For many of today’s business owners, outsourcing payroll is viewed as an affordable, secure and time-saving option. Whereas the thought of calculating wages, paying employees, filing tax returns, and performing various other account-related duties may give some people a headache, one misplaced decimal point or an incorrect tax filing can lead to a full-on migraine or worse some form of corporate financial penalty.
There is a common misconception that payroll outsourcing and payroll compliance are straightforward. Think again. In the last year alone, one of the biggest names in the tech world underpaid thousands of its workers across dozens of countries, while another company, a nation-wide supermarket chain, underpaid close to 8,000 of its workers to the tune of over US$100 million. It may seem that non-compliance does little to damage the brand making the headlines, but what does it do for employee relations?
Of course, the cost of non-compliance is not only measured by the penalties and surcharges incurred, but also the time it takes to resolve any issues identified by the relevant agencies. In addition, no employee wants to discover they are liable for additional tax because their employer made an error. Large, listed international companies are required to track and report all non-compliance issues because at the end of the day, no one wants to be hauled up in front of the CFO because of a late filing.
In total, there are seven key areas where you need to look carefully when considering whether or not to use a payroll outsourcing service. Here, we will cover three key points that include, 1) statutory returns, reports, and government websites; 2) changes in regulations such as tax reductions and Social Security Fund contributions; and 3) tax implications for benefits-in-kind.
For many smaller companies that have a set workforce earning a basic monthly salary, there would be few, if any changes, to their tax obligations. These companies would probably prefer to continue processing their payroll internally as it has always been done that way, it appears to be convenient, and it is fairly straightforward. But think again. A slight change in personnel or a regulation overhaul as we’ve seen during Covid-19, can mean added expenses when you consider the time it takes to manage the new process.
For companies doing business in Thailand, statutory returns, reports and government websites and / or platform are typically monolingual, as are systems that deal with tax, social security fund (SSF), workmen’s compensation fund, student loan fund (SLF), and Legal Execution. Choosing a payroll outsourcing service offers companies a route out of this language problem by giving them local knowledge backed up with global expertise.
Likewise, when there are changes in regulations such as tax deductions, SSF contributions, and new measures for financial support to employers / employees, it can be challenging to interpret the new rules. For example, over the past few years there have been six changes in the SSF contribution rates and four announcements relating to Provident Fund (PVF) contributions. During the same period, there were also three updates relating to SSF benefits and five new tax deduction allowances. Also, did you know there were two financial support packages worth up to THB 3m for employers in 2021?
And thirdly, as in most countries, tax implications for benefits-in-kind and staff welfare can be complex. Let’s take, for example, the many kinds of incomes and benefits that an employer might offer their staff such as school fees, complimentary flights, New Year gifts, company outings, insurance, per diem, etc. All areas relating to benefits-in-kind require specific tax treatment. Again, are you aware that there are over 100 types of assessable income that are exempt from income tax?
Who can you rely on to know whether or not the health insurance you provide to your employees is a taxable benefit or whether a sales manager’s mileage reimbursement is taxable? Any error in calculating the taxable income and the tax to be paid will result in penalties and surcharges, perhaps even damage to your brand’s profile, never mind employee relations.
At Mazars in Thailand, it is our duty to assist our clients in fully understanding the rules, where there are benefits, and how to keep on the right side of the tax authorities, thus easing their pain points. If you would like to understand how Mazars in Thailand’s global payroll platform can be tailored for your company’s requirements, please contact us today at +66 (0) 2670 – 1100.
In our next Business Challenges column we will continue to examine the benefits of outsourcing payroll with a detailed look at SSF compliance; expatriate employees; common compliance requirements; and a range of frequently asked questions.