Charm City Payroll Conference 2018
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U.S President of Operations at Immedis, Dave Leboff address the Charm City Payroll Conference in Maryland where he talks on "Building the Foundations of Global Payroll"
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Charm City Payroll Conference 2018
- 1. Building the Foundations of Global Payroll Presented to: Charm City Payroll Conference, April 5, 2018 Presented by: Dave Leboff, President US Operations Immedis, Inc.
- 2. 1. Definitions/Overview 2. Global Payroll Operating Models 3. Locals Versus Expats 4. Technology 5. New Country Startup 6. Best Practices 7. Questions Contents Overview
- 4. Definition Global Payroll Administration The sum of all activity required to coordinate and manage the operation of payrolls in more than one country for a single employer Activities include: Secure, compliant collection and distribution of data Calculation of earnings, deductions, net pay, tax liabilities Completion and filing of employee and employer compliance Remittance of taxes to statutory authorities Delivery of net pay to employees Employee payslips Accounting and management information reporting Compliance with global regulatory frameworks
- 5. Global Payroll Overview Country 1 ICP Gross- to-Net Payroll Processing Local Compliance Employee Payslips Management Reports Accounting Reports Payroll Data Sources Payroll Processing Payroll Driven Reporting Country 2 ICP Gross- to-Net Payroll Processing Country 3 ICP Gross- to-Net Payroll Processing Global Updates Global Updates Local National Updates Local National Updates Local National Updates
- 7. Global Payroll Operations Structure COUNTRY A PAYROLL PROCESSING COUNTRY B PAYROLL PROCESSING COUNTRY C PAYROLL PROCESSING GLOBAL PAYROLL PROGRAM MANAGEMENT Governance
- 12. Global Payroll Operating Model Alternatives Governance: Responsibility always remains with organization Program management: Internal (shared services, functional, regional) Shared with aggregator Outsource to Business Process Outsourcer (BPO) Processing: Internal Outsourced Locally administered Aggregator BPO COUNTRY A PAYROLL PROCESSING COUNTRY B PAYROLL PROCESSING PEO GLOBAL PAYROLL PROGRAM MANAGEMENT Governance
- 13. Global Payroll Operating Model Alternatives: Program Management Remains Fully Internal In-Country Processing In-Country Processing Program Management PEO Governance
- 14. Global Payroll Operating Model Alternatives: Program Management Shared with Aggregator or Regional Processor Program Management In-Country Processing PEO In-Country Processing PEO In-Country Processing In-Country Processing Aggregator or Regional Processor Governance
- 15. Global Payroll Operating Model Alternatives: Program Management Fully Outsourced to Business Process Outsourcer COUNTRY A PAYROLL PROCESSING COUNTRY B PAYROLL PROCESSING COUNTRY C PAYROLL PROCESSING BPO Program Management Governance
- 16. Which Model is Right for your Organization?
- 17. Global Payroll Operating Model Which Model is Right for Your Organization New to Global •Multiple service providers and technologies •Uneven resource quality country to country •Difficult to gather credible data and consolidate Growing & Gaining Experience •Maturing governance •Global program management evolving •Reporting requirements set •Payroll process aggregation Mature •Functioning governance •Global service standards •Shared services, BPO, selected managed payroll services •Global systems integration •Business intelligence and full reporting
- 18. Global Payroll Locals Versus Expats
- 19. Local National Payroll Local Employment Law CultureDifferent Fiscal Year Ends Pay FrequenciesLanguage Social Security & otherTaxes Compliance Requirements CurrencyEquity Reporting
- 20. Expatriate Payroll 2 Reporting Jurisdictions Culture Expat Policies andTax Equalization Inconsistent Pay Frequencies Language Certificates of Coverage Compliance Requirements Multiple Currencies Equity Reporting
- 22. A Word About Technology HRMS Global Payroll Data Management Local Payroll Systems Local Payroll Systems Local Payroll Systems • Global data repository • Global compensation and benefit programs • Joiners/Leavers • Expatriates • Global policies • Accepts joiners/leavers/updates/global demographic changes • Translates changes into various currencies • Returns local GTN data • Flexible, detailed reporting • HR, Management, Accounting, Treasury • Local GTNs • Local compliance reporting • Payslips • Accept data from Global Data Management System and report back to it
- 23. Risk Management Secure, compliant data management Operational rigor (e.g. ISO 27001, SOC reports) Error reduction Program Control Clear view of payrolls and detail you manage Manage each payroll calendar and each step in the process Auditable history Reporting Accounting Analytics What Global Payroll Technology Should Do for You
- 24. Technology is all about Risk Management & Control
- 25. Global Payroll New Country Startup
- 26. Opening a New Country New Country Hit Team Payroll Treasury Legal Accounting Finance Tax Mobility Comp & Benefits HR
- 28. Best Practices Train up/Join APA/GPMI/GPA Get buy-in on a governance team Find trusted vendor/partners with facilitative technology Gain vendor management competencies Build a strong new country hit team
- 29. Expatriate Policies and Tax Equalization for Payroll Pros
- 30. Contents Overview 1. Definitions 2. Expatriate Programs & Policies 3. Income Tax & Expat Policies 4. Tax Equalization Administration 5. Q & A
- 31. Verb: To settle oneself abroad Noun: A person who lives outside their native country Definitions Expatriate
- 32. An employee who .. Transfers across national borders To work on assignment for their employer Under terms and conditions of a company-developed policy For a period of time exceeding a business trip Definitions Company-Sponsored Expatriate
- 33. The application of global mobility policy & relevant law as part of ongoing domestic payroll processing Definitions Expatriate Payroll Administration
- 35. Types of Company Sponsored Assignments 184 Days – 1Year 1 – 1+Years Indefinite< 183 Days PolicyType Payroll Setup Assignment Length Home and Host (Concurrent ) Host Long Term Int’l Assignment Local ShortTerm Int’l Assignment Extended BusinessTrip Home and Host (Concurrent ) Home (unless no tax treaty)
- 36. Types of Company Sponsored Assignments 184 Days – 1Year 1 – 1+Years PolicyType Payroll Setup Assignment Length Home and Host (Concurrent ) Long Term Int’l Assignment ShortTerm Int’l Assignment Home and Host (Concurrent )
- 37. Expatriate Policy Basics – Policy Principles When moving the expat from Country A to Country B, an expatriate’s “quality of life” and “net pay” should feel like home country When employee moves to new assignment or back home compensation and tax should not be a complicating factor in deciding whether to take the assignment Similar goods and services burden Similar housing burden Similar tax burden Similar net-in-pocket
- 38. Balance Sheet – Foundation of Expat Policy Development Housing $15,000 Net Reserve $20,000 Tax (30%) $30,000 Cost of Living $35,000 Stay at Home Profile Housing $20,000 Cost of Living $10,000 Additional Assignment Allowances Additional Assignment Cost = $50,000 Tax Grossup at (40%) on Additional Allowances $20,000 $12,000 $4,800 $1,920 $768 $307 $123 $49 $20 $8 $3 $1
- 39. Balance Sheet – Foundation of Expat Policy Development Net Reserve $20,000 Housing $35,000 Cost of Living $45,000 Tax $50,000 Housing £ 26,915 Cost of Living £ 34,605 Tax £ 30,760 Exchange Rate = GBP .769 per 1 USD
- 40. Expatriate Programs and Policies Exchange Rate: GBP to USD = .769 PAYCODE Paid At Home (USD) Paid in Host (GBP) Salary USD 100,000 Allowances (Hypo Cost Of Living) (USD 35,000) (Hypo Housing) (USD 15,000) (HypoTax) (USD 30,000) Actual Cost of Living Allowance (Host) GBP 34,605 Actual Housing Allowance (Host) GBP 26,915
- 41. Expatriate Programs and Policies
- 42. Income Tax and Expatriate Policies
- 43. • Dual country tax • Different fiscal years • Complexity of foreign tax laws and languages • Certain locations may be perceived to be more or less economically attractive than others • Risk allocation between employer and employee Tax Drivers of Expatriate Policies
- 44. 1. Laissez Faire 2. Tax Protection 3. Other 4. Tax Equalization Common Expatriate Tax Policy Models
- 45. Income Tax and Expatriate Policies
- 46. Tax Equalization
- 47. Employer charges employee a hypothetical tax roughly equivalent to his/her stay at home tax (or some other policy-derived amount) Defines and locks in employee’s tax burden Employer pays 100% of employee’s actual Federal, State, Local, FICA, Medicare, Foreign Income Tax, Foreign Social Tax obligation Risk/reward for tax planning shifts to employer No tax incentive to stay or leave a country Tax Equalization
- 48. • Assignee is responsible for a policy-derived amount (“estimated theoretical tax”) approximating the employee’s stay-at-home tax liability • This estimated obligation is retained each pay period in the form of a negative allowance called “hypothetical tax” (like tax withholding) Tax Equalization Cycle • Employer pays all of the expat’s “actual home and host country income and social taxes” • After the tax year is over and all tax-related information is known, an “actual theoretical tax” is calculated and compared to the hypothetical tax retained for a final true-up – This “true up” is known as Tax Equalization Like comparing withholding to actual tax on a tax return
- 49. Tax Equalization Cycle Employee Estimated Theoretical Tax is $30,000 annually. Therefore, on a semi-monthly payroll $1,250 Hypothetical Tax is retained from salary each period Employer pays GBP 30,760 of Actual UK PAYE and grosses up $10,000 of Actual US Tax on behalf of employee After year end Tax Consultant computes stay-at-home (Actual Theoretical) tax in the amount of $29,850 Employer reimburses over-retained Hypothetical Tax of $150 to employee
- 50. Income Tax and Expatriate Policies
- 51. Questions?
Editor's Notes
- Decide program management model Approve program budgets Approve relevant policies Mobility Employee vs contractor Tax and legal opinionsApprove accounting protocols Execute contracts Outsourcing BPO Aggregator ICP Technology Approve performance standards Approve treasury strategies
- Seat on governance team Monitor/measure program performance Compliance with privacy framework (GDPR) Vendor sourcing and management Global data management and reporting Integration technology platforms Local compliance oversight Key role hires Allocation of roles and responsibilities Ensure right skills and competencies are in place Expat program and policies integration Net pay strategies/ delivery for expatriates Seat on new country implementation team Non-local compensation and benefits updates Skills and Competencies Program management Vendor management Global technologies Foreign exchange Country registrations Tax treaties Basics of international employment law Expatriate policies Expatriate-related law Section 911 RAs vs. NRAs Special rules for certain visas Global compliance frames GDPR OFAC AML Culture
- Compensation/ benefit updates Joiners/leavers Gross-to-net calculations Tax remittances Local compliance Net pay Expatriate processing Payslips Integration with global systems/processes
- Relevant Attributes Size of organization Type of organization Centralized/decentralized Functional/regional Shared services Number of locations Volume of employees in each location Availability of “fit-for-purpose” technology Availability/capability of resources Inclination to outsource Maturity of global payroll program
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