The Southeast Asian (SEA) region is experiencing rapid growth and is poised to become one of the world’s top economic zones. With its multitude of nations, industries and cultures, the region presents exciting business opportunities for organizations worldwide.
In general, the term ‘business’ invariably includes the very crucial function of payroll systems, a cornerstone for any operational process. In terms of SEA countries, given the presence of diverse landscapes and cultures, navigating the payroll process and its compliance can pose various challenges.
Although the market is teeming with payroll software products, there remains a disconnect between the requirements of organizations and the available solutions. This gap is especially evident in SEA countries, where the payroll systems are notably fragmented and lack consistency.
Overview of Payroll Process in SEA
In general, each SEA country follows certain rules and regulations when it comes to payroll systems. For instance, the HR payroll compliance for foreign companies in Indonesia covers individual income tax for employees, capital gains tax, social security costs, sales tax, payroll tax, withholding tax and business tax. Payroll processing process reports are typically due by the 10th of the following month, with records required to be maintained for at least 5 years.
In Thailand, HR payroll compliance laws vary depending on whether your business recruits residents or non-residents. Key considerations for business owners include taxable income, value-added tax, social security contributions, property tax, specific business tax and corporate income tax.
Businesses in the Philippines must adhere to various payroll process laws set by the Department of Labor and Employment (DOLE) and the Bureau of Inland Revenue (BIR). In Vietnam, companies are obligated to comply with tax regulations such as individual income tax, value-added tax, social security costs, business tax, withholding tax and concerns related to permanent establishment.
Singapore does not mandate monthly withholding obligations, but businesses are still required to make social security contributions.
Bottom line: if your organization looking to expand to the SEA, you will have to invest in robust payroll software systems that are capable of efficiently managing the payroll cycle for large and diverse workforces spread across countries with different compliance regulations.
Moving Beyond Basic Payroll Systems
An important consideration while managing payroll process in SEA is that your payroll software needs to be robust, powerful, agile and adaptable. It should be capable of addressing these problems such as data leakage resulting from disparate systems, errors stemming from manual processes and potential legal repercussions for regulatory non-compliance.
To handle payroll service in the SEA region effectively, your payroll systems must be able to handle sensitive personnel data from various locations, accommodate diverse pay schedules, meet compliance standards across multiple countries, streamline payroll process times, ensure accuracy and scale seamlessly with business expansion. Failure to meet these can result in severe consequences, including legal liabilities, financial losses and reputational damage to the organization.
Let’s deep dive into some more challenges that SEA countries pose for the payroll processing process:
1. Fragmented Payroll Systems
Despite advancements in HR payroll technology, many organizations in the Southeast Asian region continue to rely on manual processes with minimal automation. Hybrid payroll systems, combining offline and online components are often used with a significant part of the payroll process still being conducted manually.
The systems lack full automation and even integration with their Human Capital Management (HCM) platform or the rest of the tech stack.
Ideally, payroll systems should have the capability to seamlessly integrate with HR, workforce management and all other systems throughout the employee lifecycle so as to enable real-time input processing. A payroll software should also efficiently capture and integrate all payroll cycle-related data, including compensation, time and attendance records, rewards and recognition, performance-related payments, additional benefits and more.
If a payroll software, is unable to capture the above aspects, as is the case for many in SEA countries, it may lead to various challenges for the organization. This includes prolonged payroll processes and payroll cycles, increased chances of errors, reduced transparency and the potential error in documenting critical data, leading to inaccurate payments.
2. Isolated Payroll Systems
The use of siloed systems in the payroll process exacerbates the complexity of an already multifaceted process involving various stakeholders and teams. These include teams responsible for tax, finance, compliance, workforce management and attendance. Besides, multiple stakeholders such as the employee’s line manager, department head and finance head are also involved in the process.
However, the movement of data among these stakeholders results in several challenges including an increased chances of omissions and sensitive information being exposed, leading to security issues and an inefficient payroll process overall. Integrating systems and streamlining data flow is imperative to address these issues and ensure an efficient and secure payroll cycle.
3. Regulatory Challenges for Payroll Systems
With a diverse workforce spanning the SEA regions, the necessity for a multi-country payroll software becomes important. As mentioned earlier, given that different SEA countries have different compliance requirements, a payroll system must be capable of navigating these complexities. It must be equipped to manage a range of complexities associated with diverse organizational structures, variations in payroll cycles and distinct compensation structures tailored for different employee groups, among other factors.
In the absence of this, organizations may encounter challenges including risk of non-compliance, lack of audit trails, breaches of trust and the potential for inaccurate payments. Managing these regulatory and compliance issues effectively is essential to ensure legal adherence and maintain the integrity of payroll processes.
4. Dissatisfied Employees Due to Poor Payroll Systems
In today’s era of self-service empowerment, many organizations prioritize providing employees with seamless self-service options to enhance their overall experience. However, with siloed payroll systems in place, employees encounter difficulties in accessing their payroll information independently.
They often resort to emailing their HR or finance teams for details regarding their benefits, compensation, tax implications, salary advances and other related queries that could resulting in a less efficient and satisfactory experience for employees. A payroll software needs to offer employee self-service portals to ensure employees do not have to run from pillar to post to address their queries.
Unified and Adaptable Payroll Software: Solution to a Solid Payroll Process
Although inefficiencies in the payroll process may not immediately disrupt business operations, they can build over time, eventually posing significant challenges.
If you are looking to operate in the SEA region, you will need to invest in a payroll software that offers you features like:
- Multi-Country Payroll
- Efficient Payroll Process
- One-Click Payroll
- Integrated Payroll System
- Managing Income Tax
- Flexible Benefit Plan
- One-Click Final Settlement
- Statutory Receipts
- Employee Self-Service Portal
Check out solutions like Akrivia HCM that is specifically designed for organizations in Southeast Asian countries. Akrivia offers a unified and adaptable payroll software designed efficiently to transact with speed.
With 9 products and 40+ modules, it also offers a plethora of additional features and capabilities designed to enhance efficiency, minimize errors and shorten payroll processing time all the while ensuring compliance and control.
For more information, schedule a demo today!
