How complex is payroll in South America? – An overview
How often do you receive a paycheck? Once a month? Twice a month? Weekly? Irrespective of how often you get it, it adds up to your annual salary. But, in contrast to the 12-month payroll followed everywhere, 13th and 14th-month wages are mandatory in Peru: one in July and the other in December. Here are some of the complexities that one could encounter while administering Payroll in South America:
Determining the minimum pay for employees within a country is essential, but every country has a different minimum pay bar defined for its employees. While Ecuador tops the list with $425 per month, Venezuela’s minimum wage is less than $30. Each individual’s pay needs to be above the limit set; if not, it becomes a compliance issue. This directly translates into just one thing –penalties.
Employees are compensated for the hours they invest in aiding the company’s growth. When they spend more than the stipulated time at work, they need to be fairly compensated for their efforts. However, each country has a different way of paying for additional hours.
In Argentina, overtime during weekdays is paid at 150% whereas during the weekend it becomes 200%, i.e., double the salary. The overtime pay on the weekday is 200% of the regular wage and 250% during the weekends in Uruguay. If the overtime policies of two countries that share borders are drastically different, you can only imagine what it is like in the other nations within the continent.
Leaves and Holidays
The annual leave entitlement for employees in Uruguay is 20, while for employees in Peru, it is 30. However, the employees in the former country get an additional annual leave for every four years worked.
In Uruguay, fathers are entitled to a 13-day paternity leave period. This is quite generous compared to the 5-day paternity leave policy in Chile. However, post the 7th week after birth, the mother can transfer all her maternity leaves to the father in Chile.
Bolivia has a flat tax rate system. All the employees who earn pay a 13% income tax on the income made. In contrast to this, most South American countries have a progressive tax rate system with different tax rates for different income brackets. Handling different tax rates is a time-consuming and demanding task. Computing tax rates for other employees according to their income brackets only amplifies the challenge.
In a nutshell, like different countries have different cultures, the payroll culture varies between borders. It could be the 13th or 14th-month pay for some, while it’s just 12 for most. Administering payroll globally is a task, but one can ace it effortlessly with the right payroll provider.
Global Payroll is an art. To get it right, you got to be skilled. Reach out to us to know more about Global Payroll.