Tackling payroll complexity in Latin America

With a mixture of emerging and booming economies, political uncertainty and instability and extreme contrasts in business confidence and fortunes, the 22 nations of Latin America can never be categorized as one homogenous whole. But for regional and global payroll managers, there are common challenges and opportunities – and as this research survey concludes, different kinds of demands on the senior payroll professional that may lead to a reassessment of the role of the regional payroll manager.

Webster Buchanan Research held in-depth discussions with a select group of senior international HR and payroll managers from multinationals responsible for Latam, along with country specialists with expertise in individual legislative issues and customs. Respondents were predominantly drawn from Webster Buchanan’s Global Payroll Research Network1 (see “Appendix 1: Methodology”).

The challenges respondents cited included:

  • Compliance requirements can be complex and difficult to interpret, with frequent changes, onerous payroll reporting requirements, detailed paper-based record keeping and complex salary calculations. Changes are sometimes ambiguous and payroll managers are given little notice to implement them. Respondents take a collaborative approach to these challenges, working closely with both in-house functions (such as legal) and third party vendors
  • Many HR administrative requirements impinge on payroll, including requirements around onboarding, separation processing, time and leave processing and records management. The administrative burden in the region is high, stemming from statutory and company specific regulations and a raft of other factors such as the use of workbooks and the requirement to sign payslips, as well as complex rules around hiring and firing in some countries
  • Wages are paid weekly, bi-weekly or monthly - but different legal and customary norms mean employers can end up running more frequent pay cycles. One respondent reported having to run almost a dozen payroll cycles every week in Mexico for different employee groups
  • Payroll managers must be able to respond to company-specific collective labour agreements (CLAs), sometimes at extremely short notice (two days being the minimum cited). This can lead to multiple challenges, not least from a system perspective. Given that this kind of change is not ‘owned’ by a multinational’s software vendor, reconfiguring systems can be difficult for payrolls that run in-house, while outsourcers can’t always be expected to manage the complexity and provide the flexibility required to accommodate last minute changes, configuration changes and retrospective calculations
  • With labor laws often tilted strongly in favour of the individual, organizations adhere to strict processes for voluntary and involuntary terminations, which makes processing leavers extremely burdensome
  • Benefits awards can be particularly complex in some countries, sometimes because of local custom rather than statutory requirements, and employers’ benefits obligations can make salary costs relatively high

To manage these complexities, the Latam regional payroll manager may well require a different set of skills than a conventional in-country payroll professional. More collaborative, but also sufficiently empowered to fight its own corner, payroll must be able to assume the role of a cross-functional enabler ensuring HR, legal, in-country teams and vendors work together in a joined-up way. Dealing with these particular complexities means payroll assuming new roles:

  • As a cross-functional enabler, anticipating and interpreting changing requirements for HR administration and workforce management
  • As a process management expert, agreeing and/or imposing and policing processes that bring regional or global standardization where possible and allowing exceptions where necessary
  • As a change manager, with the skills and experience required to drive through significant change to processes and working practices
  • As a regional leader, managing in-country experts who have the proximity and language skills to deal with local requirements

In addition, our research found:

  • It may be necessary to plan for a higher headcount in payroll to manage the complexities of collective labor agreements. While this is not technically payroll’s responsibility, HR will often seek help interpreting time and pay implications. Ideally payroll should have a role in the bargaining process, if only to ensure it has advance notice of changes
  • Organizations that manage Latin American payrolls remotely should look to local advocates to help overcome resistance at a country level
  • Critical factors for setting up regional centers include use of selfservice technologies and sharing resources across countries. Where outsourcers are used, this may include extending the scope of services beyond payroll to HR administration
  • While the administrative overhead in Latam is likely to be eased over the coming years as paper-based forms and manual practices are gradually automated, some country initiatives – such as the new reporting requirements of Brazil’s eSocial program – may actually create extra work for payroll

To read the full report, click here or follow the relevant link on the left (GPRN membership required)

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