Debbie Gibson, Head of Sales and Partnerships, activpayroll
Employer payroll can be a challenge for large organisations with operations in several countries, especially when it comes to trying to balance day-to-day operations with the opportunities that come with expansions into new territories.
Getting payroll right therefore requires a comprehensive understanding of what is expected in each territory that a business operates in as well as the constant changes coming into effect. The UK, Italy and Germany are known for their dynamic economies but Italy and Germany are also some of the more challenging places to undertake payroll operations in the world with stringent regulations, so what should organisations be aware of?
Making Payroll Work for your Business
Payroll processes in the UK involve making the necessary deductions from employee payments alongside any additional earnings like tips, bonuses, or statutory sick and maternity pay. Similar to the UK, it is legally acceptable to provide employees with online payslips in Italy and Germany, with digital payroll interfaces now the mainstay in all three countries making it vital for the digital experience to be a priority for employer payroll.
For employers with payroll operations in multiple countries, the need for accurate reporting is essential, particularly when it comes to compliance with local tax legislation. In Italy, employers are required to keep payroll records for 10 years from the date of the payroll processing. In Germany, such information should be kept for six years and in the UK payroll reports must be kept for three years from the end of the tax year that they relate to. Additionally in the UK, employers have a responsibility to retain records to prove that they are paying a minimum wage to their employees.
Payroll records in addition to helping with compliance can be a treasure trove of information that enable businesses to understand where payroll is having an impact on the overall bottom line. This is especially true in modern organisations where key decisions are backed by data and payroll can reveal trends over time. This can all be challenging for large organisations with international operations, as each country will have different requirements. In-house professionals can feel overwhelmed at the scale of the requirements and the pressures put upon them to get things right, but help is at hand from external providers who can help with the challenges of day-to-day management and reporting.
Key Changes for Employers in 2024
So what do employers need to know about as 2024 continues at pace? The cost of living continues to dominate the news headlines and is affecting many employees, and as a result the minimum wage in the UK has increased to £11.44 for individuals aged 21 and over £8.60 for those aged 18 to 20, and £6.40 for individuals under 18. In Germany, the minimum wage has increased to €12.41 per hour, with customs authorities both in the UK and Germany responsible for enforcing minimum wage requirements, leading to fines being issued for non-compliance.
To alleviate financial pressures on employees, there are also social security changes to be aware of this year. In Italy, employees are exempt from paying certain social security contributions for 2024 and in Germany, social security thresholds have increased to €62,100 for health and nursing care insurance. In the UK, social security known as National Insurance has been reduced for employees from 12% to 10% starting 6 January 2024, followed by a further decrease to 8% from 6 April 2024. [1]
The reality is that payroll providers who carry out payroll operations day in and day out working with a range of clients will have a greater store of expertise than an in-house professional. Therefore, paying an external provider is not just about getting the task done but more importantly, gaining access to the expertise that can make a real difference.
Overcoming International Payroll Challenges
Fundamental to the success of payroll is understanding the people it impacts. Employers need to be attuned to the different expectations and preferences of employees in various countries regarding compensation. Language barriers and time zone differences further complicate global payroll management, so employers often need to hire bilingual staff or use translation services to ensure clear communication about pay and benefits. Different local labour laws may have various requirements regarding cutoffs and deadlines.
In addition, currency fluctuations also need careful management to ensure budget stability and accurate employee compensation. Employers must also consider whether employees will be paid in their local currency or the currency of the country where the company is headquartered.
Global operations can simultaneously be full of challenges and opportunities for businesses and payroll can be one of those areas where a lack of consideration for those impacted can have repercussions. Recently in the UK, leaders at supermarket chain Asda were warned that an update could result in major payroll errors. The supermarket went ahead with the update which led to more than 30,000 employees receiving wrong payslips.
International employer payroll is far from straightforward and it can be a challenge for businesses to keep up with the changes in every country that they operate in. Ultimately, by getting payroll correct employers can keep their most valuable assets (employees) happy and secure in their roles.
The figures were from the ap website but I have also checked these figures via desk research and found them in the following links. https://kpmg.com/xx/en/home/insights/2024/01/flash-alert-2024 003.html. https://www.gov.uk/government/publications/the-national-minimum-wage-in-2024. https://wageindicator.org/salary/minimumwage/germany. https://www.gov.uk/government/publications/changes-to-national-insurance-contributions-from-6-april-2024.. https://www.aoshearman.com/en/insights/le-novita-del-2024-in-tema-di-lavoro-e-previdenza-tra-decreto-anticipi-e-legge-di-bilancio.
