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20 th Annual IL Statewide APA Conference

20 th Annual IL Statewide APA Conference. August 22, 2013 10:20 am Session. International Payroll Challenges and Best Practices. Michele Honomichl Celergo CEO E-mail Address: mhonomichl@celergo.com. International Payroll Challenges and Best Practices. Introduction

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20 th Annual IL Statewide APA Conference

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  1. 20th Annual IL Statewide APA Conference August 22, 2013 10:20 am Session

  2. International Payroll Challenges and Best Practices Michele Honomichl Celergo CEO E-mail Address: mhonomichl@celergo.com

  3. International Payroll Challenges and Best Practices Introduction • Michele Honomichl, CEO Celergo • Challenges of International Payroll Implementation • International Payroll Differences • International Payroll Management Options • Compliance 20th Annual IL Statewide APA Conference – August 22-23, 2013

  4. International Payroll Challenges and Best Practices Challenges of Launching International Payrolls New Country Launches Divestitures Acquisitions Transitions Shadow Payrolls 20th Annual IL Statewide APA Conference – August 22-23, 2013

  5. International Payroll Challenges and Best Practices Challenges – New Payrolls • Entity – Need One Or Not? • Flexibility Of Initial Hires • Registration For Tax & Social Programs • Benefits Set-up • Payroll Funding • Payroll Timing 20th Annual IL Statewide APA Conference – August 22-23, 2013

  6. International Payroll Challenges and Best Practices Challenges – Divestitures • Entity Set-up • Benefit Changes • Registration of Tax and Social Programs • Expectations of Current Staff • Payroll Harmonization • New Time Reporting and HR Systems • Lack of HR Support & Expertise 20th Annual IL Statewide APA Conference – August 22-23, 2013

  7. International Payroll Challenges and Best Practices Challenges – Acquisitions • Merge Into Current Operations • Harmonize Benefit Packages • Change Management With Employees • Convert Current Entities • Review Registrations • YTD Loads & Parallel Run Complexity 20th Annual IL Statewide APA Conference – August 22-23, 2013

  8. International Payroll Challenges and Best Practices Challenges – Transitions • Obtaining Indicative and Compensation Data • Parallel Running of Both Systems • Reviewing Variances • Determining Compliance • Employee Communication 20th Annual IL Statewide APA Conference – August 22-23, 2013

  9. International Payroll Challenges and Best Practices Challenges – Shadow Payrolls • What Is A Shadow Payroll? • When Is A Shadow Needed? • How Is It Managed? • What Information Is Needed? • Is It Required For Every Country? 20th Annual IL Statewide APA Conference – August 22-23, 2013

  10. International Payroll Challenges and Best Practices Implementing An International Payroll Basics Documents Employment Contracts Requirements 20th Annual IL Statewide APA Conference – August 22-23, 2013

  11. International Payroll Challenges and Best Practices Implementing An International Payroll – Basics • Project Plan • Timing • Indicative Data • Compensation Data • Parallel Runs • Employee Communications 20th Annual IL Statewide APA Conference – August 22-23, 2013

  12. International Payroll Challenges and Best Practices Implementing An International Payroll – Documents • Entity Registrations • Local Tax and Social Registrations • Employment Contracts • Generally Required • In Local Language • Registered Or Available For Local Government (Spain) 20th Annual IL Statewide APA Conference – August 22-23, 2013

  13. International Payroll Challenges and Best Practices Implementing An International Payroll – Employment Contracts • Employment Contracts • Need To Include: • Compensation • Local Collective Agreements • Benefits • Payroll Timing • Other Local Requirements • Special Circumstances for Divestiture or Acquisition 20th Annual IL Statewide APA Conference – August 22-23, 2013

  14. International Payroll Challenges and Best Practices Implementing An International Payroll – Requirements • Health & Safety Inspections • Designation of A Local Signatory (“Chop” in Asia) • Bank Account • Local Benefit Set-up: MPF, Superannuation, Health, etc. • Worker’s Compensation 20th Annual IL Statewide APA Conference – August 22-23, 2013

  15. International Payroll Challenges and Best Practices International Payroll Differences Year-End Work Days Vacation & Holidays Pay Cycles & Timing Withholding Requirements HRIS Integration Funding 20th Annual IL Statewide APA Conference – August 22-23, 2013

  16. International Payroll Challenges and Best Practices International Payroll Differences – Year-End • Not All On Calendar Year • UK, Hong Kong, India: April To March • China - Monthly • Personal Year-end Adjustments Not Allowed – Japan • Personal Filings Only – Hong Kong 20th Annual IL Statewide APA Conference – August 22-23, 2013

  17. International Payroll Challenges and Best Practices International Payroll Differences – Work Days • 37.5 to 48 Hours Versus 40 Hours • Determined By Collective Agreement • No Exemption For Overtime • Mid-East: Work Days: Sun-Thurs, Sat-Wed, Mon-Fri 20th Annual IL Statewide APA Conference – August 22-23, 2013

  18. International Payroll Challenges and Best Practices International Payroll Differences – Vacation & Holidays • Determined By Collective Agreement • Typically Much Higher Than US • Often Taken In Blocks • Maybe Mandatory Or Have Required Pay-out • Holidays Close Banks Locally 20th Annual IL Statewide APA Conference – August 22-23, 2013

  19. International Payroll Challenges and Best Practices International Payroll Differences – Pay Cycles & Timing • By Collective Agreement • Statutory • Monthly Versus Bi-Weekly • Requirement For Semi-Monthly Pay Cycles: Philippines, Canada • Cycle Based On Overtime: Mexico 20th Annual IL Statewide APA Conference – August 22-23, 2013

  20. International Payroll Challenges and Best Practices International Payroll Differences – Withholding Requirements • Social Taxes Only • Dependent On Employee’s Legal Status • Required For Contractors And Other 1099 Type Engagements 20th Annual IL Statewide APA Conference – August 22-23, 2013

  21. International Payroll Challenges and Best Practices International Payroll Differences: Payroll Filings • Tax Payments • Multiple Payments • Tax Receipts • Monthly, Quarterly, Annual Filings • Power of Attorney 20th Annual IL Statewide APA Conference – August 22-23, 2013

  22. International Payroll Challenges and Best Practices International Payroll Differences: HRIS • Localization information for Payroll • Interface for payments/deductions • Timing • Data Management • Data Sync 20th Annual IL Statewide APA Conference – August 22-23, 2013

  23. International Payroll Challenges and Best Practices International Payroll Differences: Funding • Bank Accounts: • Not required for many countries to do payroll • Entities are required to open a bank account • Russia, Japan, Brazil need local bank accounts • Funding Practices: • Some currencies are considered exotic “KRW, COP, TWD” • Some currencies are pegged or floating fixed to USD – HKD, CNY • Have full SWIFT codes in case the need to enact BCP is required • Most employees are paid electronically 20th Annual IL Statewide APA Conference – August 22-23, 2013

  24. International Payroll Challenges and Best Practices International Payroll Differences: Funding (cont.) • Timing: • May take several days to send money • Currency control in many countries • Internal transfers may take up to 5 days - Japan 20th Annual IL Statewide APA Conference – August 22-23, 2013

  25. International Payroll Challenges and Best Practices International Payroll Management Options Pay Locals Via Wire Transfer Manage Payroll Internally Outsource To A Local Firm Outsource to a Global Payroll Company 20th Annual IL Statewide APA Conference – August 22-23, 2013

  26. International Payroll Challenges and Best Practices Pay Employees Via Wire • Most Risky To Company • Employee Required to Pay Own Taxes • Potential Local Withholding Requirement • Employee Not Properly Registered • Alternative Option: PEO 20th Annual IL Statewide APA Conference – August 22-23, 2013

  27. International Payroll Challenges and Best Practices Manage Payroll Locally • Local Employee Has Access To Payroll • Limited Internal Expertise • Local Payroll Compliance Concerns • Limited Visibility to HQ • If Over 500, May Be Most Cost Efficient 20th Annual IL Statewide APA Conference – August 22-23, 2013

  28. International Payroll Challenges and Best Practices Outsource Payroll To A Local Firm • Review Local Firm to Meet All Needs • Accounting Firms Also Do Payroll • Outsourcer Needs To Be Managed • Output Needs To Be Integrated Into Accounting • Limited Visibility to HQ If Managed Locally 20th Annual IL Statewide APA Conference – August 22-23, 2013

  29. International Payroll Challenges and Best Practices Outsource Payroll To A Global Payroll Company • Global, Regional, or Local Approach • Processors, Technology, Aggregators, Service Co. • HRIS Interface • Improve Visibility • Improve Control and Follow One Global Process • Lose Some Flexibility 20th Annual IL Statewide APA Conference – August 22-23, 2013

  30. International Payroll Challenges and Best Practices Compliance Local Compliance Data Privacy Safe Harbor OFAC, FCPA 20th Annual IL Statewide APA Conference – August 22-23, 2013

  31. International Payroll Challenges and Best Practices Compliance - Local • Tax Changes • Collective Agreement Updates • Online or Manual Filing Changes • Pay Slips 20th Annual IL Statewide APA Conference – August 22-23, 2013

  32. International Payroll Challenges and Best Practices Compliance – Data Privacy • European Union • System Requirements • Data Uses • Sign-Off by Employee Groups 20th Annual IL Statewide APA Conference – August 22-23, 2013

  33. International Payroll Challenges and Best Practices Compliance – Safe Harbor • Compliance with EU Privacy Directives • US Certification • Notice - Individuals must be informed that their data is being collected and about how it will be used. • Choice - Individuals must have the ability to opt out of the collection and forward transfer of the data to third parties. • Onward Transfer - Transfers of data to third parties may only occur to other organizations that follow adequate data protection principles. • Security - Reasonable efforts must be made to prevent loss of collected information. 20th Annual IL Statewide APA Conference – August 22-23, 2013

  34. International Payroll Challenges and Best Practices Compliance – Safe Harbor • US Certification(cont.) • Data Integrity - Data must be relevant and reliable for the purpose it was collected for. • Access - Individuals must be able to access information held about them, and correct or delete it if it is inaccurate. • Enforcement - There must be effective means of enforcing these rules. 20th Annual IL Statewide APA Conference – August 22-23, 2013

  35. International Payroll Challenges and Best Practices Compliance – OFAC, FCPA • Office of Foreign Asset Control • OFAC Sanctions • Foreign Corrupt Practices Act • Compliance • Penalties for compliance failure 20th Annual IL Statewide APA Conference – August 22-23, 2013

  36. International Payroll Challenges and Best Practices Conclusion • Understand The Country • Legal Entity • Benefits • Employment Contracts • Payroll Requirements • Accounting (VAT) 20th Annual IL Statewide APA Conference – August 22-23, 2013

  37. International Payroll Challenges and Best Practices Conclusion • Hire Good Local Support • Legal, Accounting, Payroll • Ensure You Are Compliant • Registrations – Health, Social, WC • Payroll Submissions • VAT And Corporate Filings 20th Annual IL Statewide APA Conference – August 22-23, 2013

  38. Thank You for Attending! 20th Annual IL Statewide APA Conference – August 22-23, 2013

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