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Asia-PacificFeature

Payroll in APAC Region Is Unique, Complex, Varied

By David Barak

What has 11 time zones, 10 languages, and almost 60% of the world’s population?

Just when you thought your global payroll processing couldn’t get more complex, imagine your company deciding to expand into the Asia-Pacific (APAC) market—a dynamic, fast-growing region with three of the world’s top economies.

With powerful business hubs such as Singapore, Hong Kong, and Shanghai, tapping into this market makes solid business sense. Yet, country-level data privacy legislation, cultural sensitivities, and requirements for post-payroll activities necessitate unique infrastructure and specific regional knowledge. 

Western enterprises often approach APAC with processes similar to their existing payroll procedures. However, several key differentiators in this market cannot be ignored.

Two Major Differences Working Within APAC

First, gaining access to a single view of complete workforce data can be a challenge. Some countries in the region are hyper-connected—such as South Korea and Japan—and internet connectivity and reliable technology devices are predictable. In emerging countries such as Indonesia and Cambodia, companies might be relying on in-house payroll applications—not because they want to but because uneven technology is the daily norm.

Second, treasury services across the APAC region can add challenges. Currency conversions can be complicated, banking times vary, and certain countries place additional regulations on foreign currencies. Added to the mix are fines and penalties for late submissions—even if it’s by a few minutes.

India, with 29 states, and China, with 26 provinces, are good examples of complex legislative landscapes that validate why APAC payroll expertise is required. The APAC region has “last mile” post-payroll activities, including lodgment, filing, payments, and funding (read more about “last mile” global payroll). Going back to our example of India and China, the degree of variance from the mode of submission to the filing deadline is not only different per country but also from state to state and from one municipality to another.

KPIs Differ in APAC

Right about now you’re probably shaking your head, wondering how you and your team are going to ensure payroll efficiency across this multinational region, even one step at a time. It’s true that the key performance indicators (KPIs) needed to measure strategic, financial, and operational performance in APAC are different. It’s why many companies are opting to incorporate new, more efficient metrics mentioned in CloudPay’s Payroll Efficiency Index report. Among these metrics are first-time approvals, data input issues, issues per 1,000 payslips, payroll calendar length, and supplemental impact.

Let’s look at the three locales mentioned earlier: Singapore, Hong Kong, and Shanghai, plus two others, Korea and the Philippines.

These major financial hubs have sophisticated, well-defined labor laws. For example, Singapore requires new hires to be paid no later than the seventh of the following month. Similarly, Hong Kong requires new hires to be paid within seven days of the current payroll cycle. Shanghai represents more dynamic challenges associated with frequent legislative changes, making data input more error prone.

Higher error rates aren’t acceptable; however, some aspects of payroll processing across the region have become the de facto norm. Hong Kong’s payroll has early cut-off dates for initial input, resulting in the likelihood of changes or corrections. In Singapore, the supplemental “leavers run” ensures that leavers are paid within the required seven days of their last working day. Singapore also requires itemized pay slips to be issued to all employees, including details of employment such as date of payment, basic salary amount, deductions made, and net monthly salary.

Another example of this fast-growing region is South Korea, one of the top economic success stories in the APAC region. Now the fourth-largest economy in Asia by GDP, it has enjoyed huge success and expansion in recent decades. It’s also one of the most competitive markets in the region, one where being efficient and organized is valued. Upon the hiring of a new employee, whether in country or expat, companies operating in South Korea need to have that employee registered by mid-month of the first payroll period. Information on the employee should include details of the employment contract, resident registration number, and the official start date. Conversely, termination notices must be served 30 days in advance by the employer. Alternatively, 30 days of pay in lieu of notice can be paid instead.

With around 110 million people, the Philippines has the 13th largest population in the world, spread across more than 7,500 islands in the western Pacific Ocean. Doing business in the Philippines places extraordinary emphasis on interpersonal relationships. On a more practical level, the administrative procedures of setting up operations in the Philippines can be a long, drawn out affair. All payments must be made from in-country bank accounts. However, companies that use a third-party global payroll solution are not required to set up in-country bank accounts. The Philippines also has a complex system regarding payment on public holidays, and minimum wages in the Philippines vary between different regions.

Emerging Alternative Methods of Payment

If your head is spinning by now, that’s also normal. This large, diverse region is fraught with challenges and payroll idiosyncrasies. It’s also one of the most enlivening opportunities for global expansion, with a talented workforce that adopts disruptive technologies and drives innovation. That said, the cost and impact of supplemental runs due to inefficiencies can add up quickly. Understanding the volume of payroll runs affected is the first step toward minimizing negative impacts.

Going forward, I predict this is the region that will move quickly toward alternative methods of payment. These will include e-wallets and cryptocurrency—using smartphones the way pay slips were once distributed. Either way, relying on in-house payroll across APAC may not be realistic. It’s a region where automated global payroll processing is best left to the experts.

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DavidBarak

David Barak is the Senior Vice President of Strategic Alliances & Marketing at global payroll provider CloudPay. In this role, Barak leads a team focused on communication, brand strategy, HCM ecosystem partnerships, and HCM integrations.