Many local companies have acknowledged the opportunities that lie beyond the borders of South Africa, expanding their businesses and services into new regions on the continent.
Ripe with opportunities in the mining and retail arenas, among others, many of these ventures are `people` intensive and these companies now face the dilemma of how to handle payroll requirements on a larger, multinational scale.
Peter Ibbotson, Chief Executive Officer of Praxima Africa Payroll Systems (Pty) Ltd, looks at some of the key considerations for these companies in terms of solving this payroll quandary.
"Expanding operations into Africa takes considerable planning, resources and financial investment and setting up a payroll in a foreign country is no simple exercise," he says.
"Although one might initially be inclined to run a payroll from the country that the company has expanded into, detailed administration over a distance in general is problematic. However, it remains a company`s duty to ensure staff are paid correctly and timeously."
There are a few options companies that need to run a multinational payroll should consider. The payroll can either be outsourced or run on an in-house payroll system managed by in-house staff. "The latter is more complicated as staff must not only have a thorough understanding of local tax laws and implications but also have the skills and knowledge needed to manage foreign taxation systems. As tax is never static, this adds further complexity to the issue."
Although in-house payrolls are still popular, the fact remains that a payroll is not the first concern, priority or even the core business of most companies. While in-house payrolls may meet basic payroll requirements, these businesses often remain unaware of the additional benefits that can be obtained when outsourcing the payroll function to specialists.
"It is prudent to look locally when considering the various payroll options," Ibbotson advises. "The complexity of a multinational payroll is reduced when it is outsourced to a single provider as it delivers complete management of the payroll from a central point. In addition, as few South African developed payrolls cater for multiple taxation systems, outsourcing delivers this vital component of a business - that is often overlooked - into the hands of specialists."
The most obvious complexity is the different currencies and taxation systems that apply when running a multinational payroll. However, a rules-based payroll solution is able to cater for any taxation system and currency, according to Ibbotson, and it is not necessary to run a payroll in the country where the company is represented to ensure reporting and governance, he adds.
"Reporting follows rules, driving the case for a rules-based payroll," he says, "and delivery of these reports to the various authorities is as simple as e-mailing them. Outsourced payroll specialists establish contacts with the various tax offices and ensure they are well informed on all issues pertaining to tax."
Another common issue faced by companies expanding into Africa is that they must deal with the needs of expatriates based in African countries. Often, payment is required into a South African bank account as well as into a second account that is held with a locally-based financial institution. This split in salary is to ensure financial commitments in both countries are met as, more often than not, homes are maintained in both countries.
"If exchange controls in the relevant countries allow for split payments - and most do if the correct reporting is provided to exchange control - this is easily managed by an outsourced payroll service, further lessening the burden on the company," says Ibbotson.
"Dealing with a financial institution that is represented in most African countries is advisable. This simplifies the process of payment queries and is easier to manager as the various bank accounts are held with one entity. Tracking payments is easier. For example, one of Praxima`s client`s employees, based in a country north of South Africa, contacted their local office to say that they had not received payment. The problem was resolved within an hour."
Centralising a multinational payroll also offers the benefit of tightly integrated human resources (HR) functionality where this service is offered. "Payroll and HR are intrinsically intertwined and, in most cases, make use of one database. This eliminates repetitive input and also reduces human error," says Ibbotson.
Updating payroll information on one database means the HR systems is automatically updated too. There is much information that is fed from a payroll system to an HR system and vice versa, providing more functionality and promoting efficiency within an organisation. Contracts can be generated from payroll information, while performance appraisals that impact earnings are streamlined with an integrated payroll and HR solution.
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