TMF Group report compares legislative complexity in HR & payroll
TMF Group’s latest sub-report assesses the impact of developments in HR and payroll legislation across the globe. HR & Payroll: Navigating Complex Requirements in Turbulent Times ranks 77 countries from the most complex to the least complex jurisdiction.
“So, for colleagues in human resources, it provides essential insight into the key trends that affect their cross-border business and its approach to workforce management and payroll compliance,” says Michelle Solomon, Head of HR and Payroll Services, TMF Australia.
The data is sourced from TMF Group’s Global Business Complexity Index (GBCI) that identifies the most – and least – challenging jurisdictions around the world for doing business. The HR & Payroll paper is one of three sub-reports, the other two: Accounting & Tax, and; Rules, Regulations and Penalties.
Solomon says the HR & Payroll report focuses on:
- Hiring and terminating employees
- The ongoing management of HR and payroll
- The relationship between international workforces and local rules
- Technology as an enabler for both employers and employees
“For businesses, complexity in these areas is ultimately about a jurisdiction’s approach to the relationship between employer, employee, and government,” she says.
Solomon says, from the perspective of a business looking to expand into a new market, an ideal ranking is at the lower end of the spectrum. These locations have human resources and payroll management regulations that are generally more favourable for employers.
“These are less complex jurisdictions characterised by an openness to businesses, with a legislative environment that encourages foreign direct investment – such as favourable subsidies for new multinational firms looking to set up there,” says Solomon
“Requirements surrounding foreign ownership are also often less strict than in other places,” she adds.
Australia ranks as the 21st most complex jurisdiction for HR and payroll management in the 2020 report.
“While it’s not at the very top of the ranking, this positioning suggests that the level of complexity around managing human resources and payroll in Australia is certainly above average,” says Solomon
“In Australia’s case, our research found that terminating employment can be more of a challenge for businesses: factors such as an employee’s contract type and length of service have to be taken into consideration, a reason has to be cited for terminating employment, and there are formal processes in place that allow individuals to challenge dismissal,” says Solomon.
In Australia, there is also a greater emphasis on employer obligations to ensure the employee entitlements are maintained. Recently, annualised salary arrangements oblige employers in Australia to have a method of tracking hours worked and to perform a yearly reconciliation of hours worked, including a review of hours when an employee leaves their job.
“As far as payroll is concerned, mandatory reporting requirements tend to be more comprehensive and more frequent in Australia when compared with other jurisdictions,” says Solomon.
She also says the hiring of overseas workers is more restrictive in Australia because of criteria regarding a worker’s country of origin, level of skill and current salary.
She adds that businesses are also required to report information on employee bonuses and disclose details of non-Australian employees working for a company.
“Finally, benefits that companies are legally required to offer to both permanent and temporary workers are more numerous in Australia,” says Solomon.
TMF Australia’s Head of HR and Payroll Services says there are several unique aspects to the Australian HR and payroll.
“When we look at the demographics of Australians, we can see Australia has an aging population. Funding of employee retirement is now very important,” she says.
“Superannuation (mandatory retirement savings) is calculated and paid via the payroll. The superannuation industry is heavily regulated, with legislation in favour of the employee to protect their retirement savings. Superannuation funds are also under high scrutiny as to the fees and charges they apply as well as how the money is invested,” says Solomon.
Superannuation is currently set at 9.5% of employees’ Ordinary Time Earnings (most work hours bar overtime). The government says a decision on whether to increase this percentage to 10% will be made in its May 2021 Budget.
“There are many strategies the Australian government has put in place to secure the prevention and protection of non-payments, including strict deadlines in which payments need to be lodged and penalties to the employer for late payments” says Solomon.
“Company directors become personally liable for the unpaid amounts and this can result in legal proceedings against them,” she says.
Despite ranking at 55th place in this HRP sub-report, Solomon says the administration of HR and payroll in New Zealand has much in common with Australia.
“Australia and New Zealand have similar labour laws which are quite strict in terms of minimum entitlements and employer obligations. Both countries go to great lengths to protect and prevent employees being taken advantage of.”
Solomon says New Zealand also has specific legislation regarding maximum hours of work, minimum leave entitlements, workplace behaviour, ending employment and resolving employment disputes.
She says it’s even quite common to see Australian and New Zealand payroll practitioners processing each country’s payroll!
“Both countries are involved in real time reporting with the ATO (Australian Tax Office) and IRD (Inland Revenue Department) and have similar regulations regarding their retirement saving scheme, referred to as “KiwiSaver” in New Zealand,” says Solomon.
Interested to know more about how the rest of the jurisdictions measure up and why? Click here to download and view the full report or speak to an expert directly.
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