Global Payroll Regional Focus Presented by Kira Rubiano

Global Payroll: Regional Focus Presented by: Kira Rubiano Date: October 2017

Speaker Kira Rubiano Senior Partner Management Specialist Celergo Global Payroll Kira Rubiano: krubiano@celergo. com (847) 512 -2627 2 California Payroll Conference The Wonderful World of Payroll

Agenda v. Regional Breakout v. Payroll Set-up v. Payroll Timing v. Payroll Calculations v. Funding Requirements v. Compliance & Filings v. Outsourcing & Management Trends 3 California Payroll Conference The Wonderful World of Payroll

Regions for Today's Presentation California Payroll Conference The Wonderful World of Payroll

Regions v. Middle East & Africa (MEA) v. Latin America v. Asia Pacific v. Europe 5 California Payroll Conference The Wonderful World of Payroll

Payroll Set-up v. Entity v. Employment Contracts v. New Hires and Terminations California Payroll Conference The Wonderful World of Payroll

MEA: Payroll Set-up Entity: Most countries require entity set-ups for payroll • PEOs are not common • Many try to use the contractor route initially • Entity needed for work permits Employment Contracts: Standard/Offer letters California Payroll Conference The Wonderful World of Payroll

Agenda. Set-up MEA: Payroll Benefits: Few additional benefits offered New Hires: May have to be registered with local agencies California Payroll Conference The Wonderful World of Payroll

MEA: Payroll Set-up Terminations: Standard, except Algeria California Payroll Conference The Wonderful World of Payroll

Latin America: Payroll Set-up Entity: Most countries require entity set-ups • PEO an option for most locations Employment Contracts: Complex, include collective agreements • Peru: register every contract with Ministry of Labor • Contract based on industry sectors California Payroll Conference The Wonderful World of Payroll

Latin America: Payroll Set-up Benefits: Supplemental benefits are “topped up” – life, medical, pension (tax exempt) • Meal and transport tickets are common New Hires: Often need to be registered with local government agencies California Payroll Conference The Wonderful World of Payroll

Latin America: Payroll Set-up Terminations: Difficult. • Protect the employee – terminations with no cause are costly • Usually a labor lawyer is involved, often requires off-cycle payments California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Payroll Set-up Entity: Most countries require entity set-ups • PEO an option for some locations • China: Rep Office need to use PEO Employment Contracts: Standard/Agreements California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Payroll Set-up Benefits: Some benefits, but mostly government sponsored or individually sourced New Hires: Passport and “booklet” copies are common request California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Payroll Set-up Terminations: Standard California Payroll Conference The Wonderful World of Payroll

Europe: Payroll Set-up Entity: Many countries require entity set-ups • PEO an option for most locations • Do not need an entity in Netherlands, UK, France, etc. Employment Contracts: Complex California Payroll Conference The Wonderful World of Payroll

Europe: Payroll Set-up Benefits: Many benefits are included in social taxes, but often companies “top them up. ” • Meal tickets are common New Hires: Often need to be registered with local government agencies • Elements include: collective agreements, payroll timing, and termination clauses California Payroll Conference The Wonderful World of Payroll

Europe: Payroll Set-up Terminations: Difficult. • Usually a labor lawyer is involved, often requires off-cycle payments California Payroll Conference The Wonderful World of Payroll

Payroll Timing v. Pay Cycles v. Payroll Calendar v. Holidays & Work Week Year-End California Payroll Conference The Wonderful World of Payroll

MEA: Payroll Timing Pay Cycles: typically monthly Pay Dates: 25 th – 27 th Holidays: Islamic and Christian Holidays California Payroll Conference The Wonderful World of Payroll

MEA: Timing Work Days: • Oman, Saudi Arabia: Saturday to Wednesday • UAE, Qatar: Sunday to Thursday • Lebanon, Angola, South Africa: Monday to Friday Work Week: 40+ hours (43 to 50) California Payroll Conference The Wonderful World of Payroll

MEA: Timing Year-end: Middle East: • May have none, (GOSI countries- Jan to Dec), Exceptions – Pakistan: Jul to Jun • Africa typically: Jan to Dec, South Africa: Mar to Feb California Payroll Conference The Wonderful World of Payroll

Latin America: Timing • Pay Cycles: Typically monthly and semi-monthly • Mexico (Dependent on Overtime) • Factories may be weekly • Brazil and Argentina: Semi-monthly, with estimated pay • Pay Dates: 15 th, EOM • Holidays: Christian, Carnival and Easter – 10 to 15 holidays a year California Payroll Conference The Wonderful World of Payroll

Latin America: Timing Work Days: Monday through Friday Work Week: 40+ hours (48 most of them) Year-end: Jan to Dec California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Timing Pay Cycles: Typically monthly • Australia (more variability) • Philippines/Russia: semimonthly Pay Dates: 25 th; EOM Holidays: Lunar New Year; Ramadan; May Day California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Timing Work Days: Monday through Friday • Bangladesh: Sun – Thurs • Pakistan: Mon – Sat Work Week: 40 hours Year-end: • Hong Kong/India: Apr-Mar, Australia: Jul-Jun, Most Jan-Dec • China: None • Japan, Korea include personal tax filings in year-end California Payroll Conference The Wonderful World of Payroll

Europe: Timing Pay Cycles: Typically monthly • Collective agreements determine cycles per year • Belgium: 13. 92, Southern Europe: 12, 13, 14 Pay Dates: 25 th, 27 th/28 th, EOM Holidays: Christian Calendar; Many bank holidays California Payroll Conference The Wonderful World of Payroll

Europe: Timing Vacation: Taken in blocks in the summer 2 to 3 weeks Work Days: Monday through Friday Work Week: 37+ hours Year-end: • Most are Jan to Dec; UK is Apr to Mar California Payroll Conference The Wonderful World of Payroll

Payroll Calculations v. Income Tax v. Social Tax v. Other California Payroll Conference The Wonderful World of Payroll

MEA: Calculations Income Tax: • No wage tax in the Gulf Cooperation Council (GCC) • Most of Africa – PAYE concept – withholding and remittance Social Tax: • GOSI in GCC • Africa - Most have social tax – single digit percentages California Payroll Conference The Wonderful World of Payroll

MEA: Calculations Other: (Benefit programs, expats, taxable events) • EOSB – end of service following statutory guidelines • Meal allowance, housing, transport allowance, Company cars California Payroll Conference The Wonderful World of Payroll

Latin America: Calculations Income Tax: • Scaled like US – No state concept Social Tax: • Include: Pension, education, welfare • Appear on the register combined into a schema – similar to FICA • Cost: 10 to 15% - usually has a cap, EE and ER contribution, ER is higher California Payroll Conference The Wonderful World of Payroll

Latin America: Calculations Other: (Benefit programs, expats, taxable events) • Meal Tickets/Allowance • Holidays: Special Treatment depending on location California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Calculations Income Tax: • Many countries do not withhold wage taxes, these are paid by the individual (Hong Kong, Singapore) • Others have sophisticated schemes like Korea and Japan Social Tax: Common – pension, health, unemployment California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Calculations Other: (Benefit programs, expats, taxable events) • Australia has a fringe benefit tax • Housing in Hong Kong and India • Transportation California Payroll Conference The Wonderful World of Payroll

Europe: Calculations Income Tax: Wage tax – usually payable following month Social Tax: • High: up to 35% • Includes: pension, disability, medical, unemployment, church tax, training, and supplemental taxes depending on income California Payroll Conference The Wonderful World of Payroll

Europe: Calculations Other: (Benefit programs, expats, taxable events, accruals, days off) • Meal tickets • Holidays: Paid more for holidays and more days than standard • PTO based on accruals and collective agreements California Payroll Conference The Wonderful World of Payroll

Funding Requirements v. Bank Accounts v. Funding Practices v. Money Movement Timing California Payroll Conference The Wonderful World of Payroll

MEA: Payroll Funding Bank Accounts: • Some countries do not require local bank accounts for payroll (UAE, Egypt, Israel) • Entities are required to open a bank account California Payroll Conference The Wonderful World of Payroll

MEA: Payroll Funding Practices: • Some currencies are not traded and need to send USD (Nigeria Naira) • Most employees are paid electronically • UAE, Saudi Arabia and Qatar have WPS requirement • Discussion of Middle east currency similar to the EURO • Test transactions fully, as they are often complicated and do not have all elements of a normal transfer (some countries do not use addresses) • Have full IBAN and/or SWIFT in case the need to enact BCP is required California Payroll Conference The Wonderful World of Payroll

MEA: Payroll Funding Timing: • May take several days to send money into Africa, third party bank required • Payments in country take 2 to 3 days or in some case up to 6 days California Payroll Conference The Wonderful World of Payroll

Latin America: Funding Bank Accounts: • Many countries do not require local bank accounts • Entities are required to open a bank account • Brazil and Argentina need a local account to pay local taxes California Payroll Conference The Wonderful World of Payroll

Latin America: Funding Practices: • Some currencies are considered exotic “COP, BRL” • May have to send USD and reconcile • Have full IBAN and/or SWIFT incase the need to enact BCP is required • Most employees are paid electronically California Payroll Conference The Wonderful World of Payroll

Latin America: Funding Timing: • Complex funding with third party banks involved • Normal international wire timing is 2 to 3 days • In country transfers typically take 24 hours California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Funding Bank Accounts: • Many countries do not require local bank accounts for payroll funding but highly encouraged • Entities are required to open a bank account • Russia needs a local account to pay local taxes California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Funding Practices: • Some currencies are considered exotic “KRW, TWD” • Some currencies are pegged or floating fixed to USD – HKD, CNY • Have full IBAN and/or SWIFT in case need to enact BCP is required • Most employees are paid electronically California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Funding Timing: • May take several days to send money into Asia (5 days for Korea, up to 10 for Taiwan) • Internal transfers may several days - Japan California Payroll Conference The Wonderful World of Payroll

Europe: Funding Bank Accounts: • Many countries do not require local bank accounts • May have bank accounts in one country service many countries • Some cases need in country bank account for refunds Switzerland California Payroll Conference The Wonderful World of Payroll

Europe: Funding Practices: • Relatively stable currencies, with high trade volumes • SEPA (Singe Euro Payment Area) fully implemented as of 2014 • Have full IBAN and/or SWIFT in case the need to enact BCP is required California Payroll Conference The Wonderful World of Payroll

Europe: Funding Timing: • Move funds within 48 hours from outside SEPA zone • Local transfer can still take up to 24 -48 hours • Most bank to bank relationships, so transfers are relatively simple • Same day transfers are available California Payroll Conference The Wonderful World of Payroll

Compliance & Filings v. Tax Filings v. Compliance v. Risk California Payroll Conference The Wonderful World of Payroll

MEA: Compliance Tax Filings: • Middle East: GCC countries have GOSI/SS filings (UAE, Qatar, Oman, Kuwait, Saudi Arabia, Bahrain) - GOSI: Compulsory in Saudi Arabia • Optional by employee in other countries and across the region • Africa: Filings are often manual and may be required to be submitted in person California Payroll Conference The Wonderful World of Payroll

MEA: Compliance: • Middle East: GCC, very minimal – Lebanon, Pakistan, Jordan: Complex • Africa: Difficult to keep up to date on taxes. Often retroactive and local payroll systems have limited capability • Compliance: Filings are manual & many countries have poor record keeping • Tax law is open to interpretation and may vary by industry (oil & gas, financial) California Payroll Conference The Wonderful World of Payroll

MEA: Compliance Risk: Work permits are based on compliance, which is poorly maintained locally • Filings can be very difficult; Government is continually changing its requirements • Low level of compliance with data standards California Payroll Conference The Wonderful World of Payroll

Latin America: Compliance Tax Filings: • Are often manual and require in person submission and online • Brazil – Move to E-social • Submissions for each social program (Income and social) • Pay slips need employee signatures (Mexico) California Payroll Conference The Wonderful World of Payroll

Latin America: Compliance: • Based on collective agreements and industry • Complex and often changing as the political environments are changing California Payroll Conference The Wonderful World of Payroll

Latin America: Compliance Risk: • Latin America has challenges with changing political environments • Currency restrictions, money movement restrictions • Tax law changes are often open to interpretation • Countries are watching contractors to ensure benefits California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Compliance Tax Filings: • Many are still manual • Require a company seal, stamp, signature • Need to be kept for audit purposes • May be simple, mainly year-end and Pension programs (MPF, CPF) California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Compliance: • Not significant change in types of taxes, programs (rates change often) • Well documented requirements • Japan complicated – need special employees to confirm social calculations California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Compliance Risk: • As a region, Asia Pacific is low risk on compliance and has high transparency • China and Russia pose some risk related to data and data privacy California Payroll Conference The Wonderful World of Payroll

Europe: Compliance Tax Filings: • From simple to complex (Switzerland, UK simple – Italy, France – complex) • Several countries have different timings for different forms • Generally do not have the concept of “state filings”, often split by type (social insurance, tax, etc. ) • Shift to Automated Filing System (UK RTI, France DSN) California Payroll Conference The Wonderful World of Payroll

Europe: Compliance: • Not significant change in types of taxes, programs Standard forms, process for compliance • Some ambiguity on what is required to be taxed or not • Also includes employment contracts, work place, and other ancillary administration related to payroll California Payroll Conference The Wonderful World of Payroll

Europe: Compliance Risk: As a region, Europe is low risk on compliance and transparency • General Data Protection Regulation (GDPR) - Data security and privacy is very key - Risk is in employment practices versus payroll California Payroll Conference The Wonderful World of Payroll

Payroll Trends California Payroll Conference The Wonderful World of Payroll

MEA: Payroll Trends Outsourcing: • Payroll is often outsourced for the Middle East • African payroll is often outsourced by companies with smaller local populations, when the HQ is international • South African companies outsource, but in the rest of the region the outsourcing concept is not as mature California Payroll Conference The Wonderful World of Payroll

MEA: Payroll Trends Management: • Payroll Best Practice: Manage in Region • Need Sunday to Thursday or Saturday to Wednesday support • Time zone support • More oversight is needed for pay calculation auditing • May need tax consulting support California Payroll Conference The Wonderful World of Payroll

Latin America: Payroll Trends Outsourcing: • Payroll is outsourced some of the time, more now than in the past • Latin American payroll is often outsourced by companies with smaller local populations, especially when the HQ is international • Payroll outsourcing by Latin American not as mature • HR Admin components are often outsourced with payroll as part of the package (Medical exams, archiving of payroll and HR documents, registering employment contracts, probation period) • Increased size of expatriate populations – LATAM international trade agreements – fueling expat population growth California Payroll Conference The Wonderful World of Payroll

Latin America: Payroll Trends Management: Payroll Best Practice-Manage in Region • Need local language support • More oversight is needed for HRO administration • May need tax consulting support for tax law change California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Payroll Trends Outsourcing: • Payroll is often outsourced for Australia, New Zealand, and some countries on a local basis • Cost is very low to managing payroll inhouse, so many companies will only outsource for visibility and compliance, but not for cost • Asian payroll is often outsourced by companies with smaller local populations, when the HQ is international California Payroll Conference The Wonderful World of Payroll

Asia Pacific: Payroll Trends Management: • Payroll Best Practice: Manage in Region, Can be Global • Small Asian payrolls can be managed remotely, as English is typically good and payroll is transparent • Larger Asian payrolls are often managed in region for time zone support or managed in-house California Payroll Conference The Wonderful World of Payroll

Europe: Payroll Trends Outsourcing: • Payroll is often outsourced in Europe, it is a maturing market - Both European and global companies outsource • Generally companies outsource because of the complexity and prefer to keep their headcount in non-core areas low • The cost of outsourcing is high (typically not a cost play, but an expertise, technology, or visibility requirement) • Also, try to streamline the process across the region California Payroll Conference The Wonderful World of Payroll

Europe: Payroll Trends Management: • Payroll Best Practice: Manage in Region, Can be Global • If populations are small, can manage globally • Language can be an issue, • Payrolls are more complex from an employment perspective, lending to regional support being preferred • Very large populations need inhouse local expertise California Payroll Conference The Wonderful World of Payroll

Thank You!