6 European payroll challenges for US companies (October 2018)

When it comes to HR and payroll, the European market can be particularly complex for US-based companies. Here's why.

While the 28 member countries of the European Union are unified in some ways, when it comes to HR and payroll, they can vary greatly, from how they implement EU directives to government disclosure requirements. And non-EU member states such as those in Eastern Europe, Switzerland and Scandinavia present unique difficulties of their own.

If you're experiencing headaches coordinating HR and payroll in Europe, working with in-country experts can help you navigate the complexities and streamline your processing. Here are six key challenges that businesses from the United States can face when managing payroll in Europe.

  1. Reporting frequency and requirements

    Each country in Europe has specific requirements regarding what type of information must be reported and when. In some nations, employers must keep up-to-date figures and report information to external authorities monthly. In other countries, government reporting is much less of a burden and only required annually.

    In the United Kingdom, all employers must notify Her Majesty's Revenue & Customs (HMRC) of their PAYE (Pay As You Earn) liability at the same time, or before, they make payments to employees. Reports must be submitted to the government each time the business completes a pay run; failure to comply results in fines. In >Ireland, benefits are taxed notionally through the payroll, whereas in the UK they are reported after the end of the tax year on a special form. In some countries, the tax authorities are proactive. For example, Finnish tax authorities send individuals a pre-filled tax return in the spring of each year. If there is nothing to correct, once checked it can simply be filed for personal records.

  2. Annual leave entitlements and other employee benefits

    Employee entitlements, including annual leave and paid public holidays, vary by country and region. The influence of unionisation and European Works Councils also must be taken into account, particularly as in some countries they can shape everything from company pay rates to holiday entitlements and even the way office furniture is arranged.

    In stark contrast with the United States, the average leave and public holiday entitlement across the EU is 34 days. Members of the EU have a legal obligation to offer four weeks' paid holiday as a minimum as part of the Working Time Directive (WTD).

    French citizens have...

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