‘’A Sunday well spent brings a week of content’’ – Proverb
As the proverb suggests, if one should spend their Sunday evening well – preparing for the week ahead and tidying away the previous week’s clutter – then the next 7 days to come will promise to bring an air of content and organisation. With this in mind, is it not wise to spend the latter half of December, tidying up the previous year and preparing for the new (financial) year to come?
As many organisations’ financial year comes to an end, and preparations begin for the next – schedules get busier, deadlines loom closer and the to-do list can seem never ending. With this in mind, Immedis have put together an overview to coordinate rounding off the financial year, and preparing for the payroll year ahead.
Crossing the ‘I’s and Dotting the ‘T’s in your Payroll Year End
When operating a global payroll, employers have to deal with many different sets of rules. While every country is different and has their own nuances – there are, however, similar objectives and challenges around the world.
As we approach Christmas, and in Europe’s case – a shutdown of operations for in some cases up to 2 weeks – it is important to note that this is not the same in every jurisdiction. While many countries operate on a calendar tax year basis, remember that December 31st does not always mark the payroll year end in every country. Therefore, when operating in multiple jurisdictions, it is important to ensure you have a calendar illustrating the global view.
Regardless of whether or not you are facing year end challenges in December this overview will be helpful when you reach the relevant year end in any country (as the challenges are similar).
When we talk about payroll year end considerations we can break this down to 2 separate categories:
- Closing out of the current year –the look back period
- Opening up the new year – the look ahead period
Closing out the Current Year
Looking back over the past year is both a time to reflect on the past 12 months but more importantly, a time to review your employee data and ensure both accuracy and consistency. Some factors to consider when looking back:
Year end filings with tax authorities – will this be done online or by paper? What are the country specific deadlines? Who in the organisation holds responsibility?
- A year end ‘health check’ is advisable in order to make sure all details are in order – many treat this as a mini internal audit
- Reconciliation calculations may need to be done (for example where estimates may have been needed during the year)
- Country specific arrangements such as modified payroll must be considered
- It is important to review benefits in kind, fringe benefits etc and to ensure all have been captured and recorded correctly
- Employee year end statements must be prepared
- Year-end bonuses must be considered
- Additional country specific year end filings may be applicable – for example, those relating to Employees who have left during the year must be considered – they will need to be reported in the filings
- Timing of year-end payments to employees and tax authorities must be reviewed – this especially important when working across multiple jurisdictions as there will be different holidays and banking hours – careful planning on timing is needed here
- Payroll operators should check all new hires during the year and make sure all the details on file are correct and that nothing was estimated
- It is important not to forget to check short term employees – those that commenced and ceased in the year
- Consider how employee documentation will be delivered – soft copy or hard copy?
- Don’t forget to review fully equity transactions, particularly where there are mobile employees
- Mobile employees – make sure they complete their calendars for review to ensure that all obligations have been met globally
Opening up the new year
While looking back can be a time to reflect, looking forward should be used as a time to plan and more importantly, review all your data to start the new year fresh, consistent and with proper procedures and information already in place. Factors to consider looking forward:
- Verify all the data on file for current employees
- Check for any employee changes in their personal circumstances which may impact on the payroll
- Review employee withholding forms and make sure that all is set up for the new year
- Review benefits affecting payroll – there may be changes in rates for the upcoming year
- Consider salary reviews which may be effective from 1 January
- Consider software updates required – have you renewed your payroll software? Can this be done before the holidays?
- Pension communications may need to issue to employees for the upcoming year
- Consider salary reviews/increases
- Changes in tax and social security legislation may affect the specific treatment of compensation items and restructuring may be an option to consider
- Are there any forms to be ordered for the new year?
- Prepare the global calendar for the year ahead – consider all holidays, public holidays etc in all the relevant countries
- Consider any changes in employment law and data protection regulations globally
December is challenging as it is a short month but often times people are shocked by how challenging January is. Start your new year organised- with all your data up-to-date so you can put your focus on your business strategies, ensuring compliance and actioning best practices moving into the next 12 months.
Be prepared before you close up shop for the Christmas period!
Christine Keily is the Chief Tax & Payroll Officer at Immedis.
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