Canada 31st in payroll complexity: Survey
Canada ranks in the bottom 40 per cent when it comes to the complexity of doing payroll, says a new report measuring the intricacies of payroll in 48 countries.
The Global Payroll Complexity Index 2017, prepared by HR and payroll solutions provider NGA Human Resources, gave Canada an average complexity score of 5.07 out of 10, below the global average of 5.54. That placed Canada at number 31 on the list.
The country with the most complex payroll was France, with a score of 7.59, followed by Italy at 7.56. Malaysia had the least complex payroll of the countries measured, scoring 1.18 on the scale. The United States ranked 18th, with a score of 5.78.
The results are based on a survey of about 3,000 global HR and payroll professionals and experts, as well as interviews with industry stakeholders. NGA Human Resources conducted its research in collaboration with six payroll associations, including the Canadian Payroll Association (CPA). The survey is the third one the company has prepared on global payroll complexity, with its last report published in 2014.
To measure complexity, the survey looked at factors such as managing payroll data, payroll parameters, payroll calculations, government reporting and geographical influences.
Payroll data takes into account the types of data fields necessary to accurately pay employees, including employee name, tax code, pay scale, bank account number, employment status, and employment type (blue-collar, white-collar, student, seasonal).
The survey found that countries in Western Europe had the highest complexity for managing payroll data, with the largest number of different employment types. By contrast, Canada was one of the countries where payroll data was easier to manage.
Payroll parameters refers to data fields needed to determine an employee’s net pay, such as benefits, overtime, leaves, and statutory deductions. Italy and France ranked the highest in terms of complexity, needing to use a greater than average number of payroll fields to calculate net pay. Canada and Switzerland were at the bottom of the scale.
Canada also ranked near the bottom for complexity of payroll calculations, which looked at factors such as the number of payroll runs in a month, retroactive calculations, and the number of legal or HR-related updates to implement in a year. Once again, France and Italy came out as the most complex.
For government reporting, Canada ranked last, making it the least complex country in the survey in which to report payroll data to government. To determine complexity, the survey focused on factors such as reporting frequency, what needs to be reported, and the difficulty in preparing the reports. Italy and France again took the top spots for complexity.
Geographical influences refer to each country’s and employer’s own cultural and regulatory factors, as well as union agreements that affect payroll. Here, Italy, Belgium and France were the most complex, while Canada ranked in the bottom five. Canada and the United States, however, did report a higher than average complexity for running a payroll in another currency.
While Canada placed in the bottom half of the complexity rankings, Anne Clifford, global payroll senior director at NGA Human Resources, said the results do not mean that payroll here is simple to do.
In a recent webinar held to release the results, she said it is important to remember that the report positions countries relative to each other, but it does not say that payroll is not complex in countries that score lower.
Steven Van Alstine, vice-president, education at the CPA, said he was surprised by the results, especially because Canada ranked closer to the middle in the 2014 survey, placing 16th of 35 countries studied.
He said the 2017 results could partially reflect the fact that more countries were included or that changes in government requirements here have helped to reduce payroll complexity.
“A big part of (the CPA’s) mission is payroll leadership through advocacy and education, so working with government and providing them with the feedback that we do, we make legislation more effective and more efficient for both government and for us,” he said. “We changed the (remitting) threshold, which makes the necessity to do more frequent remittances for smaller employers less of an obligation. That obviously reduces complexity.”
Van Alstine said it is also possible that the weight NGA Human Resources gave to the measures explored in the survey could have had an impact on Canada’s placement.
“It really depends on what is being looked at in terms of complexity. We know that in Canada if you have a payroll where you are dealing with all provincial jurisdictions and territories, there are 200 legislative and regulatory requirements that can be tied to payroll,” he said.
“Unfortunately, that wasn’t as big on the measure in terms of how many different pieces of legislation and regulation you deal with. Those were the kinds of things that we were trying to get them to explore because payroll is not always necessarily responsible for all of those aspects in all of these different countries.”
He also said he wonders if the results would have been different if the survey in Canada had been in both English and French.
“We did send the survey out to our membership, but we were not able to send it to our French members because it was an English-only survey,” he said.
With Quebec having its own tax system, separate public pension plan and its own parental insurance plan, Van Alstine said employers with Quebec payrolls face challenges ensuring that they are complying with all of the requirements for both the federal and Quebec governments.
“You add Quebec into the mix and there is a requirement to make remittances to two levels of government,” he said. “I think we all know that adding Quebec payrolls to the situation does definitely make it more complicated, so I think we would have seen the rankings change had that been the case.”
Besides Quebec, Van Alstine said the number of payroll-related rules in Canada make payroll complex here, regardless of how the country placed on the index, especially for employers with employees working in a number of provinces/territories.
“The volume of legislation is the biggest factor and the myriad of different pieces of legislation that touch on payroll and the fact that it is the most legislatively dynamic area in an organization. When you think about accounting requirements and finance requirements, those are relatively static, but payroll is often changing and is fairly dynamic.”
The report also identified market and HR industry influences affecting payroll complexity. They include a global economy and cross-border payrolls, the use of big data and analytics in payroll, the replacement of payroll legacy systems with integrated HR and payroll cloud-based solutions, and legislative requirements to protect employees’ personal information.
Van Alstine said these influences are at play in Canada, with larger organizations focusing on leveraging big data, employers using cloud-based technology to integrate HR, payroll and time and attendance systems, as well as laws that mandate what information employers may collect from employees and with whom they can share it.
He added that the trend of cross-border payroll is affecting Canada, especially in relation to the United States.
“We have seen not just a migration of payroll from Canada to the United States for those that have parent organizations in the U.S., but we have also seen the reverse... Organizations are looking for efficiencies in administration of payroll and they are looking to move the payroll to where, for them, it makes more sense.”
The report says all of these influences are changing the nature of payroll from a largely administrative function to a vital part of an organization’s business.
“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,” said Clifford.
To help their employers succeed, Van Alstine said it is essential for payroll professionals to stay on top of legislative changes and for payroll managers to keep abreast of what is happening in the larger business environment.
