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Business in the Asia-Pacific region is booming: In 2001, for example, the region accounted for about one-fourth of all global merchandise exports. By 2014, that figure had risen to one-third. That same year, Asia-Pacific businesses generated more than 40 percent of global Gross Domestic Product (GDP). Overall, economic output for the region quadrupled over the last 20 years.
In the face of such rapid growth, many Asian businesses are finding themselves scrambling to keep up. Payroll, in particular, tends to be an area of particular concern. It’s one function in which there’s simply no room for the kind of error that can upset both employees and regulatory agencies.
Here are some of the primary challenges HR professionals in Asia are grappling with:
Varied regulatory environments
While there are differing opinions as to which countries are included in the Asia-Pacific category, it’s generally considered to include everything from Mongolia to New Zealand and from Central Asia and Iran to Kiribata. That means that there are many different national governments, each with their own labor laws and regulations as well as their own standards for things like overtime pay, sick pay, holidays, etc. In Vietnam, for example, female workers are entitled to a six-month maternity leave, while Hong Kong only mandates 10 weeks at 80 percent pay.
In addition, companies operating in APAC must constantly keep up with each country’s regulatory changes. For example, Japan’s “My Number” law went into effect January 1, 2016. That law requires all workers to have a number that is correlated with personal information like tax reporting, medical records, and bank accounts. Businesses operating in Japan had to collect and manage every employee’s number, and many had to upgrade security to be in compliance with government standards.
The number of business leaders in Asia who are managing multiple systems is 50 percent higher than the global average, and the complexities involved in that have led many companies to handle payroll on a local level in order to take advantage of on-the-ground insight into compliance issues. However, localized payroll processing is inefficient and expensive.
Lack of documentation for current processes
In many cases where payroll functions are localized, there are no documented processes. And, if there are documented processes, they often don’t reflect reality. They’re not compatible with “the way things are done” locally – so employees ignore them. Not only does the lack of documentation present compliance challenges, it carries the risk of major disruption when a key employee leaves, taking their knowledge of the payroll system with them.
Currency differences
Operating across multiple countries in APAC also means dealing in differing currencies and regulations regarding those currencies. In addition, constantly changing exchange rates add another layer of complexity that can be somewhat reduced by localizing payroll functions. The tradeoff is reduced efficiency.
Weak reporting capabilities
Workforce costs and productivity are key business metrics. However, it’s difficult to analyze those factors when each unit is reporting different metrics or using customized calculations for common metrics. This lack of standardization also increases the risk of audits and regulatory violations.
These are just a few of the pain points affecting all businesses working in the Asia-Pacific region. Don’t wait until a crisis to address them. Start investigating your options (outsourcing, handling payroll functions in-house locally, handling them in-house from a centralized location, etc.) now so that you can make an informed decision when the time comes.
