Payroll more complex than it might seem

Global ranking highlights challenges of compliance, data protection
By Anne Clifford
|Canadian HR Reporter|Last Updated: 01/19/2018

Payroll is no longer just about paying people, it’s about managing data —the handling, control and security of data in an ever more complex tax and legal landscape.

This was the overriding finding of the 2017 Global Payroll Complexity Index (GPCI), an independent study published by NGA Human Resources in October that ranks nearly 50 countries and regions on their payroll complexity levels.

Traditional ways of managing payroll processes are being challenged faster than ever. This acceleration is due to advances in technology, more complex legislation and data privacy regulations, developments in benefits and rewards, and changes in workforce structures.

Canada landed mid-table, but this is not to suggest its payroll is any less challenging. Many of the risks and challenges can be offset so the ranking does not necessarily align with the assumption of simplification.

In countries where the 2017 Global Payroll Complexity Index reports a fall in complexity — the United States and Canada notably — this is not because the challenge is any less, it’s because the high-risk, high-admin payroll processes have been outsourced or automated to reduce the risk of fines and reputation damage.

“When factoring in the added challenges of two official languages, the multifaceted legislative requirements and disparate governing bodies of Quebec, and the multijurisdictional challenges placed upon practitioners who operate in this province and others, the complexity of Canadian payroll remains exceptionally high,” says Steven van Alstine, vice-president of education at the Canadian Payroll Association (CPA), which partnered in the study.

The rise in compliance

A significant change since the GPCI was last published in 2014 is the amount of data in modern payroll processes, and the legislations that monitor and control this in each country. No two countries have the same rules or reporting schedules so multi-country payroll models have multi-compliance challenges, adding multi-country complexity to already complex processes.

Payroll professionals are responsible for managing and securing this data. And the compliance stakes are only getting greater. Are they really qualified to do this?

Non-compliance in Canada and North America is taken seriously by the authorities. Increasingly, there are no second chances. Failure to comply or a data breach carries far more than stiff fines. The damage to a brand and business reputation can be — and has been — a killer for many businesses around the world.

It’s no surprise then that a poll of Canadian payroll professionals during a GPCI webinar found payroll, HR and regulatory updates are their greatest challenge, securing over 65 per cent of votes.

Zero tolerance on payroll non-compliance and the competitive emergence of new business economies means, without a doubt, businesses must have robust payroll.

Is payroll more complex?

Complexity remains high or very high for Canadian payroll teams when it comes to managing payroll data and the payroll calculation process. Much of the work the CPA is doing is to work with the Canadian government to make payroll processes as efficient and effective as possible. The objective is to make legislative reporting efficient and consolidated.

There is work being done with Service Canada, too, around record of employment (ROE) administration. Again, the discussion is to streamline the information provided to the government, and how it can be used by other departments. The overall objective is to lessen complexity.

The Canadian government is supportive of the payroll community. Over the last few years, it has run many initiatives to reduce the paper and administrative burden, and these seem to be helping. Another positive is that, from an administration perspective, the Canada Revenue Agency is the main remittance gatekeeper when it comes to core statutory withholdings.

“This is a double-edged sword,” says Van Alstine. “The fact that efficiency and effectiveness is a mantra we preach and work with government on at both a federal, provincial and territorial level, it is counterbalanced by issues around complexity, like Quebec payrolls and organizations operating within multiple jurisdictions.”

Quebec was not included in the 2017 GPCI, but will be in the next study, pre-empting an expected increase in complexity.

Issues on the horizon

So, what will affect next-generation payroll?

The global economy: Many companies are expanding internationally and this means recruiting and paying people in new countries. This adds complexity where previously payroll departments were running only local payrolls.

Big data and analytics: Big data and analytics are the new organizational gold. Payroll specialists are the bedrock of HR data. They not only have workforce data, they have up-to-date data, compliance data, time-needs data, and complete, real-time data. Payroll is becoming the best enabler for analytics — not only internally, but for regulators as well.

Global regulations and controls: Organizations are now being regulated at a global level. These global regulations are being imposed by multiple regulatory bodies across the globe. It’s similar to the Sarbanes-Oxley regulation in the U.S., which set a precedent and spawned the Japanese SMJ equivalent, for example, so again we’re seeing the emergence of global regulations for HR data that will affect payroll in the local market.

Global view of business: As mentioned earlier, payroll is the bedrock of data, so as businesses grow and expand into new regions, the decision-makers are coming to payroll to get that global data and global view.

Compliance: This is going to become more stringent at the global and local levels, and is being enforced with payroll departments through audits with external bodies coming in and fine-tooth-combing organizations.

Protection of personal information: We’re in a world where everything is electronic. Cyber-crimes are increasing; we’re seeing breaches and hackers wanting to get in as they realize the power of data. Going forward, payroll needs to be even more diligent in the protection of personal employee data.

Anne Clifford is senior director of global payroll operations at NGA Human Resources . For more information on the study, visit my.ngahr.com/payrollcomplexity-2017.


Summary findings for Canada

•Canada sits at 31st in complexity ranking and remains in the bottom 40 per cent.

•65 per cent report managing technical and HR updates as the greatest challenge.

•25 per cent highlight the challenge of regulatory reporting and data analytics.

•63 per cent manage payroll in two or more jurisdictions.

•Canada has the challenges of two governing bodies and two official languages.

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