Cultural vs legislative complexity: What influence does it have on European payroll administration costs? Cultural vs legislative complexity: What influence does it have on European payroll administration costs?

Cultural vs legislative complexity: What influence does it have on European payroll administration costs?
04 Dec 2017

By comparing the costs incurred in Europe with those in North America, this metric shows how cultural and legislative complexity both play a key role in the expenditure required to administer European payroll.

Why it’s important

As companies continue to focus on global payroll transformation to lower the cost of the payroll process, it is important to understand the implications of both cultural and legislative complexity.

Strategic implications

The cost of the payroll process for companies paying employees in Europe is approximately five times higher than that of companies paying staff in North America. The reasons for the discrepancy are a mix of legislation and culture. Although around three out of five countries in Europe are members of the European Union (EU), a number of issues that impact the payroll process in the region are not as prevalent in North America. These include:

• Multiple currencies

A significant number of EU countries do not use the euro, making foreign exchange rates an important part of the day-to-day payroll process for multinational companies.

• Multiple time zones

There are approximately seven time zones across Europe compared to three in North America, which can sometimes lead to delays in getting work done during regular business hours.

• Multiple languages

Almost 25 official languages are spoken across Europe compared to between two and three in most areas of North America.

• European Works Councils

European Works Councils are a large part of the culture in many countries across Europe, with almost all employees having representation.

In North America, on the other hand, a significantly smaller number of employees are similarly represented.

But to really understand payroll cost differences, it is important to explore the additional effort required in managing the impact of such issues during each pay cycle. For instance, the need for currency conversion means that treasury and banking activities play a bigger role in the European payroll process. The multitude of languages spoken is reflected in many countries’ payslips and European Works Councils have an important influence on the pay rules used to calculate gross to net wages.

Legislation likewise varies across the 50 or so countries of the region, with regular information updates required if payroll professionals are to keep on top of frequent changes.

This means that as a savvy payroll manager, it is your responsibility to articulate clearly the big difference in payroll processing costs between Europe and North America to the leadership and transformation team. While the basic gross to net calculation will be the same in both instances, sharing this knowledge about major cultural and legislative differences will help them to set realistic cost reduction targets and timelines.

-By Felicia Cheek, global payroll advisory programme practice leader and senior business advisor at The Hackett Group.

 

By comparing the costs incurred in Europe with those in North America, this metric shows how cultural and legislative complexity both play a key role in the expenditure required to administer European payroll.

Why it’s important

As companies continue to focus on global payroll transformation to lower the cost of the payroll process, it is important to understand the implications of both cultural and legislative complexity.

Strategic implications

The cost of the payroll process for companies paying employees in Europe is approximately five times higher than that of companies paying staff in North America. The reasons for the discrepancy are a mix of legislation and culture. Although around three out of five countries in Europe are members of the European Union (EU), a number of issues that impact the payroll process in the region are not as prevalent in North America. These include:

• Multiple currencies

A significant number of EU countries do not use the euro, making foreign exchange rates an important part of the day-to-day payroll process for multinational companies.

• Multiple time zones

There are approximately seven time zones across Europe compared to three in North America, which can sometimes lead to delays in getting work done during regular business hours.

• Multiple languages

Almost 25 official languages are spoken across Europe compared to between two and three in most areas of North America.

• European Works Councils

European Works Councils are a large part of the culture in many countries across Europe, with almost all employees having representation.

In North America, on the other hand, a significantly smaller number of employees are similarly represented.

But to really understand payroll cost differences, it is important to explore the additional effort required in managing the impact of such issues during each pay cycle. For instance, the need for currency conversion means that treasury and banking activities play a bigger role in the European payroll process. The multitude of languages spoken is reflected in many countries’ payslips and European Works Councils have an important influence on the pay rules used to calculate gross to net wages.

Legislation likewise varies across the 50 or so countries of the region, with regular information updates required if payroll professionals are to keep on top of frequent changes.

This means that as a savvy payroll manager, it is your responsibility to articulate clearly the big difference in payroll processing costs between Europe and North America to the leadership and transformation team. While the basic gross to net calculation will be the same in both instances, sharing this knowledge about major cultural and legislative differences will help them to set realistic cost reduction targets and timelines.

-By Felicia Cheek, global payroll advisory programme practice leader and senior business advisor at The Hackett Group.

 

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