Males only)
Produce Leaving Statement of Earnings
South Africa Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due
IRP5 Certificate if the Employee is Leaving Prior to the Bi-Annual Return
Submit Leave Details on the monthly file (UI19 Form) to UIF
Module7 Unit 4 Global payroll or pension system Page 93
Countries
Employee Based Forms Employer Filing Responsibilities
Leaver
Other Information Employee Tax Forms
Employee Social Security Forms
Employment References
Other Forms / Tasks
In Year
Leavers Only
Sweden Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due
Leavers are to be reported on Annual Statements
United Arab Emirates
Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due
Calculate any End of Contract Gratuity. These are equivalent to 21 days’ pay for each year of the first five years of completed continuous service and 30 days for every year of completed continuous service thereafter. The total gratuity should not exceed two years’ wages. Employees are entitled to a pro- rated amount for service periods less than a full year, provided
Module7 Unit 4 Global payroll or pension system Page 94
Countries
Employee Based Forms Employer Filing Responsibilities
Leaver
Other Information Employee Tax Forms
Employee Social Security Forms
Employment References
Other Forms / Tasks
In Year
Leavers Only
they have completed one year in continuous service.
Module7 Unit 4 Global payroll or pension system Page 95
APAC
New Hires
Countries
Employee Based Forms
New Joiners
Unique Identifier Information Required
Employee Tax Forms
Employee Social Security Forms
Right to Work Forms Other Forms / Tasks
Australia Tax File Number (TFN)
Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job, TFN and Superannuation Member Choice Form
Tax File Number (TFN) Declaration and / or a Withholding Declaration, where provided. This must be completed upon commencement of employment
Australia Tax File Number (TFN)
Employees must complete a Superannuation Member Choice Form to nominate the fund for superannuation contributions. An employee who does not complete the form will be assigned to the company’s default superannuation fund.
From 1st January 2010 it is compulsory for all new employees to be supplied with the Fair Work Act Information Statement, which are the minimum employment conditions.
Statement can be found at http://www.fairwork.gov.au/Pay-leave- and-conditions/Conditions-of- employment/Documents/Fair-Work- Information-Statement.pdf
Module7 Unit 4 Global payroll or pension system Page 96
Countries
Employee Based Forms
New Joiners
Unique Identifier
Information Required Employee Tax Forms
Employee Social Security Forms
Right to Work Forms
Other Forms / Tasks
Hong Kong Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job
If Employee does not have the right of Abode or Land in the Hong Kong Special Administration Region (HKSAR) then a Visa / Work permit is required
India Provide HR / Payroll with Personal details of the new Employee and Contractual details of Employees new Job, Form P1, P2 and where applicable Form P3
Provide Form P1 (IT Declaration Forms), Provide Form P2 (IT Computation Form), Provide Form P3 (if applicable)
Copy of Social Security Card
Provide Passport or a Work Permit.
Provide PAN Provide Proof of Investments Provide Form 12B Provide Evidence of Residence Type Provide a copy of the of the Private and Voluntary Pension Fund Contracts
Japan Provide HR / Payroll with Personal details of the new Employee including Number of Dependants and Contractual details of Employees new Job
Provide Claim for Allowance of Tax Dependants if applicable
Provide Number Sheet for Unemployment Insurance
Provide Statement of Earnings to date this year. Provide Notebook for Welfare Pension
New Zealand Provide HR / Payroll with Personal details of the new Employee and Contractual
Ensure Employee completes Forms KIWISAVER (Pension) and IR330 Tax Form
Module7 Unit 4 Global payroll or pension system Page 97
Countries
Employee Based Forms
New Joiners
Unique Identifier
Information Required Employee Tax Forms
Employee Social Security Forms
Right to Work Forms
Other Forms / Tasks
details of Employees new Job
Singapore ID Number is required from Employee
Provide HR / Payroll with Personal details (this must include Date of Birth, Marital Status and ID Number) of the new Employee and Contractual details of Employees new Job (this must include Job Title, Salary, Allowances)
Must have an Employment Pass / S Pass or a Work Permit for a Non Resident
Employer to apply for an Employment Pass for all non-residents Employer must register all Singapore residents with the Central Provident Fund (CPF) If the Employer hire overseas workers they will need to pay Foreign Workers Levy (FWL)
Module7 Unit 4 Global payroll or pension system Page 98
Terminations
Countries
Employee Based Forms Employer Filing Responsibilities
Leaver
Other Information
Employee Tax Forms
Employee Social Security Forms
Employment References Other Forms / Tasks
In Year
Leavers Only
Australia Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due
No forms required. A Separation Certificate may be requested by employee if seeking benefits from the government.
Hong Kong Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due such as Holiday which are to be paid regardless of the reason for leaving. If the Employee is a Non Resident advise RICS HR if the Employee is leaving Hong Kong altogether or just leaving the
Write to the Mandatory Provident Fund Scheme (MPF) by the10th day of the month following Termination
File Form I.R.56F containing expected termination date to the Inland Revenue Department (IRD) by no later 1 month before termination. If the Employee is leaving Hong Kong also File Form I.R.56G at the same time
Module7 Unit 4 Global payroll or pension system Page 99
Countries
Employee Based Forms Employer Filing Responsibilities
Leaver
Other Information
Employee Tax Forms
Employee Social Security Forms
Employment References Other Forms / Tasks
In Year
Leavers Only
Company
India Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due
Produce Salary Certificate
Provide a copy of Approved Resignation Letter / Clearance Form
De-register Employee record with Provident Fund
Japan Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due
New Zealand Provide the Leaving Date and Leaving Reason to HR / Payroll including any
Module7 Unit 4 Global payroll or pension system Page 100
Countries
Employee Based Forms Employer Filing Responsibilities
Leaver
Other Information
Employee Tax Forms
Employee Social Security Forms
Employment References Other Forms / Tasks
In Year
Leavers Only
additional payments due such as Holiday Pay
Singapore Provide the Leaving Date and Leaving Reason to HR / Payroll including any additional payments due such as Holiday Pay. Holiday Pay is not payable where the leaving reason is "Misconduct" If the Employee is a Non Resident advise RICS HR if the Employee is leaving Singapore altogether or just leaving the Company
Tax Clearance must be obtained from IRAS before making any Final payment to the Employee. If the Employee is a Non Resident RICS must advise the Payroll Company 1 month in Advance If the Employee is a Non Resident The Employment Pass must also be cancelled
If the Employee is a Non Resident, Form IR21 must be sent to IRAS
