When I first prepared to move to Singapore six years ago to set up Webster Buchanan’s new AsiaPac HQ, one of my first jobs was to outsource anything that remotely resembled a support function. Top priorities were corporate and immigration lawyers and a company secretarial service to get us set up, quickly followed by accountants, auditor, a bank and HR advisory services. While hunting for lunch near the famous Raffles Hotel one day even stumbled across the best local print shop for business cards and marketing collateral. Oh, and while we remembered, we did a little bit of research into domestic payroll providers.
Our blasé approach wasn’t simply down to the fact that for the first month or so I was the only person we expected to have on the payroll, but more a reflection of the relative ease of running payroll in Singapore. In the time it takes a large and complex multinational to complete their build-to-gross in France, I’ve processed payroll, jumped in a cab to Changi airport, hopped across to a nearby tropical island and started downing my first cocktail on the sun lounger. With a bit of luck, I’ll even have had time for a visit to Singapore’s fabulous night zoo on the way.
Anyone who’s worked on the operational side of international payroll will know how hopelessly unfair life is when it comes to payroll complexity. Working with one multinational on a project across Latin America last year, we saw the number of pay elements used by individual country teams vary from mere handfuls to the high hundreds – a figure that can extend into the thousands when you look at complex companies operating in some of the trickier European countries. When I say these pay elements were ‘used’ I deploy the term loosely, since it’s a fair bet that a reasonable chunk of those high-volume codes are either duplicated, partially overlapped or redundant - but it does give a taster for what happens when you combine a complex legislative environment with a complex corporate structure.
Coincidentally, the disparity between Singapore and more complex environments was borne out late last year when multi-country payroll vendor NGA Human Resources released research into country complexity across 35 countries. Called the Payroll Complexity Index, NGA assessed complexity around five factors – gross-to-net calculation, unions and collective bargaining, taxes, benefits and industry-specific regulations. With over 700 respondents including local subject matter experts, consultants and global payroll system engineers, the results gave a good insight into why some payroll environments are so tediously tricksome.
NGA’s research, which is available from its website, decoupled the different external components that combine to make payroll processing complex. They include the frequency of legal updates (highest in Mexico and Italy), the complexity of gross-to-net calculation (led by Germany, France and Belgium) and treatment of garnishments (led by Argentina and Peru). The number of data points and frequency of reporting to government were also ranked, along with factors such as the complexity of benefits and degree of union influence (headed, interestingly, by New Zealand). Merged together, France emerged as the top country for overall complexity, followed by Italy and Germany, with the US coming in seventh. At the other end of the scale, Singapore came out as the easiest country, accompanied by the likes of Hong Kong and Malaysia.
The external factors analysed by NGA are not of course the only issues in determining payroll complexity – internal factors also contribute. They range from the volume of changes within an organisation – compare the number of starters and leavers in a high-turnover retail environment, for example, to a more staid, high-retention local business – to the make-up of the workforce and the nature of pay-related internal policies.
All of this matters, and not just in terms of the hassle it creates for weary payroll managers. For one thing, it helps non-payroll stakeholders understand why different countries requires different amounts of time, resource and subject matter expertise to function, which can influence everything from cost comparisons to the feasibility of outsourcing. Just as important, if you’re looking to work with a multi-country payroll outsourcer, you need the reassurance that they can handle the intricacies of your most complex operations – which means you need to take a good look at both their operations and their customer base in your most challenging countries.