Whether you are a start-up hiring your first staff member or a large Multinational Corporation hiring hundreds or thousands of employees annually, payroll compliance is a legal requirement and applies to every company worldwide.
Payroll compliance is defined as the combined set of activities involved in the payroll process including capturing all data, control of the data and the calculation of allowances, deduction, benefits and the net wages.
Why payroll compliance legislation is important
Payroll compliance is one of the largest financial obligations a company has, ensuring stringent compliance regulations are in place within your company will ensure avoidance of serious penalties, fines and potential lawsuits. Payroll compliance is more than simply processing payroll, it goes beyond making sure your employees are paid correctly and on time. Payroll compliance includes human resources, employee benefits, bonuses, hiring, disciplinary procedures, holiday, sick leave, pensions and any other benefits. When it comes to Global Payroll, Finance an HR departments must be knowledgeable of the local payroll legislation in the country employees are based. Legislation differs around the world. Payroll training covering the relevant legislation for the countries you are operating in is a worthwhile investment for any Multinational Company.
Top 5 Payroll Mistakes
1) Poor record keeping Records such as taxes, income, receipts and personal data must be kept up to date and stored correctly in line with governing regulation/legislation such as The General Data Protection Regulation in the EU. Often companies store this information across several departments or across multiple staff within the business. This can lead to various risks, such as:
- Data security beaches
- Information being lost or mislaid
- Storage of out of date information
- Unauthorized individuals having access to sensitive employee information
Outsourced payroll software can help automate record keeping tasks, increase accuracy, produce an audit trail saving time and increasing efficiencies.
2) Failing to file appropriate forms on time Late filing of information such as tax forms can incur fines and penalties. It is the employer’s responsibility to both adhere to the relevant deadlines and to ensure that the forms are filed correctly within the time allocated by the governing body. Employers who have employees globally and operate global payroll must adhere to the legislation of the country the employee is based; each country and jurisdiction has individual regulations concerning taxes and filing employee forms.
3) Overtime payments and rules Overtime rules and regulations in terms of payment and maximum hours employees can work overtime in a week/month differ across industries and countries. Employer's should define the overtime specific to the company and the remuneration in line with local legislation in the employment contract to avoid any confusion at a later date.
4) Employee Benefits Employee benefits such as health insurance, parking, meals, lodging, stock or share options etc. must be taxed correctly in line with the local rules and regulations. Whether a benefit is taxable or nontaxable varies across countries.
5) Outsourcing Payroll Services to the wrong company When choosing an outsourced payroll service such as payroll software, payroll vendor or third party, it is vital to carry out due diligence on the provider or service. Review contracts thoroughly, talk to their clients, review their processes. In the case of Global Payroll this is imperative to avoid penalties and fines for incorrect payroll and taxes.
In conclusion, maintaining a compliant payroll process and keeping a clear record with tax authorities promotes a positive reputation for your company and brand and will avoid penalties, fines and lawsuits. For more information on how Payslip automates record keeping tasks, increases accuracy and produces an audit trail saving time and increasing efficiencies take a FREE Trial of our software today.
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