04:05 Issue 4

04:05 GLOBAL PAYROLL

Selecting

ISSUE 4 I 2024

CANADIAN FIASCO ConseneLes nobis es eaque pra ne que dictatumquae aut lam et faciis maiores.

THE SEPTEMBER ISSUE: Let’s celebrate Payroll Week in style!

DEWS: Modernizing End

PAYROLL AND FRINGE BENEFITS TAX IN AUSTRALIA A marriage made in heaven?

PAYROLL SETS THE PACE The perception of the payroll profession

of Service Benefits in the DIFC and Beyond

GLOBAL PAYROLL MAGAZINE

Foreword

As 04:05 finds its way into your inboxes and onto your phone and tablet screens this week, payroll professionals in the UK, the Americas and beyond are marking National Payroll Week. So we have decided to celebrate in style! When this magazine was still just an ambitious idea, we could not have imagined the warm welcome it would receive from the global payroll community or how many of the leaders and innovators in our industry would be prepared to share their knowledge and thought leadership. Vogue has its iconic September Issue and, with that in mind, 04:05 is putting its best foot forward this month with a bumper issue showcasing payroll talent in all its forms and the amazing, inspiring people who are making things happen. Cybersecurity , strategies for resilience and recovery , overcoming an underdog mindset and the impact of

Payday Super are among the topics our expert contributors are exploring. And we are proud to share a personal insight into the battle of late- diagnosed neurodivergent women . Our cover stars are our peers, our friends and our mentors; only a handful of the countless shining lights in UK payroll today. The payroll industry truly is something to celebrate and we are excited to make 04:05 a space to put payroll professionals centre stage, where they belong. We’re already planning a festive photoshoot for December’s cover for everyone who missed out this time. Between now and the festive season, we hope our colleagues across the world will have plenty of reasons to get their glad rags on and raise a glass to our collective achievements. And share the pics with us all!

CEO Global Payroll Association Melanie Pizzey

Happy Payroll Week, From all at the GPA

Contacts The Global Payroll Association , 49 Greek St, Soho, London W1D 4EG. Tel: +44 (0)203 871 8870 Melanie Pizzey - CEO and 04:05 Executive Editor: melanie@globalpayrollassociation.com Rich Robins - 04:05 Designer: hello@megandmore.co.uk Hayleigh Blinkhorne - events/vendors/advertising: hayleigh@globalpayrollassociation.com General enquiries/mentor scheme/training : info@globalpayrollassociation.com Michael Baer - US contributor: mike@globalpayrollassociation.com Nilufer Gul - GM APAC/Australia: nilufer@globalpayrollassociation.com Tel: +61 (0)413 749 714

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08 Let’s celebrate Payroll Week in style! 10 DEWS Modernizing end of service

benefits in the DIFC and beyond

16 Payroll and fringe

benefits tax in Australia A marriage made in heaven?

22 Payroll sets the pace The perception of the payroll profession 26 Working with contractors Converting independent contractors into full-time employees in Africa 32 The evolution of payrolling benefits in the UK Plans to make the payrolling of benefits compulsory from April 2026

38 U.S. practitioner’s perspective

Pride in the persistence of payroll

42 Transitioning from legacy payroll systems Why now is the time for change 50 Hidden in plain sight The battle of late diagnosed neurodivergent women 60 Navigating payroll through unexpected crises Strategies for resilience and recovery 64 Payroll profile Lorenzo Muscarà

GLOBAL PAYROLL MAGAZINE

CONTENTS 70 Latest From the States Providing disaster payments to employees 74 The impact of Payday Super Key considerations for global payroll teams 80 Highly-paid financial professionals Getting off the uphill payroll cycle 86 Global payroll compliance Best practices for staying current on changing wage laws 92 Protect your HR and payroll data MOD data breach report 96 UK neonatal leave rights and pay New rights allowing up to 12 weeks of paid leave 100 Revolutionizing global payroll How AI is shaping the future of workforce management ALSO IN THIS ISSUE 06 NEWS Interactive global payroll news 48 GPA Training

Join our experts as they take you through the process of running payrolls in different countries

56 Diary of an HR Manager 58 GPA Webinars The latest global and in-country payroll topics and trends 104 Asia Briefing Overview on Asia news 106 Find a vendor A comprehensive list of suppliers to the global payroll industry

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SOUTH AFRICA

SERBIA

Global North poaching local talent to fill skills deficit

Government proposes minimum wage hike of 8% to 10%

AUSTRALIA

National Public Data confirms hack of ‘billions’ of Social Security numbers

$217,000 recovered for Cairns food outlet workers

GLOBAL

SOUTH AFRICA

Revolut launches early wage access platform Payday

Companies Act amendments pose significant risk to lower- paid employees

Online job boards found advertising salaried jobs below minimum wage

HS2 pays ‘staggering’ £6.2m to HMRC for mismanaging IR35 off- payroll rules

CANADA

AUSTRALIA

Union claims company owes workers $10m termination and severance pay

Pushback against NSW Premier’s return to office order

GLOBAL PAYROLL MAGAZINE

NIGERIA

KUWAIT

FEC directs fast-tracked removal of universities from IPPIS

Cost-cutting drive will see Kuwait Airways terminating expats and retirees

GLOBAL

CloudPay secures $120m funding to strengthen global customer base

Workers rally nationwide after heat-related deaths

Click on the interative map to view other world news

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Kerry Hudson

Will Jackson

Emma Streatfield

Susan Ball

Lee McIntyre- Hamilton

Megan Kirk

Lara Smart

GPA CCO Archie Pi (Chief Cuddle Offi

GLOBAL PAYROLL MAGAZINE

Natalie Turner

Kevin Waller

One late summer afternoon in London town, we gathered a few of our favourite UK payroll people for a very welcome catch-up and a jolly glamorous photoshoot. For The September Issue, we wanted to encapsulate the enthusiasm, energy and sense of camaraderie that make the payroll community so special. We’ve had another challenging year and it was such a pleasure to capture these moments of celebration to hold up as an example of what we would love to see National Payroll Week become. You’ll know many of these faces from GPA events and webinars and you will come to know some of them through their words in the pages of this magazine in the months ahead too. Part of our ethos for 04:05 is to bring payroll professionals together. To pool ideas and knowledge, allow individual voices to be heard and carve out a space for us to share our wins. We want you to be excited about what the future could hold and by learning more about our peers we can inspire one another. National Payroll Week should and could be a fabulous celebration that everyone wants to be a part of because this industry is a wonderful place to be, thanks to the people who populate it!

Bob Rehill

izzey

ficer)

How are you celebrating Payroll Week?

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DEWS of the

GLOBAL PAYROLL MAGAZINE

S: Modernizing End Service Benefits in e DIFC and Beyond

By Thenji Moyo and Dilini Loku

The payroll industry has seen a dramatic evolution in recent decades due to advancements in technology and artificial intelligence (AI).

While the industry historically relied upon manual calculations and paper records, technology and AI algorithms have streamlined processes and claim to increase accuracy, compliance, and employee satisfaction. This article will explore

entitled under the now amended DIFC Law No.2/2019 (“DIFC Employment Law”) to end-of-service gratuity (ESG) upon being terminated, provided that they completed a year of continuous service and were not required to register with the General Pension and Social Security Authority (GPSSA). However, the absence of a strict obligation upon employers to accrue gratuity under the DIFC Employment Law may have created significant risk, as mismanagement of cash flow could have led to employees being unable to obtain ESG. DEWS has effectively replaced the traditional payment of ESG to employees and may have mitigated said risk. The scheme requires DIFC employers to make monthly contributions to their employees’ DEWS accounts and allows employees

the introduction of the Dubai International Financial Centre

(DIFC) Employee Workplace Savings Scheme (DEWS); an online platform that aims to facilitate the payment of end-of-service benefits to DIFC Employees. We will then examine recent developments and future trends expected across both the UAE and the GCC region. What is DEWS? DEWS was introduced via Employment Law Amendment Law No.4/2020 (“DIFC Law No.4/2020”). Prior to its introduction, DIFC employees were

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Recent Developments As mentioned, employers are only expected to make monthly payments into DEWS for expatriate employees, as GCC nationals are qualified to register with the GPSSA. However, recent changes were announced by way of DIFC Law Amendment Law No.1/2024 (the “Amendment Law”). The Amendment Law requires employers to make top-up payments into a qualifying scheme for GCC national employees where there is a gap between their monthly pension contributions, and what they would have received had they been enrolled in DEWS. However, note that top-up payments will only be required where the difference is greater than AED 1,000. Prior to the Amendment Law’s introduction, GCC nationals may have been prevented from receiving end-of-service benefits that were fully comparable to the benefits given to their expatriate counterparts through DEWS, due to statutory pension caps. The “top up requirement” may then work to alleviate this imbalance. The Amendment Law also introduced provisions that apply in circumstances where an employee is considered to be a “Sanctioned Person” and is unable to be enrolled in DEWS or an alternative qualifying scheme due to their status. The Amendment Law defines a “Sanctioned Person” as “any individual, entity, body or organisation listed on a sanctions list issued and passed by the United Nations Security Council, any consolidated list of financial sanctions issued by the Federal Cabinet of the UAE or any other sanctions that may apply to a Qualifying Scheme

to make additional voluntary contributions from their monthly compensation. Employees are then granted the opportunity to select an investment plan from a number of options, ranging in risk. Once an employee is terminated, the contributions will be directly paid into their nominated bank account, or the employee can choose to remain invested in DEWS and obtain the benefits at a later date.

Benefits of DEWS DIFC payroll professionals may

“DEWS has effectively replaced the traditional payment of ESG to employees and may have mitigated said risk.” benefit from the organisation DEWS provides, as having a centralised online platform may allow them to handle the payment of end-of-service benefits with efficiency and ease. Furthermore, requiring monthly contributions may aid payroll professionals in effectively managing company cash flow, and avoid having to grapple with a growing liability that would incur upon the employee’s termination. The monthly contributions requirement may also benefit employees, by providing them with a sense of greater financial security. Furthermore, granting employees the opportunity to invest may allow them to play a more active role in securing their future finances.

GLOBAL PAYROLL MAGAZINE

“The development of alternative schemes outside of DEWS may hint at the possibility of the introduction of pension schemes for expatriates in the UAE in the future, which may lead to greater numbers of expats choosing to reside in the country throughout retirement.”

Future Trends The development of alternative

or its trustee or administrator” . The Amendment Law requires employers to accrue ESG for the sanctioned employee until their employment is terminated, or until they are no longer considered to be a Sanctioned Person. The explicit obligation in the Amendment Law to accrue gratuity may provide the sanctioned employee with greater protection in comparison to the DIFC Employment Law. In October 2023, the UAE Cabinet announced the introduction of a voluntary alternative scheme through Cabinet Decision No.96/2022 (the “Cabinet Decision”). The scheme is applicable onshore and in free zones that follow the Federal UAE Labour Law. However, note that it has also been made available to non-Emirati employees working in the public sector. According to the Cabinet Decision, employers can grant employees the option to opt into the voluntary alternative scheme. The scheme operates similarly to DEWS, as it requires employers to make monthly contributions to the employee’s account and releases the benefit to the employee upon termination. Furthermore, employees are also given the opportunity to select from a range of investment options.

schemes outside of DEWS may hint at the possibility of the introduction of pension schemes for expatriates in the UAE in the future, which may lead to greater numbers of expats choosing to reside in the country throughout retirement. This in turn may help the UAE achieve its goal of becoming a popular destination for retirees, as evidenced by its launch of the 5-year retirement visa. The developments in the UAE must also be observed in connection with the growing calls for the introduction of expat pension schemes in the GCC. Answering these calls with modern, simplified solutions like online platforms may grant Gulf countries the opportunity to not only support their expatriate populations and attract new global talent but also gain a competitive edge over other global economic hubs. Conclusion In conclusion, the introduction of DEWS and similar alternative schemes may have significantly transformed the payroll industry within the DIFC and beyond. By requiring monthly contributions, DEWS may assist payroll professionals with managing company

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cash flow and avoid risk created by the lack of clear obligation to accrue gratuity within the DIFC Employment Law. Recent developments via the Cabinet Decision may have increased the scope of applicability for alternative schemes, while the Amendment Law may have ensured that GCC nationals receive comparable end-of-service

benefits to their expatriate counterparts using DEWS and similar alternative schemes. The increasing availability of alternative schemes may demonstrate the UAE’s efforts towards attracting a greater number of retirees and encourage other countries in the GCC region to take similar steps towards introducing formal pension schemes.

Authors: Thenji Moyo and Dilini Loku

Thenji Moyo (Partner) Thenji Moyo is an award-winning lawyer who heads the Gateley legal employment practice and is a qualified specialist Partner advising on all U.A.E. and DIFC employment law. Having worked in the U.A.E. for over 10 years, Thenji advises numerous blue chips, multinational, regional, local and private clients from all industry sectors on complex legal issues.

Thenji was awarded the Employment Lawyer of the Year at the inaugural G.C.C. Lexis Nexis Women in Law Awards for her outstanding contributions to the legal industry. Thenji has a keen interest in uplifting diversity and inclusion in the workplace and was awarded the Equality Initiative of the Year at the first Lexis Nexis Women in Law Awards and the Middle East Legal Awards 2022. Dilini Loku (Senior Associate) Dilini is a UK-qualified lawyer who joined Gateley in 2023 as a senior associate for employment. With over a decade of experience, Dilini has advised various businesses on complex legal queries relating to employment and pensions law, ranging from start-ups to multinational companies. She has also provided guidance in relation to restructuring, reorganisation, redundancies, transfer of employees, global mobility solutions, senior executive appointments, and terminations. Dilini is well versed in all aspects of non-contentious employment law, as she has routinely advised on and drafted employment contracts, director service agreements, consultancy agreements, business protection agreements, non- disclosure agreements, employment policies, and procedures. She is also instructed on employee benefit design matters, with a particular focus on employee share option schemes.

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Payroll and Fringe Tax in Australia

Author: Paul Mather

One of the challenges with the relationship is that Payroll is generally a defined person or team within an organization. However, FBT is often a responsibility that one person manages as part of their role (jokingly referred to as managing FBT whilst doing the day job). At the very least Payroll and FBT need to be good friends, who communicate regularly and understand each other’s needs and obligations! Someone once said to me that Payroll and FBT were like a marriage made in heaven. There is certainly some truth to that statement – when the relationship between the two goes well, there are no issues, but when the relationship breaks down issues can arise.

In addition, Payroll and FBT should support each other and be each other’s “Eyes and Ears”.

What is FBT? FBT (Fringe Benefits Tax) was

introduced in Australia in 1986 to close the large non-taxing loophole of non- cash fringe benefits. The FBT law currently has 13 defined fringe benefit categories, including cars, car parking, loans, meal entertainment, board, housing and debt waivers.

GLOBAL PAYROLL MAGAZINE

e Benefits

“At the very least Payroll and FBT need to be good friends, who communicate regularly and understand each other’s needs and obligations!”

The FBT law contains specific taxing rules, namely exemptions and concessions, for different employer types including Charities, Not for Profits, Small Business and employers operating in designated Remote Areas. In 1999, the Reportable Fringe Benefits regime was introduced, to effectively “complete” the reporting of fringe benefits from not just an employer reporting requirement to a reporting requirement for employees.

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What is the current State of Play with FBT? Recently the Australian Taxation Office (ATO) have announced significant gaps in FBT revenue and FBT registrations. These are areas of concern and the ATO has highlighted the failure by employers (and their tax agents) to engage with the FBT requirements, including reporting the fringe benefits provided to employees in relation to motor vehicle benefits, namely private use of employer- provided motor vehicles. The ATO has specified key areas of concern where they see a significant level of non-compliance in situations where an employer provides a motor vehicle to an employee (or their associate) for their private travel or makes it available to use privately. Specific areas of ATO concern include when employers: treat cars as 100% business use, even though they are used or available for private purposes don’t have a valid log book or the log book is not a representative sample of actual travel treat all eligible commercial vehicles (Utes) as FBT exempt, without considering if the private use of the vehicle was limited. Many employers believe that a motor vehicle purchased or leased by the business is 100% business because it is a business vehicle. However, the FBT rules require records to prove the level of business use. Without records as proof, the motor vehicle is effectively a 100% private or personal non-cash fringe benefit.

What are the key interactions between Payroll and FBT, and what’s important? There are a number of key areas of interaction including: 1. Employees 2. Reportable Fringe Benefits 3. Salary Packaging including Employee Contributions 4. Living Away From Home Allowances Employees Whilst this may seem obvious, there are some practical challenges here, the main one being what I call the “name game”. Let’s say we have an employee on the Payroll called William Smith. However, in the business, he is known as Billy Smith – and is referred/recorded that way in expense claims. The employee has a novated lease, in the name of Bill K Smith, and health insurance provided in the name of Will K Smith. From an FBT perspective, this becomes a challenge in identifying and reporting fringe benefits when it seems like there are 3 or 4 different employees receiving different benefits – when in fact there is only one employee. A similar challenge exists with an employee who has adopted a local name. For example, Wun Tan may be known as Sally Tan, Sally Wun Tan or SW Tan. What is the solution? Having the Payroll ID number as a single unique identifier across the business.

GLOBAL PAYROLL MAGAZINE

Reportable Fringe Benefits The Reportable Fringe Benefit (RFB) regime was introduced on 1 April 1999 to allow for full reporting of an individual’s employee cash salary and non-cash fringe benefit remuneration. One of the key outputs from FBT Return preparation is individual employee RFB amounts. Where an employee receives more than $2,000 in RFBs within an FBT, the employer is required to report the grossed-up value of the fringe benefits on the employee’s annual income statement. All fringe benefits are reportable unless they are excluded. The key exclusions are: 1. Exempt benefits (excluding exempt Electric Vehicles) 2. Meal Entertainment (unless Salary Packaged) 3. Entertainment Facility Leasing (unless Salary Packaged) 4. Car Parking 5. Certain Remote Area Benefits 6. Pooled or Shared Cars An interesting reporting quirk can occur due to the different year ends for FBT and Income. If an employee’s employment is terminated between say 1 April 2024 and 30 June 2024 , then any reportable fringe benefits received in that period will need to be reported on the employee’s 2025 income statement. Salary Packaging and Employee Contributions Salary Packaging is a very popular flexible remuneration tool that employers may offer to their employees. It provides an opportunity for

employees to sacrifice future salary in exchange for non-cash fringe benefits. Commonly Salary Packaged benefits

include motor vehicles (novated leases and associate leases), car

parking, portable electronic devices, relocation expenses and remote area benefits, in-house child care and recreational facilities, and airline lounge memberships. Salary Packaging can cause headaches for both Payroll and FBT. Often the Salary Packaging is outsourced, requiring good lines of communication and from an employer perspective the need for approval processes and careful checking of payroll deduction amounts. Salary Packaging can comprise pre- tax deductions (Lease Payments and Running Costs) and post-tax deductions. The latter known as Employee Contributions (EC), are determined based on the salary packaged fringe benefit taxable value, with the most common example being a Novated Lease. For a sedan motor vehicle, the taxable value is based on the Cost Price (including GST but excluding Stamp Duty and Registration) of the motor vehicle, multiplied by a statutory fraction of 20%. For example: $30,000 motor vehicle x 20% = $6,000 Taxable Value (based on a full FBT year). The purpose of an employee making an EC is to reduce the Taxable Value to nil. Therefore, in this example, the employee must contribute by way of a post-tax EC $6,000 in order to reduce the Taxable Value to nil.

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The effect of Salary Packaging the EC is that the employee pays tax on the EC at their marginal rate, rather than being taxed at the FBT rate of 47%. Salary Packaging involves a lot of “moving parts” and requires a close working relationship between FBT and Payroll, together with clear and up-to- date written Salary Packaging Policies and Processes. As always, employees must be encouraged to seek their own tax and financial advice before entering into a Salary Packaging arrangement. Living Away From Home Allowances (LAFHA) LAFHA is the payment of a tax-free allowance, usually via Payroll, to an employee to compensate the employee for the non-deductible expenses (accommodation and meals) incurred when Living Away From Home. LAFHA is the only allowance that is taxed via the FBT regime. LAFHA was historically a common (and very popular) benefit provided to employees on temporary working visas and local employees on temporary secondment/relocation arrangements. However, significant changes were made to the FBT law in 2011 and now LAFH arrangements require the employee to: 1. Maintain a home in Australia for the duration of the LAFH assignment; 2. Be limited on the tax concession to a maximum 12 months at any one location; and 3. Substantiate their actual expenditure on accommodation and food beyond a statutory amount.

The 2011 changes effectively curtailed the ability for an employer to provide an LAFH arrangement (free of FBT) to an inbound temporary visa holder. Importantly, the new requirements apply where an employee on an LAFH arrangement is reimbursed for LAFH expenses or directly provided with LAFH benefits. LAFH provided in this way are generally not cited by Payroll. The above is intended to provide some insight into the relationships and crossovers between Payroll and FBT – a good working relationship, and understanding of each other’s needs are crucial from a compliance, governance and employer-employee perspective.

Author: Paul Mather

Paul Mather has over 25 years of experience

dealing with Fringe Benefits Tax, Salary Packaging and Employment Taxes in Australia. Paul is a current member of the ATO’s FBT Working Group and was a member of the former ATO National Tax Liaison Group (NTLG) Fringe Benefits Tax Subcommittee (from 2005 to 2013). Prior to creating FBT Solutions in 2009, Paul worked in the Employment Taxes and Indirect Taxes teams for 10 years at EY. Paul has also previously worked in commercial roles in Australia and London, as well as at Chartered Accounting firms PKF and BDO in New Zealand.

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The perception of the payroll profession has evolv over time. In the past twenty-five years, an entire emerged, fostering a sense of belonging among p various companies and across the globe. Payroll p united, but it’s time for us to shift from being the u becoming top contenders—and that change starts Payroll Se the Pace

By Zennie Sjölund

GLOBAL PAYROLL MAGAZINE

A Career that Grows with You There’s a saying: Once in payroll, you stay in payroll. This isn’t because payroll practitioners lack ambition or initiative. On the contrary, this profession offers endless opportunities for growth, both in knowledge and social skills, with no two days being alike. Payroll serves as the hub for employer data, navigating complex legislation and delivering essential information to both internal and external partners. The Backbone of Business and Society Payroll is the backbone of crucial areas like corporate social responsibility (CSR), helping build successful businesses and healthy societies. For this reason, we should hold our heads high and proudly showcase the value of our work. Far too often, we know how we’ve worked our magic despite poor conditions, tight deadlines, and unforeseen challenges. “Payroll is the backbone of crucial areas like corporate social responsibility (CSR), helping build successful businesses and healthy societies.”

ets

ved significantly industry has professionals from professionals are underdogs to s with attitude.

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“Significant for payroll is the diversity of knowledge areas covered—technology, tax, employment law, and more.”

Choosing Payroll as a Career When I began my journey in payroll last century, payroll wasn’t seen as a career path to discuss. Often, payroll chose you, rather than the other way around. But this is changing, with more people actively choosing payroll as a profession. In Sweden, for example, our higher vocational school programs for payroll professionals stand out compared to others, and the number of applicants is rising. Moreover, the employment rate for graduates is nearly 100%, and most remain in payroll for years after graduation. The Diverse Expertise of Payroll Professionals Significant for payroll is the diversity of knowledge areas covered—technology, tax, employment law, and more. Payroll professionals are expected to not only master these areas but also embrace technology and uphold compliance. The truth is, payroll often has the facts readily available. Taking Pride in the Payroll Profession Fifteen years ago, in Sweden, an organization was founded by like- minded payroll professionals with the goal of enhancing the payroll industry and its practitioners. We’ve made significant progress since then but we must continue moving forward.

To elevate the profession, we need to take pride in payroll as a career. This mindset is essential for challenging the misconception that payroll is less valuable—a perception that still exists at times. Recognize your competence and help uplift others. Remember, nobody puts payroll in the corner!

Author: Zennie Sjölund

Zennie Sjölund is a well-known and highly respected figure in Global Payroll. She is the Sweden-

based Divisional Director Payroll of Srf konsulterna - the association of Swedish Accounting and Payroll - and has 20 years of payroll industry experience with a special focus on payroll intelligence and trendspotting.

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Converting independ contractors into full-time employees in Africa

By Grant Geraghty

Independent contractors are increasingly popular in Africa, driven by workers seeking flexibility and companies needing diverse talent. However, working with contractors comes with risks, including navigating country-specific labour regulations and tax laws. Let’s explore these risks and why converting contractors into full-time employees may be a worthwhile consideration.

Independent contractor v employee The distinction between an independent contractor and an employee is critical, as it has significant legal and regulatory implications across Africa. Worker misclassification— when an independent contractor performs duties more aligned with an employee—can result in fines, back pay, and reputational damage.

Each country has specific criteria for determining worker classification. In South Africa, for instance, independent contractors must meet several conditions, such as being a resident, not acting as a labor broker, working independently, and fulfilling tax obligations to the South African Revenue Authority.

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dent

In Ghana, additional factors are considered; including economic dependence, time investment, and the opportunity for profit or loss. The Ghanaian Internal Revenue Service also adheres to specific guidelines for classifying workers. Taxation As in most regions, taxation in Africa is strictly regulated. Independent contractors are responsible for filing and paying their own taxes, a responsibility that shifts to the employer when a contractor becomes a full-time employee. This transition requires the employer to handle tax

deductions and contributions, which is manageable with an efficient payroll system. However, a potential consequence is that the newly employed worker may earn less after taxes, leading to possible requests for higher compensation—an expense that must be considered alongside statutory benefits. Operational risks 1. Lack of control & commitment Independent contractors have the freedom to choose how, where, and when they work, which can lead to challenges if their pace or methods differ from your company’s needs.

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While you may want to implement specific practices to boost productivity or standardize output, exerting control over contractors risks misclassification. Additionally, contractors may be unavailable for urgent tasks if they are committed to other clients. Full-time employees tend to be more committed and readily available to support in critical situations. 2. Intellectual Property In many African countries, like Nigeria for example, the copyright to any work created rests with the creator unless otherwise specified. But the copyright to work created by an employee within the course of their employment belongs to the employer. So, in fact, having employees poses significantly fewer risks with regards to a company’s Intellectual Property. 3. Unexpected Costs Should an independent contractor be wrongly classified as such, and should the local authorities find you guilty of employee misclassification, there would be much at stake for you. This includes paying hefty fines for violating worker rights, back payments for all the shortfalls experienced by the misclassified contractor/employee, as well as other financial and reputational penalties. 4. Insurance and Liability Independent contractors do not receive regular employee benefits – and that includes health and life insurance. But this doesn’t mean that contractors do not face the same risky situations as employees do – it only means that they are less safe in these

circumstances. Should an independent contractor get hurt or otherwise suffer from an incident at work, they would not be protected by insurance – and may instead ask for compensation from your company, a situation rife with liabilities. “The distinction between an independent contractor and an employee is critical, as it has significant legal and regulatory implications across Africa.” Key considerations for companies making this transition Companies looking to convert contractors into full-time employees should consider: 1. Assessing Current Workforce Evaluate your current contractors to determine if they meet the criteria for independent contractor status or if their roles suggest they may qualify as employees. Consider the necessity of their skills and the financial implications of converting them to employees. If conversion is not viable, ensure that contractors strictly adhere to the independent contractor definition to prevent misclassification issues. 2. Partnering with an EOR When operating in Africa, it can be difficult to assess who is an independent contractor and who is an employee, since the definition changes from country to country.

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a full-fledged employee holds: more control over how, when, and where work is done, owning the intellectual property of all work produced, avoiding unexpected costs associated with independent contractors, and being able to care for your employee to the full extent of the law. If you would like to have a business presence in Africa, but do not have an entity, an EOR solution may be the most suitable option for you. In both the short and long terms, EORs mitigate risks, taking on the full burden of compliance and major HR tasks such as payroll – all with the goal of supporting your business growth in Africa.

But as a company looking to grow in Africa, your time and resources are far better spent on the expanding business than on classifying employees correctly. This is why many companies without an entity in Africa choose to partner with an EOR (Employer of Record). This legal entity provides many services within one solution: employee onboarding, payroll, legal compliance, expert knowledge, risk mitigation, operational efficiency, and more. But companies need to choose the right EOR: one that possesses African expertise, and a deep understanding of the local labour laws across Africa’s diverse countries. 3. Long-Term Planning Workforce management is not a one- time task. It is a continuous process, one that must be carefully monitored for fear of one day being found misclassifying a worker, for instance. As such, partnering with a specialized partner like an EOR may be the most suitable solution for companies in Africa. Converting independent contractors into employees: the takeaways If you are choosing to work with an independent contractor in Africa, it is necessary to consider the risks that accompany this decision. From misclassification, which is a legal offence, to the financial risks incurred when workers are misclassified, all the way to the operational issues met because independent contractors cannot be told how, when, or where to work.

Author: Grant Geraghty

Grant Geraghty, Head of Client Relationships @ Africa HR Solutions, is a seasoned HR operations and payroll compliance expert with a focus on the African market. He holds a Bachelor of Commerce in Economics and Business Finance from the University of Natal, South Africa, and a certification in Payroll and Tax Administration from the University of Cape Town. With his meticulous approach and deep understanding of local regulations across Africa, Grant has built a reputation for helping organizations optimise their African expansion strategies.

Conversely, it is also worth noting the many advantages that a transition to

The evolution of payr benefits in the UK 04:05 ISSUE 4

GLOBAL PAYROLL MAGAZINE

rolling

Author: Susan Ball and Gavin Phillips

Susan Ball and Gavin Phillips of RSM UK look at the current rules and challenges for employers as the government plans to make the payrolling of benefits compulsory from April 2026.

There have been significant changes in reporting benefits in kind for employees in the UK since the introduction of P11D paper forms in the early 1960s. In April 2016, voluntary payrolling of benefits in kind (BiK) was introduced, giving employers the option to payroll benefits instead of completing P11D forms. In a notable development, the UK Government announced in January 2024 that payrolling of BiK will become compulsory from April 2026. Currently, any employer-provided benefit can be payrolled, except:

Interest-free and low-interest loans, and Living accommodation provided by the employer. Government officials plan to issue additional draft legislation later this year, to accommodate the required changes, with additional guidance also due to be published ahead of the change. This new mandatory requirement may present more challenges than employers anticipate, and it’s worth employers planning ahead if they don’t already payroll BiK.

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How do employers currently payroll BiK?

Before employers can begin, they or their agent must register online with HMRC before the start of the tax year. Ideally, HMRC prefers registration to occur before the annual coding process begins, typically around December, to prevent employers from receiving multiple tax codes for their employees. Employers have the discretion to choose which BiK to payroll, but there is a specific category that requires an all-or-nothing approach. These are the benefits reported as ‘other’ items in Section M on the P11D. Employers must either payroll all items usually reported within Section M or none. Upon registering, HMRC will automatically identify all employees with the selected BiK or expenses in their tax code and remove them, issuing an amended tax code in its place, so you must only select those you will be payrolling. Once the tax year has started, employers must continue to payroll the registered benefit for the entire tax year, or for as long as it’s provided. The tax due on payrolled BiK is collected by adding the cash equivalent value to an employee’s taxable pay each pay period. To determine the BiK value, employers need to work out the cash equivalent value of the benefit, then know the number of pay periods to be made to the employee in the tax year. The cash equivalent of the benefit is divided by the total number of pay periods.

“Double taxation is the biggest concern, but the onl instance of quasi ‘double’ taxation that should occur is when the employee is compensating for an underpayment from the previous year, which would have happened regardless”

The resulting amount is added to the employee’s pay in the payroll each pay period. The item will usually be taxable, and not subject to NIC for payroll purposes as Class 1A NIC applies, but this will depend on the treatment of the individual BiK. The amount needs to be updated immediately if any changes are made during the year. It’s important to note that only payrolled BiK should be reported on the Full Payment Submission (FPS). Any non- cash BiK not payrolled are reported

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under the existing P11D procedure. If an employer decides to payroll car and car fuel benefits, information detailed on the P46 (Car) must be reported on the FPS. All payrolled BiK need to be included on the Full Payment Submission (FPS), which is sent to HMRC on or before each payday. There are special rules: if the 50% regulatory limit applies, also known as the ‘overriding limit’ in the legislation, which stipulates

that an employee cannot have a tax deduction greater than 50% of their taxable pay in that pay period, and when an employee leaves. As these potentially involve reverting to a P11D, this rule may change in future. What if any employee makes good in full or part a BiK? Some employees may make a payment towards the cost of a BiK, known as ‘making good’, such as net pay benefits. When this occurs, it reduces the cash

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equivalent of the benefit under the tax rules. If the full cost is made good, there is no taxable BiK. Employers need a process for checking making good has occurred. If an employee is only making good in part, this needs to be considered when calculating the amount to be payrolled. Again, we have special rules if making good relates to company cars’ and vans’ private fuel. How should employers communicate payrolled BiK to employees? When BiK are taxed through the payroll employees should receive: a letter explaining the concept of payrolling benefits, how it operates, and its implications, including the deduction of tax through payroll and changes to their tax code. This also applies to new employees who receive benefits that the employer has registered to payroll. Each year, before June 1 following the end of the tax year, details of: The benefits that have been payrolled in the tax year. The cash equivalent of each benefit that has been payrolled in the tax year.

6th after the tax year the benefit was received. However, over the duration of the BiK, the appropriate amount of tax should be deducted, whether through payrolling or traditional methods. What about employers’ Class 1A NIC? Although the tax due on the BiK is being collected in ‘real time’ under voluntary payrolling, no provision has currently been made for the collection of Class 1A NIC on a real-time basis. The employer still currently needs to complete the P11D (b) and calculate Class 1A NIC. Again this may change in future. What about globally mobile employees? Employers with a globally mobile workforce will face various considerations. This includes UK-based employees on overseas assignments or working remotely from abroad, as well as overseas employees on assignment in the UK. For employees assigned to the UK, the new rules will highlight the practical issues and challenges of obtaining benefit details in real-time when benefits are provided outside the UK. HMRC acknowledges these challenges and, for example, allows PAYE to be calculated on a best-estimate basis for tax-equalised employees (i.e., when an employer settles any UK tax and National Insurance (NIC) liabilities due for an employee) under a Modified PAYE scheme. This scheme involves reconciling any tax due upon filing an employee’s UK tax return, with an extended P11D submission deadline of 31 January. Where NIC is payable,

What is the biggest worry for employees?

Double taxation is the biggest concern, but the only instance of quasi ‘double’ taxation that should occur is when the employee is compensating for an underpayment from the previous year, which would have happened regardless. This often occurs with benefits reported on the P11D during the second year, as the first P11D is not submitted until July

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What should employers do now, ahead of April 2026? Employers should:

an Appendix 7A scheme will also be required, whereby any NIC due is reconciled with HMRC by 31 March (following the end of the tax year). The focus on the processes and practicalities of obtaining overseas benefit details each pay period is reinforced accordingly. For UK employees working outside the UK, similar challenges will arise in collating benefit details provided outside the UK in real time, particularly when an employee remains tax resident in the UK.

Consider the flow of data on benefits and expenses as early as possible to ensure accurate payroll processing per pay period, especially if the data is stored in multiple systems or locations. Check payroll software can accommodate new payrolling of BiK, including any breakdowns of the data, as reports will be required. Evaluate the need for software to assist in calculating benefit-in-kind amounts and tracking for reporting purposes. Consider payrolling some benefits from April 2025, ahead of the mandatory

implementation in April 2026. For globally mobile employees,

establish processes and procedures to regularly identify benefits provided to employees outside the UK in real time. Stay updated on any changes to legislation and guidance.

Authors: Susan Ball and Gavin Phillips

Susan Ball is a partner at RSM UK , and she has more than 30 years’ experience working extensively in the employment tax, investigations and reward field. Susan is the past President of the Chartered Institute of Taxation and sits on its employment taxes committee.

Gavin Phillips is a Tax Director at RSM and has worked in the field of global mobility taxation for over 19 years. Gavin has extensive experience advising organisations who have a globally mobile workforce with the related employment tax and payroll compliance requirements that may arise.

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U.S. Practitio Pride

GLOBAL PAYROLL MAGAZINE

oner’s Perspective: in the Persistence of Payroll

By Christine Stolpe

“That’s the night that the lights went out in Georgia!”

These are the song lyrics that reverberated in my head throughout the first half of 2020 when every payroller around the world had to quickly pivot the standard operating procedures in order to continue getting employees paid. And when certain employee populations were considered essential, there were additional premiums, bonuses and incentive pay that payrollers had to keep track of for tax purposes. Added to all of this were the emergency measures enacted by the different levels of governments that those in payroll were expected to learn, understand and implement in a very short amount of time. These are the reasons that a certain song kept playing in my head throughout the first half of 2020.

“There will always be a new tax, a new benefit, a new law or a new reporting requirement that causes management to lean on payroll… not lean-in to payroll, no, no… but to lean ON payroll to make “IT” happen.”

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Relying on Payroll to Get “It” Done There will always be a new tax, a new benefit, a new law or a new reporting requirement that causes management to lean on payroll… not lean-in to payroll, no, no… but to lean ON payroll to make “IT” happen. Our focus in global business is to gain and maintain compliance across all work locations, which creates a lifelong learner of each payroller. Each of the new taxes, benefits, laws or reports require the payroller to not only learn how the change will affect the payroll processes in place but also how they may affect the business, the employees or the shareholders. During times of sudden changes, like when the pandemic caused many of us to pivot, the learning curve becomes quite steep. It can be a struggle to determine what it is that we do not yet know about the changes. Enacting the changes without knowing all the details may lead to systemwide errors, overpayments to employees or underpaid taxes to authorities… all of which could be considered payroll procedural failures from an auditor’s perspective. Changes Since 2020 All this is not to say that the payroller goes quietly into the payroll unknown with adventures in legal interpretations of quickly drafted legislation.

the worldwide events of 2020 brought us more into the spotlight than many of us wanted or were ready for. “And yes, payrollers around the world made "it" happen, but not without making good use of the multitude of opportunities to create more awareness around historical restrictions placed on the payroll.” Yes, there was much complaining. There were many Zoom calls with more questions than answers. There were multiple levels of tax credits and economic stimulus payments that conflicted, were duplicated or became administratively burdensome without reprieve. And yes, payrollers around the world made “it” happen, but not without making good use of the multitude of opportunities to create more awareness around historical restrictions placed on the payroll. We let it be known that a lot was being asked of us without any additional resources - in fact, fewer resources in many cases. We brought to the attention of leadership the workaround processes that had been developed as a stop-gap for system deficiencies prior to the sudden pivot to full-time remote work.

We have become a much more lively community over the past decade, and

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