Introduction

With most companies having an international presence, payroll managers are often tasked with setting up or documenting pay practices to cover multiple locations.

In the first part of How to set up pay practice documentation for multi-country processing  Sharon Tayfield, Operations Director within the Global Payroll Services Senior Management Team at BDO briefly outlined the importance of documenting pay practices to ensure that external service providers and/or local teams have the correct rules to accurately process payrolls.  Sharon looked at the generic rules around pay day, base pay rate and leavers and joiners, as well as working with incomplete time data, where a time recording system is utilised by the organisation, in this article Sharon will delve further into the other factors.

Ensuring that pay practices contain sufficient information to enable external services providers or local teams to process the payrolls accurately requires some basic steps to be followed when it comes to drafting payroll practices. In part two of this article series, Sharon looks closely at such factors as business travel time; company car and car allowances; excess fares and relocation allowances, and various leave options.


How To Set Up Pay Practice Documentation For Multi-Country Processing – Part 2

 

Business Travel Time

Many employers will have some form of policy in place regarding travel especially in light of increasing global mobility. The pay practice should cover the rules around when business travel is considered normal work time and when business travel would not be considered normal work time. It is common practice that should an employee be required to travel on a normal day of rest (normally a Saturday, Sunday or public holiday) they would be entitled to take a subsequent work day as compensatory time off which is termed TOIL (Time off in lieu). Where travel is extended across 2 working days during the employee’s home time zone there should be rules determining whether the employee would be entitled to overtime or TOIL.

The pay practice should have sufficient details, depending on how information is passed to the payroll department or external payroll service provider, to ensure that there would be no doubt as to how to process time recorded as travel time on the payroll.

Company Car and Car Allowances

It is common for employers offering company cars/leased vehicles or car allowances to have special rules in place around eligibility. Country tax legislation covering company cars differs considerably in terms of the value placed on the benefit and the value of private mileage/kilometres which an employee can undertake before additional taxes need to be paid.  The pay practice should, therefore, set out whether the employer will provide any tax assistance for employees in countries where the private mileage/kilometre threshold is lower than other countries.

Employees receiving car allowances generally are not permitted to submit claims for reimbursements but this could vary from country to country so again the pay practice would need to set out the rules to be adopted in that country.

Excess Fares Allowances and relocation allowances

Employers can require employees to change work locations within a country or within a region. The normal rule is that if the new location is within a commutable distance/time) from the employee’s current home location, generally within an hour, then there would be no requirement for any supplementary allowances. However where the distance/time is in excess of the policy then the employee is often compensated with an additional allowance to cover the extra cost. This allowance is often referred to as an excess fares allowance (EFA). If the new location is not within reasonable daily travel, the employee may be granted a relocation allowance or reimbursement of relocation expenses. If an employee does not accept the relocation allowance then the employee may be able to claim an EFA. That offer may be for a limited time period or indefinitely. It is clear to see therefore why the specific rules would need to be communicated to the internal payroll team or the external service provider. The rules would need to set out the employer’s definition of commutable distance/time and also specify the conditions and criteria around the granting of a relocation allowance.

Temporary Additional Hours Supplements and On-call Supplements.

The nature of the employees’ work may require them to occasionally work additional hours or temporary additional hours. Examples of this may be employees providing training where the training necessitates either an earlier start or where for example the employee has an event to host or organise which requires either an early start or late finish.  In the horse racing industry where night races are held, it is not uncommon for employees to receive a special night-time allowance on the occasions when night racing takes place. The temporary additional hours supplement may, therefore, have a broad range of naming conventions.

Employers will generally have very specific rules in place to ensure that a maximum number of hours can be compensated per month. These requirements should be clearly set out in the pay practice material to ensure that employees are not be compensated in excess of the policy.

Where additional allowances are paid the policy should clearly state whether these allowances should be taken into consideration in the calculation of other benefits, for example, whether the allowances should be included in “pensionable” salary or be taken into consideration in determining bonus payments. (This would also apply equally to the other allowances covered above).

Various Leave Options

Leave can be regulated by legislation in different countries and can cover adoption, bereavement, maternity, paternity, sick, holiday and study leave to name but a few different types. The employer may also have their own policies covering a range of different leave types. The pay practices should indicate what the rules are governing the granting of each leave type and what conditions need to be met. Certain employers will reward employees who have a long service history by increasing the leave accrual for certain leave types at specified anniversary dates. This along with the point at which the accrual occurs and the rules around forfeiture needs to be well documented as leave management which often results in queries from employees and therefore ensuring that the allocations are correctly made initially saves time and resources for any payroll team.

Conclusion

The pay practices should as indicated above ensure that both internal payroll departments and/or external service providers have no doubt regarding how employees should be compensated. Any additional allowances should also clearly state whether they should be included in the calculation of other benefits and whether they are to be utilised in determining bonus payments or should be included in leave/holiday pay calculations where this is not specified in local legislation. The area of pay practices and what should be covered in pay practices is vast and as with any aspect of payroll management needs to be implemented correctly to ensure compliance and provide a framework for measuring the accuracy of the payroll.

 

About Sharon Tayfield

Sharon has over 25 years of outsourcing experience and has won Best Payroll Manager awards at the CIPP Awards, GPA Awards and The Rewards Awards in the last 12 months.  She has advised business owners and shareholders in the past, and has led a strong payroll outsourcing team at BDO as well as in her native South Africa.  Sharon is a regular contributor to the GPA covering African legislation and compliance and as well as GPMI publications.