Finance vs HR Payroll Responsibility—Which department should payroll be assigned to?

Recently we mentioned a local HR Manager who is conducting a feasibility study on finance vs HR processing the payroll and we promised you guidance on this sensitive subject. If you missed that article you can read it here

Although the base objective of payroll is to ensure that employees receive salaries/wages timeously, many functions form part of the processing. These can include:

  • Employee data, records and regular updates
  • Onboarding new employees
  • Salary/wage calculation per employee according to work contract
  • Local Labour Law and legislation compliance – knowing the laws and applying them
  • Variable calculations like bonuses, overtime worked, medical obligations, in-country taxes, savings schemes, loan repayments, expense claims, time and attendance, etc.
  • Stringent record keeping of pay-related matters e.g. leave management, gratuity/pension accruals, taxes (if applicable), medical insurance, Visa and passport renewal dates, attendance records, bank records, etc.
  • Generation of payments
  • End-of-service benefit estimates
  • Many reports e.g. auditing, accounting, financial, management, legislative payments and requirements, etc.
  • Analysis – comparative and individual – per department, across departments
  • Disbursement of earnings

You can add to this extensive list…

When one looks at the draft of every item required, it becomes apparent that not one department can be responsible for it all. Understandably, new business start-ups initially ‘do it all’ and it is normally the business founder that carries the load. However, the moment the business starts to scale up, or for larger businesses, it is necessary to allocate the tasks.

This is the point that OPS asks the question: “Is Finance or HR responsible for payroll?”

OPS recommend that both departments are accountable for various portions. In addition, they will require input and/or assistance from other business associates and divisions e.g. IT, C Suite management, line managers, etc. and vice versa – other departments and colleagues will require input from payroll, HR, Finance.

A ‘split’ that separates the functions into independent task forces that have minimal contact with each other, is counterproductive. Disastrous in fact.

What should you do if there is antagonism in your organisation over payroll responsibility? OPS suggest the following steps:

  1. Payroll, HR, finance, IT and related stakeholders make a decision to focus on two common objectives:
    • Employees paid on time and accurately
    • Constant improvement of company processes and cost efficiencies
  2. Discuss the various processes required to achieve these goals
  3. Strategise who is responsible for each portion
  4. Align your processes to work together
  5. Meet regularly to review what is working and what needs adjusting (we suggest a minimum monthly meeting after payroll has run)
  6. Collaborate to bring your company ever closer to the goals you are aiming at – don’t play the ‘blame game’

Still not sure how to resolve your (unique) issues? Need some advice? Contact us

Payroll Treasury—What is it and what are the advantages?

Companies with payroll disbursements in more than one country face many risks like salary payments being on time, secure and compliant. There is a solution – Payroll Treasury Services.

 

What is a payroll treasury service?

How www.dictionary.com describes ‘treasury’, really sums it up: “treasury[trezh-uh-ree] noun, plural treasuries. A place where the funds of the government, of a corporation, or the like are deposited, kept and disbursed.”

A Payroll Treasury Service allows a company to make a single currency payment into a treasury account, normally in a ‘foreign’ country/ies. Their elected payroll provider is then responsible for disbursing the net employee salaries from the treasury account. In some instances where country laws permit, these payments can include statutory and third-party payments. The disbursement can include multiple currencies, multiple country payments.

What are the advantages of the service?

Over the years, OPS have found that Clients have benefited from the Payroll Treasury Service in many areas, including:

1. Time efficiency

Outsourced services like treasury payments are about freeing up the Client’s time. This enables them to spend time on other value-added activities.

2. Cost cuts

Due to the volume of transactions and amount of payroll payments that OPS make, we have been able to negotiate better than market rates for exchange rates and transaction fees. These benefits are passed on in full to our customers and/or their employees.

3. Error reduction

OPS’ automated processes are well established, meaning there is less likelihood of error.

4. Audit trail

Payroll Treasury Services are available for audit. A record of all transactions is maintained as they occur, meaning a statement of account on the Client’s account, including treasury transactions, is available at any time. An added advantage of the audit trail is Anti Money Laundering compliance.

5. Part of comprehensive service

The Payroll Treasury Service is part of an end-to-end service that OPS offer from the time of joining to termination, incorporating all payroll processing and payments and the maintenance of HR records.

6. Payroll specialists

Knowledgeable, experienced staff processing salaries e.g. if a salary does not reach an employee’s bank account, OPS establishes the reason for the non-delivery and corrects; staff paid on time; planning a Client-centric calendar; working around multiple time zones and public holidays etc.

7. Confidentiality

With the total payroll payment being made in a single fund transfer, there is less likelihood of employees viewing other staff remuneration packages across the company unless authorised by the company to do so.

Outsourced Payroll Solutions (OPS) were established in January 2008, and work in partnership with our Clients to develop, implement and manage an end-to-end, cloud-based payroll management solution across the Middle East. If you want to know more about our Payroll Treasury Services, please contact us.

Expat Tax for South Africans

With effect March 2019, the South African Government is planning to change the taxation laws for ‘tax residents’ living and earning outside of South Africa.

For the past 16 years, South African law stated that if a ‘tax resident’ is working abroad for more than 183 days a year and 60 days of those are consecutive, they do not have to pay income tax in their home country.

Currently, changes to this ‘tax exemption law’ are being proposed by the National Treasury.

In short, these draft amendments include:

  • Date of implementation – 01 March 2019
  • If tax is being paid in a foreign country where they are working, the South African will continue to abide by the tax law submissions of that country
  • Submission of tax returns in South Africa, disclosing all monies earned abroad and what taxes have been paid, will be mandatory whether or not they are currently paying tax where they are employed
  • The currency earned will be converted to South African Rand (ZAR), and the tax due on the salary will be calculated against the South African Revenue Service (SARS) tax tables
  • If the resident is paying tax in the country they are residing, the tax difference paid there will be deducted off the percentage owed in South Africa
  • If, as in the case in the UAE and many Gulf states, the salary is not taxable, the full % tax as stated by SARS, will be applicable
  • The tax returns will apply to all South African permanent residents and citizens, however long they have worked abroad
  • SARS will not entertain tax relief/deductions for expenses like other taxes paid; property rental; flights to and from South Africa; children’s education; transport and living costs etc.

The biggest concern that the majority of South Africans living in the UAE or Gulf states have, is that their salary is based on local living costs. Between what they earn in the region and the South African Rand conversion, it is just not comparable. This independent report on cost of living Dubai vs Johannesburg gives an example: Expatistan

Our suggestion is that the HR Department invites an expert into the Company to present the situation as it is now and what is likely to happen. Invite all South Africans on staff to attend, be informed and ask questions around their concerns. Please email us if you need a referral to a consultant.

Extra reading:

Tax Consulting South Africa

Moneyweb

International Adviser

3 Payroll Pain Points—and what to do about them

15 August 2017

“When we sit with Payroll and HR Professionals, there are many situations that cause them incredible stress. Individuals and departments are overloaded, exhausted and motivation is low. They barely get through daily ‘admin loads’, which stops them focusing on innovative and creative ways to improve efficiencies etc.” – Outsourced Payroll Solutions

It is an exhaustive list, so OPS have reviewed the top 3 pain points:

Keeping to agreed payroll calendar deadlines: this is excrutiating. A calendar is agreed months in advance, but submissions like monthly variables etc., are given through late. The impact to employees being paid on time and the accuracy of payments and management reports is compromised.

Suggestions:

  1. If a comprehensive calendar has not been circulated previously, compile one for a minimum of 6 months in advance. Consider several factors eg salary payment date as the ‘goal’; whether a payment date falls on a weekend and needs adjusting; plot in public holidays (add global dates if other countries’ input affects payroll); all data required; which department/person is responsible for submitting that data etc. Consider a face-to-face meeting to discuss the schedule and consequences of deadlines not being met. Month 1: test results and adjust calendar. Month 2: the calendar must be followed. If any person does not submit according to deadline, email ‘offender’ after the cut-off date, and advise them that necessary adjustments will be made in the following payroll run. Do not issue this as an idle threat, follow through.
  2. Warning – brace yourself as this may seem brutal! If a calendar is already in place but not being followed, take action. One month prior to taking this action remind relevant staff that calendar deadlines are mandatory. Enforce target dates detailed in point (i) and confirm adjustments will be made in the following payroll run.

Confidentiality: in every organisation, whatever the size, payroll confidentiality is critical. This applies to both employee and company data. We heard about a staff member who repeated to a colleague what a peer was earning. It caused enormous problems because the peer was earning way above the norm for staff in that department. In another incident, the person responsible for the payroll disclosed to others what packages senior management were on. The offender was dismissed immediately, but the confidentiality breach had devastating effects.

Suggestions:

  1. Stringent background checks when hiring payroll staff
  2. Conduct confidentiality training
  3. Have staff sign a confidentiality agreement (email us for a template if you need one)
  4. Restrict and assign access to specific tasks using encrypted password protection
  5. Ensure printed document hard copies are stored in a secure location, with restricted access
  6. Payroll staff to be located separately from other staff members
  7. Consider outsourcing the processing of the Executive segment of the payroll

Accuracy: mistakes, unreliable information and data being submitted after deadline cause stress for payroll specialists. Whatever the reason, it impacts salaries being paid on time and often results in having to make adjustments on the next salary run. Consequences include incorrect reporting and having to recover overpayments from employees. All part of a vicious pain cycle.

Suggestions:

  1. Ensure skilled, knowledgeable, dependable staff are employed from the outset
  2. Training for all involved in the payroll process. Payroll, HR and other departments
  3. At the very minimum put procedures in place like a payroll calendar, set up Excel spreadsheets for automatic calculations; implement a QA process where senior staff check colleague’s work etc.
  4. Ideally install a reliable software solution (If you prefer to use the OPEX budget, consider outsourcing the entire payroll)
  5. Track monthly errors – what they are, ‘trends’, whether the same person is making the mistakes and plan how they can be avoided in future

What are YOUR payroll pain points? Share them with us and we will get back to you with solutions.

Generosity Burnout in Organisations

Who are the Takers, Matchers, Self- Protective Givers, Selfless Givers in your organization?

Harvard Business Review Professor Adam Grant and Reb Rebele from Wharton University of Pennsylvania

Although givers are the most valuable people in organizations, they’re also at the greatest risk for burnout. When they don’t protect themselves, their investments in others can cause them to feel overloaded and fatigued, fall behind on their work goals and face more stress and conflict at home.”

When we read this article, we felt compelled that it’s time for a reality check – how much of your time are you giving? What portion of that time should you be giving? Are you reactive and give and give and find yourself with your back against the wall? Shattered deadlines? YOUR KPI’s not achieved? This Harvard Business Review on the research done by Professor Adam Grant and Reb Rebele, details how to identify the Takers, Matchers, Self- Protective Givers, Selfless Givers.

In any organisation, we as individuals have the pressure of achieving our core business objectives and remaining effective by doing so. One of the biggest adversaries to that achievement is responding to requests that are made daily by colleagues. The norm is the expectation that we should give, give, give. Do whatever we are asked. We readily agree, reactively, too many requests that are not in our best interest and ultimately our company.

In particular, Employees in the HR Department, including Payroll Administrators, are constantly criticised for not being ‘a peoples’ person’ because they put in boundaries. Boundaries on deadlines, boundaries on their time, boundaries around workloads. If they don’t, payrolls don’t go out on time, they are inaccurate. Those who don’t put those boundaries in place and don’t proactively respond to requests, giving each ‘demand’ thought, face burnout. Lack of efficiency. Competency is eroded.

Professor Adam Grant and Reb Rebele’s four-year study around the subject of being a ‘giver’, has led to a helpful way of determining where you are on the ‘Generosity Spectrum’. They also detail ‘7 Habits of Highly Productive Giving’ which is a useful tool to getting on track to proactive giving. Essential for each of us to become more efficient and decrease our stress levels.

It’s like it’s the world’s best-kept secret for you and your organization’s success!

A MUST READ for you and every person you know! Beat Generosity Burnout.

Is it Practical to Outsource Your Payroll?

Make a decision by conducting a feasibility study.

Article by Diana Geldenhuys | M.Com HR  I  Managing Director, Outsourced Payroll Solutions

For many businesses, there are advantages to outsourcing their payroll, such as cost efficiencies, consistency, labour law compliance etc. OPS encourages you to dig deeper, and thoroughly analyse whether outsourcing your payroll would make sense for your organisation.

Here in Dubai, we came across an HR Manager in a company who is conducting a ‘feasibility study’ on outsourcing their payroll.

The situation is very interesting. Currently, the finance department is processing their payroll and the HR Manager is wanting to improve areas like analytics capability etc. The finance department is unwilling to hand over the payroll reins to HR. She is doing research before addressing management, persuading them why change should happen. (Payroll responsibility HR vs Finance is a contentious debate that we will be covering soon.)

Here are some points you could look at when doing an in-house vs outsourced payroll feasibility study:

  • What are your operational requirements and what level of outsourcing do you require? E.g. fully managed with no requirement for payroll expertise in-house, vs very little outsourcing, perhaps just the disbursement, the WPS file or even just the C-Suite salaries.

  • What internal resources would you still need with the new model and what is the capability of your team?

  • What is your current payroll costing you to process?

  • Compare current payroll costing in the same way the proposed payroll provider cost is structured, i.e. the total payroll cost per year divided by the total number of payslips per annum.

  • Where does your payroll team get support and compliance information from?

  • How will team/stakeholder communication work?

  • How much support is needed for the employees on your payroll?

  • Does your organisation and line management have a need for bespoke reporting?

  • How clear are those requirements?

  • Determine how the new process will maximise efficiency, have zero human errors and provide a solid governance base.

  • Determine your own visibility on payroll data, processes, and reporting (Cloud computing makes this all possible).

  • Data security – who has access to this confidential information and how secure is your server?

  • Brainstorm a few questions that are unique to your company payroll.

Cleverism says this of a feasibility study: “The study is typically used in situations where an important strategic decision needs to be taken. Since the study aims to discover whether an action is viable, it can help organisations to avoid costly or operationally exhausting ventures.”

Contact us for help to conduct a feasibility study on outsourcing your payroll

Are your payroll controls and legal requirements in place?

Article by Diana Geldenhuys | M.Com HR  I  Managing Director, Outsourced Payroll Solutions

One of our Payroll Specialists was recently asked to assist a company in navigating through a rather difficult separation process with an Employee. The Employee argued for his final settlement to be significantly more. He questioned the prorated work days calculation, the way the final settlement was determined and also requested to see evidence of leave days taken.

The Company was in a predicament. They had no set calculation methodology and were unable to produce records of leave taken, other than a few emails where leave was requested. This was typical of what so often happens where HR Administration and payroll is run without a compliant system. The potential is that it can very quickly develop into a crisis.

This prompted OPS to suggest a starter checklist for small businesses to consider as part of their setup process. (Established Companies may find it useful to check that you have considered these points.) If this is done in the early stages of Company setup, it can potentially save a lot of distress and expense later on.

  1. Keep a master file of your employee data

We would suggest a web-based HR and payroll system to manage your Employee data. However, an Excel sheet with basic information should suffice in getting you started on your Employee master file. Employee details such as full name, job title, contact details, nationality, passport details, compensation and benefits, starting date, bank details and email addresses, can be maintained. Keep in mind for this to have value, it needs to be updated regularly.

  1. Determine your cost to company of every employee

The compensation and benefits package alone is only a part of what an Employee is costing you. Elements such as the annual leave they are entitled to, the loss of productivity if they are on sick leave, the annual flight ticket back to their home country, the provision you have to make for their gratuity and medical insurance costs are but a few elements that need to be quantified. This will ensure you have a more accurate figure of what an Employee is actually costing your Company.

  1. Asset control

It is indispensable to keep a record of assets that you allocate to Employees. By tracking laptops, mobile phones and other equipment and linking it to your accounting’s depreciation, you can calculate the value of these assets on a year-to-date principle. You can then determine when an asset needs to be replaced or returned when an Employee leaves the company.

  1. Cost of employee benefits

Unless an Employee is aware of what the monetary value of the non-cash part of their compensation and benefits package is, they are unable to compare the full value your Company provides. Elements such as medical insurance, Salik, metro cards, lunches, parking permits etc. are not added to the cash component of their salary package, yet contribute to providing competitive, market-related pay. By understanding the value of these non-cash benefits, Employees can often elect to stay with your Company if offered an alternative position.

  1. Accrue your end-of-service benefit

As yet, accruing for the end of service is not a legislative requirement in the UAE. Making provision for end of service benefits is generally not done by the majority of small and start-up companies. However, small companies minimise the cash flow risk when Employees leave the company, by consistent and regular accruing for gratuity payments.

We would encourage you to implement these five steps in your business processes if you are not already doing so.

Click here to take our free 3-minute checklist to analysis your payroll compliance and governance.

Payroll – A Low Key Back Office Job or Subject Matter Expert?

Article by Diana Geldenhuys | M.Com HR  I  Managing Director, Outsourced Payroll Solutions

Payroll is firmly centred around quality. The knock-on effect of compromised confidentiality, hidden errors, lack of local labour law knowledge, poor staff attendance, overpayments and debt recovery, as well as internal conflict of interest to adhere to payroll deadlines, are too great not to get it right the first time.

Historically, payroll processing was viewed as low key and delegated to generalist, junior level office staff. Associated lower costs justified these arrangements and it was partially successful for repetitive and low decision-making processes. However, payroll is no longer a back office function for unqualified, inexperienced staff, as vital metrics, forecasts and budgets are now the drivers for measuring payroll ROI.

Employees manually recording leave balances, loan repayments, monthly variables etc. are a thing of the past. Today, there is much more to payroll than a procedures manual, accruals, benefits and salary calculations – all purely labour transactional processes. The value and importance of a well-run payroll is critical to and impacts corporate strategy. The Payroll function should regularly be reviewed for cost effectiveness, governance and best practices to minimise the risk to the company.

Recently, a company contacted us with a show-stopping payroll problem. In this case, they did not submit the relevant WPS (Wage Protection System) form on time when disbursing salaries. The office administrator who handles their salaries, although very reliable, was not able to interpret the payroll within the local labour law framework. This resulted in an AED10000 (approx. US$2700) fine. Resolving the issue was important, but the ongoing benefit was to put resolutions and controls in place to mitigate this risk.

In conclusion, when next reviewing the capability of your payroll, it is worth considering the merit of comparing in-house value vs. the benefit of letting experts manage your payroll.

Queries regarding the capability of your payroll process? Ask us now.

What Paddling taught me about Payroll

Article by Diana Geldenhuys | M.Com HR  I  Managing Director, Outsourced Payroll Solutions

I love Surfski. The feeling of catching waves, and stretching your gaze to where sea and sky fuse into blue, is something that is hard to describe. Those early morning paddling times, when most of Dubai is still asleep, is just indescribable.

It was on one of these outings one morning that it struck me. Much of what I do at sunrise translates into another of my favourite things, running payrolls.

Let me explain with a few anecdotes.

1. Read the Patterns

In paddling, you constantly consider the waves, the wind, the currents,  and adjust your style and speed. In payroll, consider everything. The impact of what you do has on other teams, management approvals, legal implications etc. Everything about the external environment is just as important as your own data capturing, and the effect on your payroll cycle, you can’t run a payroll by not understanding the bigger picture.

2. Look Ahead 

Sometimes the size and rolling of waves is so darned scary you have to keep your head up and look at the horizon. You just paddle on, thus managing to stay in the boat, despite the churning of the water. Payroll is just the same, focus on the end goal –  salaries to hit the bank,  and don’t fret over the immediate things that can easily derail you.

3. Technique

I smile sagely at the odd person that still thinks payroll is a mere transactional job. The specialisation and virtuoso that is needed to understand and execute a seamless payroll are akin to a master paddler that can reach speeds of up to 50km/hr. Building payroll expertise is continuous and so understatedly valuable.

4. Work in a team 

Paddling, like payroll, is essentially an individual sport. However, it is when you are paddling in a team when the magic happens. Paddling behind someone, catching their slipstream, or being the lead, shielding the wind, being there when someone tips over, is what gives the sport its camaraderie. In payroll, working in a team brings that discernment of delivering payroll accurately, confidentially and on time.

5. You gotta love it!

A truism for almost everything you invest your time in, but trust me, if you don’t love payroll, that adrenaline needed to make it before the deadline, the smug satisfaction of accurate payroll, the glee of a job well done, will leave you cold. If that is the case, my dears, you’re in the wrong field.

Go paddling instead! 😊

Qatari Nationals Salary Payment Implications

We are aware that some of the GCC and surrounding countries have broken diplomatic ties with Qatar with immediate effect. These include Saudi Arabia, Bahrain, Egypt, the United Arab Emirates, Yemen, Libya and the Maldives.

While the economic and geopolitical impact of this severe step will become clearer over time, what we know as of now is:

  1. All Qatari nationals working in and visiting these countries need to leave within 2 weeks.
  2. Several of the countries have closed all transport ties by air, land and sea to Qatar as of 4am today, Tuesday 6th June.
  3. Access through Qatar’s only land border from Saudi Arabia, has been blocked. This has resulted in imports of food and essential items not going through.
  4. The Qatar stock market fell by about 8% since the announcement.

OPS provides payroll services to all GCC countries. We expect that there could be an impact on salary payments for Qatari Nationals, and for payments to Qatar banks. As of now, we are unsure of the extent of this embargo on financial transactions and the banking sector. The latest update received by OPS from financial institutions, is that they expect a statement from the UAE Central Bank for further directives.

In an endeavor not to disrupt salary payments, OPS is currently making preparations for contingency planning.

OPS will communicate with you as we receive information.

If you require ‘next steps’ for your Qatari staff, we suggest you direct them to the local media – Click Here for more