What if I said that every country in the world is equally complex when it comes to payroll?
I’d be wrong.
Learning the ins and outs of overseas payroll may be challenging, but there are a handful of countries that stand out among payroll professionals as particularly frustrating.
A 2014 Global Payroll Complexity survey of 35 countries conducted by NGA Human Resources, a global software and service provider, found that those in Western Europe generally had more complex payroll processes as compared with the rest of the world.
Overall, the top five most-complex countries for payroll were Italy, Germany, France, Belgium and Australia, the survey said.
Challenges arise when there are multiple levels of taxation in a country. In Australia, for example, there are federal, state and territorial taxes. Other factors affecting complexity include employee classification, foreign-worker requirements and often-changing legislative changes.
The following list highlights several countries that have been emphasized in surveys and by payroll professionals as particularly difficult:
Belgium. According to the NGA survey, Belgium is the fourth most complicated country for payroll because of its ever-changing landscape of social insurance deductions and legal updates at all levels of government, complicating gross-to-net calculations and increasing the number of retroactive pay calculations needed.
Brazil. While most people know Brazil for its coffee and festivals, payroll professionals know the country for having a highly complex tax system. This stems from strong foreign-worker regulations. A foreign company offering permanent employment to foreigners in Brazil must have at least $50 million invested in the country and registered with the Brazilian Central Bank. Foreign employees hired in Brazil also must receive payments in the Brazilian currency, the real.
China. TMF Group's Global Benchmark Complexity Index in 2015, which ranked 95 jurisdictions in Europe, the Middle East, Africa, Asia-Pacific, North American and South America, based on complexity related to regulatory and compliance perspectives, listed China as the fifth most difficult country for companies to stay compliant with legislation. The report cited difficulties from many provinces in China with separate regulatory regimes, different dialects and a lack of local knowledge.
France. Employers often consider France one of the most difficult for payroll because of its complex pay slips, social insurance categories and tax rules. For example, some employers in France are liable for payroll taxes on wages if they are not subject to the value-added tax (VAT) or subject to the VAT on up to 10 percent of total sales. Payroll taxes are based on all resident or domiciled employees' total annual salary, regardless of the business location. Thus, foreign employers also are liable for the VAT.
Italy. Italy is often cited as one of the more difficult because of regional and local taxes, complicated legislative changes and employee categories. Collective bargaining agreements (CBAs) that are negotiated between unions and employers’ associations in Italy also add an additional layer of complexity. There are hundreds of CBAs for different industries and they can even vary at the local level. CBAs expire every three to four years and have to be renegotiated, often with new base salaries. Despite its complexity, all employers must abide by these CBAs.
Did we forget a country? Tell us on LinkedIn.
Read more about the most complicated countries for payroll in the latest Bloomberg BNA white paper.
Take a free trial to Bloomberg BNA’s International Payroll Decision Support Network . With more than 90 countries covered, this is your one-stop resource for reliable, up-to-date guidance and analysis in every area of global payroll administration and compliance.
Follow Molly Ward on Twitter at @mollyalisonward.
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