APAC Payroll Considerations and Challenges for Multinational Businesses

APAC Payroll Considerations and Challenges for Multinational Businesses

The Asia-Pacific region (APAC for short) is made up of an extremely diverse group of nations. One common thread according to the International Monetary Fund is the strength of their economies, as the APAC region is the leader in growth with projected 5.5% for 2017. There is a cloudy future beyond 2017, but it is unclear for exactly which individual nations.

Trying to address APAC payroll considerations can only be done by breaking the total geographic region into smaller groups with similar cultural threads. Depending on who you ask, you may even get slightly different answers on which countries are included in the APAC region.

APAC Payroll Considerations by Region

For the sake of this post, we will break up the individual countries in the APAC region into smaller subregions that have similarities. This will allow us to view the considerations and challenges of APAC payroll as a whole through each subregion. The subregions and their respective countries are listed below along with some notable considerations to keep in mind while thinking about doing business and running payroll in the APAC region.

 

East Asia

The countries comprising East Asia range from Mongolia to the north, China (including Hong Kong and Macau), Taiwan, Japan, North Korea and South Korea.

• Ease of Doing Business

According to World Bank Group, Hong Kong and Taiwan always rank high in ease of doing business. Many of the other countries are middle of the pack at best. Be prepared to jump through some hoops outside of those top performers.

• The Size of East Asia

China alone has a population that is equal to North America, South America, Australia, New Zealand, and Western Europe combined. If you factor in the other nations of the East Asia region, you are looking at approximately 1.63 billion people – more than 5 times the USA. Be prepared to face many different cultural subsets and local regulations within these massive populations.


South Asia

The countries making up South Asia include Afghanistan, Bangladesh, Bhutan, India, Maldives, Nepal, Pakistan and Sri Lanka.

• Ease of Doing Business

Infrastructure may be a challenge in setting up business in some of the countries. Although, according to World Bank Group, getting electricity in India has improved significantly in the past year and its ranking in this category is up by over 20 points.

• Large Cultural Differences

The South Asia region is one of the most distant in terms of cultural differences compared to many western nations. For instance, Bangladesh follows a Sunday-Thursday workweek.


Southeast Asia

Mainland and maritime Southeast Asia is comprised of Brunei, Cambodia, East Timor, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand and Vietnam.

• Ease of Doing Business

The United States invests more in the ASEAN countries than any other Asian nation, including China. The ASEAN region is a rising economic powerhouse with good infrastructure and a growing middle class. Singapore was at the top of the chart in the World Bank “Doing Business” rankings in 2015 and 2016 with New Zealand.


Oceania

This is an interesting subregion. As you can probably guess by its name, it is entirely located on the ocean.  Oceania is comprised of the following island subregions: Australia, Melanesia (includes Fiji, Papua New Guinea, and others), Micronesia (includes Guam, Kiribati, Marshall Islands and others), Polynesia (includes Hawaii, Samoa and others) and Zealandia which is basically the New Zealand continent.

• Very Low Population Density

Australia, in particular, is notable in this metric, for instance, it is about the same size of the lower 48 states in the USA, but has a population roughly half the size as the state of California. Australia has an average population density of 3 people per kilometer, New Zealand has 16, and then compare this to the United States with 32 per KM or Singapore with 7,988 people per KM.

• Ease of Doing Business

On average, the Oceania region is one of the easiest for doing business. This is of course largely due to New Zealand consistently placing first and Australia typically in the top 20 of ease of doing business.

 

APAC Payroll Challenges by Region

East Asia

• Timing of Funding

Funding payroll in East Asia can take longer than expected; five days for internal transfers in Japan, ten days for external transfers into Taiwan, and five days for external transfers into South Korea. In these countries, treasury management is usually the key for payroll efficiency.

• Corruption in Government (China)

China is famous for corruption being somewhat commonplace, despite a very large anti-corruption effort currently underway. Be prepared for the occasional bribery or shakedown on compliance issues or to speed up a process.  Find a trusted partner that works ethically, legally and compliantly.


South Asia

• Difficulty for Businesses

The South Asia region as-a-whole ranks in the bottom half for ease of doing business. Two notable areas in regards to payroll where the region is in the bottom third are paying taxes and enforcing contracts. India is also famous for requiring lots of paperwork for anything compliance concerned.

• Creating a Company in India

Despite India’s high rankings in employee education and economy growth, starting a business in India can be incredibly difficult. There are roughly three times as many procedures to complete when compared to OECD countries and the average timeline is also 3X. If speed is paramount in starting or operating a payroll in India, perhaps a third party partner is your best option.


Southeast Asia

• Government Instability and Corruption

Singapore is excluded from this challenge, but the Philippines, Vietnam, Thailand, and Myanmar have all found themselves in the news recently for instability, conflicts, or corruption. Definitely consider an in-country expert who can serve as your warning system for upcoming tensions or help you avoid unnecessary headaches.


Oceania

• Difficulty in Trade

Although this fact is not directly related to payroll, Australia and New Zealand do rank very difficult for trading across borders. If you are starting operations there for trade, make sure to note the difficulty and be prepared for high costs when it comes to importing and exporting.

 


 

Please note that due to the size and diversity of the APAC region the list above is nowhere near exhaustive. Please consider sources like the World Bank’s “Doing Business” scores or Thomson Reuters “Practical Law” to seek out more detail on each country.

Also, if you have any particular questions about APAC payroll as a whole or a specific country, please contact us. We are happy to help!

 

**This article is for informational purposes only. It is not intended to constitute legal advice.

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