Global Payroll Challenges
December 13, 2016 – HLB 2016 Executive Meeting
Orlando, Florida
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• 25 Year Veteran with HCM Solutions
• Global HCM, Payroll and Time
• CPP and PHR Certifications
• MBA
• Background
• Service, Implementation, Management and Pre Sales
• Solution Architecture & Design
• Business Process Engineering
• Based in the Washington DC Metro Area
Wes Rihani – Global Solution Consultant
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ADP is a Star in the World’s Business Rankings
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# 370 10
Consecutive years
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Biggest Challenges Facing Companies
of executives expect to increase their number of employees abroad1
63% Sources: 1.ADP Global HCM Decision Makers
Survey 2015 2.ADP Research Institute 3.ADP Global HCM Decision Makers
Survey 2015 4.EY Global Payroll Survey, April 2013
of companies who thought they were compliant were fined in 20142
33% Mitigating Risk
average number of MNC Payroll Systems3
33 of companies still manage payroll administration at a local level4
65%
Globalization
Fragmentation Lack of
Expertise
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The Evolution of Work - The Changing Nature of the Global Workplace – 2016
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Focus on Compliance Thompson Reuters Top Compliance Trends 2016
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Payroll in Latin America
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What makes payroll in Latin America so complex?
• The Latin American Region is a mixture of:
o emerging and booming economies,
o Varied political landscape,
o extreme contrasts in business
confidence and fortunes
• Latin America can never be categorized as
one homogenous whole
• But, there are common challenges and
opportunities
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Latin America Payroll Main Challenges
• Compliance requirements:
o Can be complex and difficult to interpret, with frequent
changes Brazil, complex tax structure subject to frequent changes as
governments respond to developing economy
o Detailed paper-based record keeping Colombia, forms for new starters physically have to be taken to the
authorities to be stamped and signed, and copies sent to payroll
Argentina, employers register all employment relationships in a payroll
book which is inspected periodically by the Ministry of Labor.
Mexico, employees must sign their payslips and organizations are
obliged to keep receipts for a minimum of five years as evidence that
payments have been made
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Latin America Payroll Main Challenges
• Compliance requirements:
o Arduous payroll reporting requirements Mexico, CDFI file electronic versions of payslips in XML
format with the authorities
Mexico, social security contributions have to be calculated
twice, once in the payroll before month end, then again at
month end on the Social Security website and a
reconciliation between the two figures carried out
Brazil, the new reporting requirements of eSocial program
o Complex salary calculations Most countries pay a 13th month salary or bonus, and if an
employer fails to pay it, pays an incorrect amount, or is late
in paying, it is often considered a serious offence
o Changes are sometimes ambiguous and little
notice is given to implement them.
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Latin America Payroll Main Challenges
• Many HR administrative requirements have an effect on
payroll:
o onboarding, separation processing, time and leave processing
and records management.
o requirement to sign payslips, complex rules around hiring and
firing in some countries. In Mexico, for example, some organizations choose to make
final/severance payments (“finiquito”) in front of a judge to avoid the risk
of future claims from departing employees
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Latin America Payroll Main Challenges
• Frequent Pay Cycles: Wages are paid weekly, bi-weekly or
monthly - but different laws may mean running even additional
ones…
• Company-specific collective labor agreements (CLAs), need to
respond to changes sometimes at extremely short notice
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ADP Research Institute 2016
Number of Legislative Updates by Country
Americas
Country 2013 2014 2015 2016 up to May
Brazil 3 10 48 15
Canada 5 7 76 47
Mexico 1 76 52
United States 22 14 48 15
Total 30 32 248 129
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Mexico Legislative Compliance Updates
ADP Global Compliance Knowledge Base – Nov 2016
• Legislative update – Mexico – The SHCP Releases the Decree by which the Federation Revenue Act for Fiscal Year 2017 is issued; Effective: 01 January 2017 ( Tue Nov 15 2016)
• Legislative update – Mexico – The SAT Announces that the New Payslip Electronic Invoice Replaces the Annual Informative Declaration; Effective: 01 January 2017 (Fri Nov 11 2016)
• Legislative update – Mexico – IMSS Releases a Tool for Employers to Consult Completed Risk of Work of Employees (Information for ER); Effective: 08 November 2016 (Wed Nov 09 2016)
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Canada Legislative Compliance Updates
ADP Global Compliance Knowledge Base – Nov 2016
• LEGISLATIVE UPDATE – CANADA – CANADA PENSION PLAN RATES FOR 2017 HAVE
BEEN ANNOUNCED; EFFECTIVE 01 JANUARY 2017 (NOV 11 2016)
• LEGISLATIVE UPDATE (HEADS UP) - CANADA – BILL PROPOSED TO ENHANCE THE CANADA PENSION PLAN (CPP); EFFECTIVE UNKNOWN (OCT 25 2016)
• LEGISLATIVE UPDATE (HEADS UP) - CANADA – NEW INCOME TAX FOLIO: BENEFITS
AND ALLOWANCES RECEIVED FROM EMPLOYMENT; EFFECTIVE 06 JULY 2016 (OCT 25 2016)
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Reporting Requirements
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Mexico Reporting & Taxation Requirements
ADP Global Compliance Knowledge Base – Nov 2016
Social Security Mexican Social Security Institute (in Mexico IMSS) is autonomous from federal government which operates the Mexican Social Security benefits. The IMSS is responsible for several payments: retirement by age, invalidity or special retirement; sick leave; accident leave; maternity leaves, etc. • The main office is the IMSS and the sub delegations depend on the fiscal address of each company. • Once the updates are made (starters, leaves, modifications) they are registered in software provided by the IMSS that is called SUA which
determines the payment of each employee every month. • The report that support the IMSS payment is referred to as the .SUA file. The due date for the monthly declarations and payments is the 17th of
the following month referring to the payment. • Pensions are included in the Social Security Reporting • Health Insurance is also included in the Social Security Reporting
Tax Agency
• The federal office is the SAT; each clients administrative office will depend on the fiscal address. • The requested file for a client to make a declaration is generated by software provided by the SAT called DIMM that contains all of the
perceptions information and tax deductions for employee during a year. • Each employer must present a report of wages and withholdings to the SAT. Once the deduction is received and accepted by the SAT, a File
number is provided and the employer will use to generate and deliver the constancies of perceptions and deductions of each employee. • The due date to declare is before the 15 of February of the following year of the declarations
Payroll tax • The State Tax office is the Treasury offices. • The paying format might vary depending on each state within Mexican territory where the employer is located • The due date for declaration/payment varies depending on the income law of each Mexican state
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Mexico Reporting & Taxation Requirements Report Name Local Name
Category - Certificate, Declaration, Report, Registration
Type: Statutory / Non
Frequency Other Comments
Payslip Recibo de Nomina Certificate Statutory Per Cycle Emailed or Paper
Taxes Details: List of all taxes calculated REPORTE DE CALCULO DE IMPUESTOS Report Non Statutory Per Cycle Used to make payments to Social Security and tax authority
Payroll Report - List of employee wages and calculations REPORTE DE CALCULO DE NOMINA Report Statutory Per Cycle Hard copy required to be saved by the employer
Payroll Report - List of employee wages and calculations REPORTE DE CALCULO DE NOMINA Report Statutory Annual Hard copy required to be saved by the employer
SUA Payee Load Interface: reports that enables the client to make payments to SUA (Social Security)
Sistema Único de Autodeterminación - Cédula de Determinación de Cuotas Report Statutory Monthly Produced from the SUA
Statutory declaration SUA (Pagos al IMSS) Declaration Statutory Monthly Social Security Return- Monthly payment to the IMSS -
End of year comulative report REPORTE ANUAL POR CONEPTO Report Statutory Annual
Statutory declaration Determinacion del Impuesto Local sobre Nomina Declaration Statutory Monthly
Local Payroll tax - Monthly payment to the treasuries of the states
Statutory declaration Cálculo de riesgo de trabajo (IMSS) Declaration Statutory Annual Labor Risk Return- Calculation of risk of accidents to be reported to IMSS
Annual Declartion of Wanges Declaración anual de Sueldos y Salarios Declaration Statutory Annual
Annual declaration of Wages and Income Tax Witholdings - Provided by the Statutory Body
Profit Sharing Report Reparto de Utilidades (PTU) Report Statutory Annual
Profit share per employees- Lists per employee the total profit sharing they are entitled to
IMSS Confirmation Confirmaciones del IMSS Report Statutory By Occurance IMSS Confirmations received of Starters, Leavers and Changes of Salary
SAT Declaration Statutory Annual
Due Feb 15th, Clients must send the receipts of the payments to SAT for reconciliation.
SAT Declaration Statutory Annual Annual declaration certificates to employees
ADP Global Compliance Knowledge Base – Nov 2016
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Canada Reporting and Taxation Requirements
Social Security Not applicable in Canada
Pension Employers must track pension deductions remit premiums (employer and employee)
Tax Agency Clients must execute Canada Revenue Agency Business Consent Form and Ministry of Revenue for Quebec ; calculate payroll tax liabilities and make deposits to applicable agencies in accordance with the Electronic Tax Payment System, as applicable. They will prepare/submit all returns and reconciliation reports as required by the tax agencies within the jurisdictions applicable.
Health Insurance Employers must track employee health deductions remit premiums (employer and
employee);
ADP Global Compliance Knowledge Base – Nov 2016
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Canada Reporting and Taxation Requirements Category Form / Report Name Description of the Form Responsibility of Report
Preparation, fully by ER or EE or
both (e.g. EE requires to sign)?
Responsibility of Report Filing Filing Frequency Monthly /
Annually / Adhoc Who Files, ER or EE? To Whom, Gov or EE?
Taxation
Tax PD7A- Remittance Form
Statement of Account for Current
Source Deductions
Form used for employers to remit Canada Pension Plan (CPP)
contributions, employment insurance (EI) premiums, and income tax
deductions
ER ER Canada Revenue Agency
(CRA)
Depends on remitter type (e.g.
quarterly, monthly, twice
monthly, etc.)
Tax RC1- Request for a Business
Number (BN)
The first step in registering a company in Canada is applying for a Business
Number (BN), if required. The BN is a numbering system that streamlines
how businesses deal with the federal government for tax, statutory benefits,
and other matters.
ER ER Canada Revenue Agency
(CRA)
Adhoc
Tax and Social
Security
RC1B- Business Number - Payroll
Account Information
Companies must register for a payroll program account if they:
• Pay salaries or wages;
• Pay tips or gratuities;
• Pay bonuses or vacation pay;
• Provide benefits or allowances to employees; or
• Need to report, deduct and remit amounts from other types of
remuneration (such as pension or superannuation).
ER ER Canada Revenue Agency
(CRA)
Adhoc
Tax RC59- Business Consent A business owner, partner, director, trustee, or officer of a business can
authorize representatives, including employees, an accountant, a
bookkeeper, a lawyer, a payroll provider, or a firm, to act on the employer’s
behalf using this form.
ER ER Canada Revenue Agency
(CRA)
Adhoc
Tax T2200- Declaration of Conditions
of Employment
If an employer reimburses or provides an allowance to employees to offset
the cost of tools that they need for their job or the employer pays for their
tools, the amount of the payment is a taxable benefit and should be
included in the employees' income.
ER The employee does not
have to file the form with
his or her income tax and
benefit return, but has to
keep it
N/A Adhoc
Tax T4- Statement of Remuneration
Paid
Annual Statement of Remuneration Paid- The T4 slip summarizes an
employee's remuneration paid and statutory deductions withheld for a
given taxation year.
ER ER Canada Revenue Agency
(CRA) and a copy to the
EE
Annually
Tax T4A- Statement of Pension,
Retirement, Annuity, and Other
Income
Annual statement of pensions, lump-sum payments, annuities, or other
income
ER ER Canada Revenue Agency
(CRA) and a copy to the
EE
Annually
Tax T4ASUM Summary of Pension,
Retirement Annuity, and other
income
Summary of T4A slips ER ER Canada Revenue Agency
(CRA)
Annually
Tax T4SUM- Summary of
Remuneration Paid
Summary of T4 slips ER ER Canada Revenue Agency
(CRA)
Annually
Tax TD1- Personal Tax Credits Return Federal Personal Tax Credits Return Form EE EE ER Adhoc
Tax TD1 by state - State Personal
Tax Credits Return
Individual State Personal Tax Credits Return Form EE EE ER Adhoc
Tax TD1X- Statement of Commission
Income and Expenses for Payroll
Tax Deductions
Employees who are paid commissions and who incur expenses that are
not reimbursed by the company may be entitled to personal tax deductions
when they complete their personal tax return each year.
EE EE ER Adhoc
ADP Global Compliance Knowledge Base – Nov 2016
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ADP Global Payroll Solutions
Global Payroll Services, Legislative Support, Filing and Compliance
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Mexico
Argentina
Brazil
Chile
Peru
ADP Global Solutions in Latin America
Argentina
Brazil
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Brazil
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Streamline Clients in Latin America
Streamline Partnerships
+1200
Some of our Ambassador Clients…
+300
+300
+100
+100
+100
employees processed
+140 000
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