Payroll can be a time-consuming and stressful process. Especially when your business scales globally, the need for greater compliance and standardisation of payroll across jurisdictions would be higher as well.

Survey by Deloitte found that there are three major challenges faced by businesses related to globally mobile employees. The challenges include determination of tax withholding obligations, reporting of taxable compensation to local payroll, and year-end processing procedures. About 1 in 3 (35 percent) of respondents indicated that the accuracy of withholding calculation for regular or supplemental pay is their greatest challenges.

Other headaches of payroll process include accuracy and timing of payroll inputs, entry and approval of worked and absence time, inbound integrations and reporting of payroll data, complex processes or lack of process standardisation, vendor management and/ or dissatisfaction with outsource vendor, and the list goes on.  

See also: How to Calculate an Employee’s Payroll in China? (Part III)

In fact, not many HR practitioners love payroll – yet it is an obligatory process needed to ensure stability within the company. Thus, with all those challenges in mind, here are the “aha” guide for payroll processes.

Know the basic

Everything comes from the basic. When you know the basic of the payroll process, all the following procedure will get easier. So, what is the payroll basic process?

1. Know which tools you should use. Generally, payroll will require you to maximise the use of software to make everything easier and less stressful. When choosing the software consider factors such as: size of company, budget allocated, level of comfort and familiarity with regulatory.
2. Update your knowledge about law and regulation. This will require you to read and stay current to the tax laws and payroll tools.
3. Consider to be fully automated. Payroll process is identical with paper-intensive process which will make it hard for you to keep up the pace and progress. Therefore, in line with the first point, automate your payroll process. Use online portal system will likely help you save cost, energy, and time.

Know the list of payroll process

After following the basic, it is time to create and/or educate yourself with the checklist of payroll processing. The checklist should be breakdown into four sections: weekly, monthly, quarterly, and annual tasks so it will be easier to recheck later.

According to Fit Small Business, the checklist of payroll process should include the following elements.

• Collect employee data from name, address, zip code, tax withholdings, employment verification, pay rate, and employment status.
• Check for the new hires data
• Gather hours workers whether from per pay period, paid, and unpaid breaks, or overtime.
• Calculate gross pay and multiply it by pay rate or hours worked
• Process deductions and subtract to employee deductions from gross pay
• Provide net pay employees with either direct deposit or pay card, and make sure to fund your payroll account
• Document the results and keep timecards, pay stubs, and any pay change information, including raises or bonuses.

Know the rules when the business is growing

As mentioned earlier, businesses are growing faster than before. Companies around APAC region will need to deal with more complexity regarding payroll due to different languages, federal and regional differences, and different complexity of payroll regulations. Therefore, if your business grows within APAC countries, here are the factors you need to notice based on Activ Payroll.  

China

• Tax year starts from 1 January and ends on 31 December
• Social security is managed as a location-specific, separate process
• Individual Income Tax is filed and paid on a monthly basis
• A preferential tax on business is lower than the usual taxes on salaries. Preferential tax rate can only apply once a year

Japan

• Tax year starts from 1 January and ends on 31 December
• Two main payroll taxes: social insurance (usually 30 percent of the standard cost) and labour insurance
• Employee national tax liability is calculated by the company and deducted monthly from salaries
• Bonus is processed in separate payroll. But when a bonus is paid more than 4 times a year, they should be included in Standard Monthly Remuneration that is submitted to the health insurance association in July each year.

India

• Tax year starts from 1 April and ends on 31 March
• Monthly tax calculation is based on employees’ different tax saving investment declarations, made at the beginning of the financial year
• Quarterly tax returns need to be filed with the tax department
• Major social securities in India are: Provident Fund, Employee State Insurance, and Labour Welfare Fund

Malaysia

• Tax year starts from 1 January and ends on 31 December
• Income Tax is collected through Payroll via Scheduler Tax Deduction
• Main social security deductions are: ZAKAT (Muslim only), Provident Fund, Social Security Organisation
• Tax clearance required for foreign employees
• New employees can use their earnings and tax deduction from their previous employment from the current financial year

Vietnam

• Tax year starts from 1 January and ends on 31 December
• Personal Income Tax is collected through Payroll
• Mandatory social security: Social Insurance, Health Insurance, Unemployment Insurance, and Mandatory Provident Fund
• Employers are paying for Performance related bonus trend

Singapore

• Tax starts from 1 January and ends on 31 December
• No income tax is withheld via Payroll. Employees are responsible for paying their tax obligation directly to IRAS
• Tax clearance is required for foreign employees
• Social security include the Central Provident Fund

Hong Kong

• Tax starts from 1 April and ends on 31 March
• No income tax is withheld via payroll. Employees are responsible for paying their tax obligation to IRD
• New hires and leavers are reported to IRD through IR56 forms
• Tax clearance is required for foreign employees
• Social security system include Mandatory Provident Fund which applies to all employees including foreigners unless there is a valid exemption
• MPF schemes are administered by various approved MPF Trustees

Philippines

• Tax year starts from 1 January and ends on 31 December
• Salary taxes are withheld via Payroll
• Mandatory social security payments from employees and employers are Social Security System, HDMF known as PAG-IBIG,  and Philhealth contributions

Indonesia

• Tax year starts from 1 January and ends on 31 December
• Salaries taxes are withheld via Payroll
• Mandatory social securities are BPJS Manpower and BPJS Health contributions
• Employers are required to pay an equivalent of one month’s salary to employees for Tunjangan Hari Raya allowance. It must be paid before the religious holiday.

Read also: Rules & Calculations of CPF for Employers in Singapore