How Global Payslip Requirements Are Changing
Sep 26, 2019 | Topic: Compliance
In addition to being perhaps the most eagerly awaited document within any company, the payslip also serves as a cornerstone of the entire payroll process. In the majority of countries, the provision of a payslip isn’t just a matter of payroll best practice, but rather a legal requirement of employment law that is a globally accepted norm.
Although payslip expectations are shared across the majority of the workforce, the specific content detailed on the slip can vary significantly across countries, as can the method and timing of delivery. And to further complicate matters, these details and requirements change on a regular basis. Here, we take a look at some of the ways payslips are used and how the laws regulating them are evolving.
Why Your Payslip Matters
While the specific uses for a payslips may vary from country to country, in general the payslip functions as the basic record of what the employee has earned every pay period. For some countries and jurisdictions, the payslip may be required to be presented by the employee to the social security authorities on a regular basis to claim income support benefits. It will also be used to support applications for credit, such as for mortgages and credit cards.
It is worth noting that the requirement to provide a payslip usually only extends to active employees. Many companies operating pensioner payrolls will dispense with the production of a regular payslip once workers retire and switch to receiving a pension. This reflects the fact that pension payments are generally more stable than a salary (no opportunities for overtime and other variables) and also that the law does not compel their production for pensioners. The fact that a payslip won’t be arriving each month should be explained as part of retirement preparations to forestall queries from the newly retired.
How Payslips Are Changing
With the move to monthly electronic pay reporting, more countries are ceasing the issue of a year-end income certificate. In these cases, the payslip becomes even more important in terms of confirming what the employee has earned and been deducted each year.
The manner of provision of payslips is changing as well. What was once a mandatory paper document is often now an electronic document. Most jurisdictions around the world now accept e-documents as being valid pieces of evidence in court cases, and in most countries, e-payslips have become an accepted part of delivering the required payslip document.
Leading by Example
The law in France changed in 2017 to allow for a presumption that the payslip would be provided as an e-document but allowing an employee to formally request a paper document if they wished. Previously, the employee had to actively consent to receiving an electronic payslip. The Singapore law automatically allows for either a soft or hard copy (which can also be handwritten). It is a best practice globally to specify how your payslip will be delivered to your employees. Also, if e-payslips are made available via a self-service portal, it is best practice to specify how employees (and ex-employees) can access both their current and past payslips.
The prize for most modern payslip system must go to Mexico. The country has switched to a 100% electronic delivery of payslip information known as the Certificado Fiscal Digital por Internet (CFDI), which all businesses must provide regardless of size. Mexican law requires that all pay calculations and results must be recorded with electronic receipts, and the payslip information is provided electronically to both the employee and the tax authority (SAT) simultaneously.
The move is an anti-fraud measure, and SAT provides all taxpayers (employees) with a payroll viewer to allow them to confirm the data that has been filed on their behalf with SAT. This prevents the employer from presenting one set of information to the employee and a different set to SAT. Electronic receipting in Mexico is not limited to payslips – it extends to any commercial payment invoice. Revenue authorities are watching the Mexican experience closely, and it is frequently held up as the desired method for many countries in terms of pay and tax reporting.
Understanding the mandatory payslip requirements for each jurisdiction in which you are responsible for payroll is important for many reasons, from meeting employee expectations to complying with local law. Working with an experienced global payroll provider can help ensure your payroll is line with requirements across your organization.