Johannesburg, 14 Dec 2016
Africa's economy is on the rise. According to the World Economic Forum, Africa is set to become the world's second-fastest growing region after Asia between now and 2020. Factors such as rapid urbanisation, technological advances and a young population hungry for work are driving this growth and creating a wealth of opportunities. As such, multi-nationals looking to expand their operations in pursuit of new business have Africa firmly in their sights.
Expansion is an exciting, yet challenging time for any business. There are many new and unfamiliar laws and regulations to navigate when expanding into a new country, as well as local customs and traditions to respect. Typically, a company will send out trusted employees from its head office and to help set up the new office as quickly as possible. This can present some complicated payroll issues which could result in unhappy employees if not managed carefully. What's more, complex payroll calculations can cause mistakes that may result in noncompliance which can have legal ramifications.
You need to ensure that your expat employee salaries are unaffected by a transfer to a foreign office, and that your company stays compliant across all its African operations. To help you achieve this, here are three very common global payroll problems - and how to overcome them.
Local legislation
Africa is a continent of 54 countries each with its own set of laws and tax regulations. What's more, the correct local legislative guidance and information may not be readily available or up-to-date in each country. When this is the case, companies might default to the information they already have at hand, simply to speed the process up. This could lead to severe penalties and delay your new office's establishment even further.
Once all the correct information has been obtained, your company needs to make sure that it fully understands, and follows, each letter of the law. Any interpretative issues, whether of opinion or language, will cause problems with local authorities.
Salary calculations
Global payroll managers have to pay attention to tax equalisation and make sure that their expat employees are not 'short-changed' by all the host country's tax and social security deductions. It's absolutely vital that they gross up the correct pay in their home country currency as no employee should ever 'earn less' when working overseas.
Many companies still manage complex gross up calculations manually. They use time consuming iterative calculations on excel spreadsheets to eventually get the result they're looking for. An automated global payroll system can reduce the risk of human error and calculate the correct numbers much faster.
Multiple locations
Should an expat employee move from one office to another in the middle of a tax year, say from Maputo to Lusaka, the compliance challenge becomes even more pronounced. All expat employees have to be compliant in their home and host country. As the various locations multiply, the legislative and regulatory requirements increase too. All personal and company statutory declarations and submissions need to be made in each location. It can be quite complex to work out correctly as global payroll will now have to calculate the legislative implications of one home country and two host countries, provide the necessary tax certificates and payslips and ensure that the employee's earnings remain unaffected.
It can be challenging to manage global payroll in Africa, but with the right technology and support it can be done with ease. Before you send your employees to work in your new African offices, make sure you know what each country's legislative and tax requirements are. With a reliable system in place to help you ensure compliance, HR and payroll issues won't impede your company's successful growth across the continent.
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