Shifting Payroll Rules Make Employee Data A Priority

As payroll joins the high-tech stratosphere populated by other business processes, corporations are beginning to shift their approaches to this area. Businesses continue to focus on areas like compliance in their payroll dealings, but with automated and digital payroll solutions gaining traction in the enterprise, compliance has become ever more challenging.

Analysis from Bloomberg BNA in its “2017 Outlook — International Payroll” report released just before the new year suggests data protection has become a paramount concern for payroll managers.

And as payroll technology continues to evolve, corporates around the globe are struggling to keep up in varying markets faced with unique changes. Bloomberg BNA highlighted Australia, Brazil, India, the U.K. and South Africa as some markets particularly fixated on these payroll developments.

Data Security

“Countries are coming out with more stringent regulations around use of personal data and where it can be located and for what purposes,” explained Kira Rubiano, partner at global payroll service firm Celergo LLC, in an interview with Bloomberg BNA for the report.

One of these regulations is the Privacy Shield agreement, which regulates how data is moved between the EU and U.S. and requires employees to give explicit permission for their data to be shared and used. But those rules are up for review this year, the report warned, meaning companies in these jurisdictions may yet again face changes to data security requirements.

Amid these regulatory changes, employers are also tasked with keeping up with the pace of payroll innovation. Luckily, Bloomberg BNA noted, more sophisticated technology can help businesses remain compliant with data security requirements.

At the same time, analysts note that the population of payroll service providers is increasing. More rigorous competition is helping to propel the payroll services industry as a whole into a higher standard of data security and overall service. There are risks associated with this trend, however.

“The maturation of the global payroll services market will continue to increase service standards in 2017,” the report predicted, “but it will also present new and different types of challenges for those seeing to use a global payroll provider.” The relationships between payroll service providers across borders — key to servicing companies with international payroll needs — leads to what Julie Fernandez, partner at enterprise services firm ISG, describes as “confusing messages on partnership relationships.” With the speed at which payroll technology is evolving, sorting out these relationships will be critical to ensuring that payroll continues to grow more efficient and complies with data protection rules.

Geographic Focuses

There are five markets in particular that demonstrate these changes in the payroll industry, the report concluded: the U.K., India, South Africa, Brazil and Australia.

In the U.K., a new payroll tax, the Apprenticeship Levy, will come into effect in April. Businesses with payroll valued at more than $3.67 million will need to pay a 0.5 percent payroll tax, the funds from which will go towards the development of a government apprenticeship program. According to the report, the new rules have been met with confusion among the payroll community — suggesting governments may need to play a more prominent role in helping employers and payroll service providers understand and implement changing payroll regulations.

India, meanwhile, is dealing with its own governmental moves impacting the payroll space. Recent demonetization efforts and a persistent shift towards a cashless economy mean employers may no longer be able to pay employees in cash. According to Bloomberg BNA, thoough, digital payroll means employees are compensated appropriately, and the data from those wages can be more adequately tracked.

South Africa is in the midst of adopting its first national minimum wage, with proposals for such legislation potentially impacting more than 47 percent of the nation’s workforce, reports said. At present, there are minimum wages set for various industries, but South Africa lacks a nationwide requirement. Adoption of a minimum wage would mean changes in how payroll service providers and employers calculate overtime, the report noted — again, presenting an opportunity for digital payroll solutions to ease employers’ compliance efforts.

Brazil has developed an eSocial system aimed at streamlining the process of reporting and collecting data on employees related to payroll and taxes. Full adoption of the system remains in progress, with the government recently pushing back the timeline to 2018 for full adoption. That means, this year, employers and their payroll service providers have to gear up to meet the data collection requirements as the government aims to boost transparency in taxing and auditing, as well as boost the availability of employee payroll information by the labor department. The initiative, Bloomberg BNA noted, has brought some uncertainty among the corporate and payroll communities as to the appropriate level of employee data that should be made available to the government.

And finally, Australia only has a few months until its employers must implement an electronic, real-time tax reporting and payment tool. The Single Touch Payroll system will require employees to file a digital report of payroll information through a government portal.

Across jurisdictions, governments are introducing new, and oftentimes more complex, regulations impacting payroll. But across these markets is a commonality: the shift towards digital payroll solutions with an eye on payroll data. It’s a trend Bloomberg BNA said will carry through 2017 and beyond and introduce new discussions over data security, employee protection and payroll technology innovation.