66% of EU businesses say HR & Payroll Process Updates are No.1 payroll complexity and compliance challenge.
The NGA Global Payroll Complexity Index 2017 offers insight into the key factors that add to payroll complexity and ranks countries and regions on their payroll complexity levels.
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The 2017 Global Payroll Complexity Index (GPCI), published last month reveals the top payroll risks and challenges faced by businesses in nearly 50 of the main economies around the world. The key conclusion is that payroll is no longer just about paying people. It’s about managing data: handling, control and security in an ever more complex tax and legal landscape. The ever-changing nature of tax and employment legislation and differing regulations across regions said to be top two contributors to payroll complexity. Western Europe is highlighted as the most complex payroll region, with France, Italy, Germany, the Netherlands and Spain top of table. The GPCI includes responses and commentaries from nearly 3,000 professionals responsible for the reward and payment of employees in 48 countries. It highlights the positive and negative impacts of factors including the adoption of cloud technologies, managed payroll services, and the maturation of HR compliance regulations, on managing payroll and employee data.
Notable observations of the 2017 Global Payroll Complexity Index include:
Managing employee data:
Consistent with the 2014 study, Western Europe still requires the highest number of employee data items for a net salary to be correctly calculated. Germany, France, Italy and Spain are most complex, requiring an average of 17. This highlights the need for highly accurate HR source data.
Managing payroll data:
An average of 14 employee data fields impact a net salary – little change to 2014. Italy, France and Poland top the parameter ranking for complexity, contrasting sharply with Canada and Switzerland at the bottom. Benefits and attendance have replaced tax and social security as biggest impact on payroll complexity.
Payroll calculation process:
Most employers run payroll once or twice a month. Globally, North America and Oceania have the highest number and South America and Asia the lowest. France and Italy have the most payroll runs in Europe.
Government reporting & declarations:
On average, 16 data items per employee must be reported, a decrease from 20 in 2014. In South America and Europe, the number is notably higher at 35, with Italy, The Netherlands and France highest.
Each country and business type has its own cultural, regulatory factors and union agreements that impact payroll. In 60% of countries employee-specific contracts influence payroll. Additionally, multi-level rules, legislations and agreements are continually adapted to comply with economic factors and changing working practices.
In 60% of countries surveyed, more than one language is spoken, adding the need for multilingual payroll. Organisations in South America are most affected. Those in Australia and New Zealand are the least affected.
Country / Regional Spotlight
- Europe is most complex payroll region in the world
- 7 out of the top 10 most complex countries are in Europe
- France, Italy & Belgium are most complex. Luxemburg the least
- Number of data fields, runs, and technical and legal updates required for compliance is highest in Europe. 37% say updates “keep them awake at night”
- Complexity has increased since 2014 where other regions have seen simplification
- 65% say managing (legislative, HR and payroll updates) is No.1 challenge
- Gender pay, Working Time Regulations & IR35 have added to reporting and to rise in payroll parameters since 2014
- Rewards, benefits and salary sacrifice feature highly in salaried roles, adding to payroll complexity, but to operational cost savings
- Increased use of T&A apps simplified processing of hourly payroll
- Apprenticeship Levy, GDPR and Brexit are unknown challenges in next 12 months
- 24% of UK payroll professionals remain unaware of impact of GDPR on payroll
The results of the Global Payroll Complexity Index confirm that multinational organizations face myriad demands such as managing employee data, employment and taxation compliance, data storage and privacy, salary and benefit calculations, and a wide range of work rules, and time-off benefits.
Many of these are mandated by statutory country laws, work councils, and collective bargaining agreements.
Organizations are challenged with managing risk exposure, increased government audit, standardizing processes, and steering governmental changes while ensuring the integrity of their company brands.
“Zero tolerance on payroll non-compliance and the competitive emergence of new business economies means, without a doubt, that businesses must have robust payroll systems and processes in place,” explained Anne Clifford, Senior Director, Global Payroll Operations at NGA Human Resources.
“In the countries where the 2017 Global Payroll Complexity Index reports a fall in complexity, the US and Canada notably, this is not because the challenge is any less, it’s because the high-risk, high-admin payroll processes have been outsourced or automated to reduce the risk of fines and reputation damage,” concluded Anne Clifford.
About the research
NGA Human Resources examined the key trends during the first quarter of 2017 and compiled a report on how payroll complexity affects the reward of employees by organizations in one of more country, ranking in terms of complexity when it comes to compensating a local and/or international workforce and how these impact corporate planning and decision making.
NGA Human Resources produced the Global Payroll Complexity Index in collaboration with:
- Chartered Institute of Payroll Professionals
- American Payroll Association
- Global Payroll Management Institute
- Canadian Payroll Association
- The Association for Payroll Specialists (Australia)
- South African Payroll Association