3 Things You Need To Know To File Your Employee Taxes Correctly

Rapid urbanisation has opened up a wider range of job opportunities and mobility within the workforce. While this is certainly beneficial for organisations, it also puts a strain on the HR department. Tracking payroll and statutory tax reporting becomes even more important and critical as employees gradually become more mobile and cross borders for various job opportunities.

The three stages of payroll processing

Payroll processing can be broadly categorised into three main phases:

Preparation and consolidation of payroll data

The first stage is typically the most administrative part of the payroll process. It involves collecting and verifying the accuracy of payroll data. This would include employees’ overtime, fixed allowances, reimbursements, and bonuses. There may also be the need to consolidate the list of new hires as well as resignees that may require specific forms declarations to statutory boards.

Payroll processing

The second stage typically requires a lot of time and effort to run the payroll calculations while ensuring that they are accurately computed. Payroll reports will need to be reviewed and approved by the manager before performing the salary payments. Payroll staff also have to ensure that salaries are disbursed to employees on time and check for any payment rejections from the banks. Payslips are also sent out to the employees.

Statutory tax filing and mandatory contributions

The last stage would be to submit the mandatory taxes and provident and pension fund contributions. The amount of contributions would vary from country to country. In some cases, it is also dependent on the amount of salary that the employee draws.

In each stage of the payroll process, it is imperative to conduct periodic payroll audits to ensure internal efficiencies. While most payroll professionals tend to place a lot of emphasis on payroll processing in bid to maintain high levels of accuracy, the last stage of statutory tax filing and mandatory contributions are often overlooked.

Tax requirements often vary from country to country

The main challenge when it comes to managing regional payroll is ensuring compliance to the local statutory laws. Labour practices, working hours, and pension fund contributions vary from country to country. When managing statutory contributions, there is simply no room for error. Every submission to the respective statutory board has to be a hundred percent accurate. Given that labour laws are constantly evolving across countries, it is crucial to stay updated and factor in complexities when processing payroll and statutory contributions. Non-compliance can ultimately result in hefty fines and penalties.

Common information required when submitting taxes

Regardless of the country that you may be in, the key information required to submit taxes are fairly similar across the countries. This would usually include:

1. Registered Company Name
2. Registered Company Address
3. Names of the employees
4. Statutory Employee and Employer Account Numbers
5. Monthly Employee and Employer Contribution Details

Payroll software today has made it easier to extract these information with high accuracy and in a compliant format. Given that most payroll vendors would have set up the payroll software in a way that is compliant with ongoing changes in labour laws and employment legislations, this makes it easier for HR to export the relevant information while ensuring adherence to the relevant regulations.

For payroll professionals that manage regional payroll operations, leveraging on a cloud-based payroll software may help to facilitate the tax submissions. Concurrently, it allows HR to track the submission status and historical records to ensure compliance.

There are some organisations that outsource their employer and employee tax filings to an external service provider. While this may incur some hefty upfront costs, the benefits that they bring about are plentiful. For example, these payroll vendors will only use approved and finalised payroll results before processing the employer and employee tax submissions. Their tax submission system typically allows for bulk payroll upload, which facilitates the submission process and keeps it efficient and accurate. For countries that support electronic statutory submissions, organisations simply have to grant authorisation to the external payroll provider to allow them to perform the filing on their behalf. It is easy and hassle-free where statutory compliance is taken by the payroll provider.

Regardless of whether submission of tax contributions is done in-house or outsourced to an external provider, employer and employee tax contributions are crucial as these involve submission of payroll details to the respective agencies. Accuracy and timely submissions are crucial in minimising errors to ensure that tax contributions are correctly captured within the employees and external agencies’ records.

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