2017 Global Payroll Complexity Index Reveals Top Payroll Risks & Challenges
Key conclusion: 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
Western Europe is most complex payroll region, with France, Italy, Germany, the Netherlands and Spain top of table
Ever-changing nature of tax and employment legislation and differing regulations across regions said to be top two contributors to payroll complexity
66% say legislative and HR & payroll updates are No.1 payroll complexity challenge
To review the study: http://my.ngahr.com/payrollcomplexity-2017/
London UK: NGA Human Resources, a global leader in HR and payroll services, has released the 2017 Global Payroll Complexity Index (GPCI), a business intelligence report that identifies the top payroll process and compliance threats of 2017, per country and region.
This is the third GPCI report from NGA Human Resources and the first published since 2014. 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.
The report includes responses and commentaries from nearly 3,000 professionals responsible for the reward and payment of employees in 48 countries. It was produced in collaboration with payroll bodies in Europe, North and South America, South Africa and Australia.
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
- US complexity at 5.78 a point lower than in 2014 – likely the result of high complexity processes being outsourced, not a reduction in complexity
- Still in the top 40% for complexity. Only Brazil is higher in the Americas in 11th
- Complexity remains ‘high’ and ‘very high’ for US and Canadian payroll teams when it comes to ‘Managing Payroll Data’ and the ’Payroll Calculation Process’
- 67% highlight technical, HR and payroll updates as the greatest complexity challenge
- 28% of enterprise org’s in North America plan to move employees into new regions (28% to UK, 24% Asia Pacific, 20% South America)
- Zero tolerance for non-compliance is fast becoming a secondary business tax
- Canada sits at 31st in complexity ranking and remains in bottom 40%
- 65% report managing technical and HR updates as greatest challenge
- 25% highlight challenge of regulatory reporting and data analytics
- 63% manage payroll in 2+ jurisdictions; 16% in 8 to 13
- Low complexity, but one third say it’s increasing
- 71% highlight technical and HR updates challenge, despite low numbers of payroll runs and updates - likely the result of maturing legislation and reporting requirements
- 86% pay employees in 4+ countries in Africa and 43% in 8+ - resulting in highest number of languages to consider
- Retro-calculations are simple and least frequent of all regions
- 57% have payroll reporting and analytics high on change agenda
- 38% plan to expand employee operations beyond African continent
- Lowest region for payroll complexity. Only Russia is in top 20
- Highest rating for languages and number of people being paid in non-local currency
- Malaysia has least complex payroll score according to respondents
- Philippines has least complex employee data ranking
- Region has lowest number of payroll runs; India and Philippines down since 2014
- Higher than average complexity, with Brazil just outside top 10
- No fixed tax change calendar makes it impossible to standardise concurrent runs
- 37% say regulatory reporting and data analytics are a challenge
- 30% highlight the challenge of managing technical and HR updates
- Lowest number of data items required, and least payroll runs
- However, retro-calculations are particularly high
Mary Holland of the Global Payroll Management Institute (GPMI) explained:
“The results of the Global Payroll Complexity Index confirm that multinational organisations 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. Organisations are challenged with managing risk exposure, increased government audit, standardising processes, and steering governmental changes while ensuring the integrity of their company brands."
Anne Clifford, Senior Director, Global Payroll Operations at NGA Human Resources, concluded:
“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.
“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."
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
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 organisations 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.
The research is based on the following five categories
Payroll data – managing, storage and security
Payroll parameters – population groups and types
Payroll calculation – salary and rewards
Government reporting - tax and social security deductions, reporting and legislation
Geography – scope of and emerging markets
Geographical scope: 48 countries
Respondent profiles: Subject matter experts in payroll & local, regional and global payroll consultants and outsourcing experts and system engineers responsible for updating global payroll systems
Respondent volume: 2,874 submissions (734 fully completed)
Survey methodology: Online questionnaire and face-to-face commentary
About NGA Human Resources
At NGA Human Resources, our mission is to make HR work better. We help organizations worldwide pioneer digital HR, master payroll, ensure compliance, unlock workforce data, and deliver best-in-class HR operations. As a result, HR leaders can create better employee experiences, save money, and transform their organizations.
What sets us apart is The NGA Advantage. It’s a combination of deep HR experience and insight, advanced technology platforms and applications and a global portfolio of flexible service delivery options.
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