When it comes to interpreting payroll, the European market can be particularly complex for US-based companies. The 28 member countries of the European Union are unified in some ways, but vary greatly in others.
As small and medium-sized enterprises (SMEs) grow in size and scale, the complexity of their payroll process changes. When it comes to international expansion, organising payroll can become even more challenging due to the vastly different compliance requirements within each market as well as the individual cultural and legal nuances.
For US-based companies, the European market can be particularly complex. Although the 28 member countries of the European Union (EU) are unified in some ways, when it comes to interpreting payroll, they can vary greatly, from how they implement EU directives to government disclosure requirements. Non-EU states such as those in Eastern Europe, Switzerland, and Scandinavia can present unique difficulties of their own, ranging from a lack of electronic reporting to complex national and municipal tax systems
In a function such as payroll, which relies heavily on process, it's easy to forget about the importance of observing cultural sensitivity and the related complexities. But in order to have a successful global impact, it's important that cultural sensitivities are not just observed but fully embraced.
This article looks at six specific major differences and challenges that SMEs from the United States can face when managing payroll in Europe:
Reporting frequency and requirements
Each country in Europe has specific requirements regarding what type of information must be reported and when. In some nations, employers are obliged to keep up-to-date figures and report information to external authorities monthly. In other countries, government reporting is much less of a burden and only required annually.
In 2012 reporting in the United Kingdom was revamped and real-time reporting, known as Real Time Information (RTI), was implemented. It was the single biggest overhaul of the British Pay As You Earn (PAYE) system since its introduction in 1944. Essentially, all UK employers must now notify Her Majesty's Revenue & Customs (HMRC) of their PAYE liability at the same time, or before, they make payments to employees. The process is not as complicated as in some countries because employers are required to report the information to only one source, HMRC, and this is done via the Government Gateway (a centralised online reporting system). Under RTI, reports must be submitted to the government each time the business completes a pay run; failure to comply results in fines...