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The Hidden Complexities of European Payroll

Jan 26, 2012 

Payroll, wages, compensation, benefits, emoluments and salary are all different words for the same concept – giving workers payment for their services. Yet, with so many definitions for the same idea, it’s no wonder that the issue of payroll is so complicated. And, as companies with operations in Europe have come to realize, the continent is home to many hidden complexities regarding payroll, ranging from universal European Union directives to the policies of individual countries and regions.
Any company planning to expand operations to Europe will need to understand these rules to ensure that their employees are compensated properly. A good starting point is to become familiar with the following important, yet often hidden, complexities of European payroll:

  • Collective Bargaining Agreements – About two-thirds of all employees in the European Union are covered by more than 1,000 different collective bargaining agreements. These aim to define specific standards regarding such areas as minimum wages, overtime calculations, holiday entitlements and sickness compensation.
  • Sector Agreements – Within an existing collective bargaining agreement, some companies will jointly agree to apply different rules. For instance, some companies will apply the minimum wages established by the collective bargaining agreement, but others will apply other agreed upon minimum wage rules.
  • Company Policies – While collective bargaining agreements set up rules for multiple organizations, there are other rules developed at the company level. It is at this level, for example, that working time laws for the individual company are ultimately decided upon and applied.
  • Third Parties – In addition to the rules set up by government bodies, collective bargaining groups and companies themselves, payroll must also comply with a number of third parties and their regulations. These include social security, unemployment agencies and pension and other benefit providers.
  • TUPE Laws – Transfer of Undertakings (Protection of Employment) laws are designed to protect employees working for companies with a history of mergers and acquisitions, as the merged company and the previously existing companies all have their own individual policies. TUPE also protects employees from being let go during business transfers.
  • Pay Slips – Just as in the United States, there are certain items that must be included on employee pay slips. Such required items include gross pay, net pay, amounts and purposes of deductions and method of payment. Additionally, there are different legal requirements for paper versus e-pay slips.

Despite the challenges of understanding such complexities, they are of crucial importance for any company with plans to hire payroll employees in the European market. But such companies don’t have to navigate these confusing laws alone. By partnering with a trusted advisor experienced in the payroll systems of countries in Europe and beyond, like CloudPay, organizations can be sure they compensate their employees in accordance with the most complicated regulations.


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