Global mobility adds complexity to the payroll process and many multinational companies face significant challenges and persistent dilemmas in reporting globally mobile employees’ compensation data. Payroll compliance is firmly on the radar for tax authorities worldwide and in today’s regulatory environment this focus will likely to increase. This is evidenced by the growth in social security systems and the pressure to gather data in real time for processing across multiple jurisdictions. Real Time Information (RTI) in the UK requires employers to submit payroll reports to the authority “on or before” the point at which payment is made. Additionally, in many countries individuals do not file tax returns – so if payroll and withholding is not correct, the authorities will seek the shortfall (and look to levy penalties) from the employer.
At the same time, organisations are dealing with changing workforce demographics and the increase in the short term assignments and international business travellers.
Expatriate assignees’ pay data is required for timely and accurate reporting via payroll, tax return, intercompany cross charging purposes, correct allocation of corporate tax deductions and reporting of senior executive pay in statutory accounts.
With all of the above in mind, how do you ensure that delivery of payroll in each location are compliant and consistently deliver correct pay? How do you keep pace with changing regulations in every jurisdiction? In addition, many companies face the challenge of data being stored in multiple data sources, in different locations, technology systems, even third party systems, which add to the compliance challenges.
First thing first - assess where you are now. Clearly mapping the global compensation process from the start to the end of an assignment is key to ensure compliant payroll delivery, governance over delivery of compensation against policy and understanding the interaction of expatriate payroll with other functions. There is also an opportunity to review the payroll structures, simplify and gain efficiencies in the sharing of data with HR, Tax and Finance.
We have developed a global compensation management health check and worked with many companies to review their current global compensation process. Working with them to build a robust global compensation management process as well as assisting them on the road to compliance.
What next? Once you mapped out your end to end global compensation management process, you would be able to identify where certain processes doesn’t work or less efficient and in which jurisdiction(s) you face payroll compliance issue. Using these findings develop a project plan or remedial action to be taken going forward and build a business case for global compensation management process whereby a fully integrated process is built to ensure complete and accurate delivery and reporting of home and host country pay as well as non cash payments made on behalf of international assignees in all of the relevant jurisdictions.
Technology is key in the core global compensation management process. Various sources and multiple data can be captured and analysed using technology to deliver effective compensation management and help to achieve full policy and tax compliance.
Global compensation management will provide better visibility over international assignments costs and data, allowing for better governance and exception management and the ability to measure return on investment on these. Single access point to your data will enable easy reporting and access to management information.
Another potential advantage of global compensation management is the ability to reduce compliance costs because the preparation of tax returns themselves becomes a more automated and streamlined process and in some cases it is possible to remove filing requirements all together because it enables you to demonstrate to tax authorities that your underlying processes are transparent and robust and therefore year end filings are superfluous.
One Global Mobility Tax Partner, Shine network sponsor, PwC United Kingdom
Tel: +44 (0)7920 534518
Director, PwC United Kingdom
Tel: +44 (0)7595 609636
Senior Manager, PwC United Kingdom
Tel: +44 (0)7730 598843