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Thanks to digitalization, companies and organizations are no longer restricted to recruiting from the region where they are based. Instead, businesses looking to hire new staff can tap into a global talent pool and onboard promising recruits regardless of their location.
However, hiring in different countries around the world comes with a whole range of global payroll challenges. One of them is being familiar with the local payroll customs of each new hiring destination which include payroll frequency and end-of-year bonuses.
In this article, we will therefore look at which pay frequencies are standard in various countries around the globe and what their respective labor laws say with regard to 13th month pay. But first of all, let’s define what these two terms actually mean.
Pay frequency, sometimes also referred to as payroll frequency, describes how often you run payroll and issue payments to your workers. So it’s basically the time period between two subsequent paydays. Defining pay frequency for your employees is the very first step you need to take before you do anything else that relates to payroll.
Payroll frequencies vary from country to country and sometimes even from company to company. The existing payroll frequency options are:
weekly payment - means that your employees receive 52 paychecks per year
biweekly payment - means that your employees receive 26 paychecks per year
semi-monthly payment (sometimes also called bimonthly) - means that your employees receive 24 paychecks per year
monthly - means that your employees receive 12 paychecks per year
How often you have to run payroll depends on several factors. First of all, there are several countries which have legal requirements for pay frequency - and sometimes even set payday rules. Second, pay frequency might be regulated in certain industries by collective agreements - even if there is no regulation on the legal level.
A 13th month salary, often also known as 13th month pay or end-of-year bonus, is an additional payment made to employees to reward them for their work. The 13th payment is usually distributed at the end of the year but there are also countries where it is paid out at different times - e.g. in line with other cultural dates or festivities - or in several instalments. Hence the terms “holiday money” or “Christmas money” or even “Christmas bonus” which are sometimes also used.
While employees in some countries are far from receiving even a fraction of what a 13th salary would be, others even get rewarded with a 14th month’s salary. With norms and customs varying between jurisdictions, you should make sure you are familiar with the expectations your new employees in foreign hiring destinations will have concerning extra pay.
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Generally speaking, a well executed payroll which meets your employees’ expectations is the first step of winning your employees’ trust. Failure to deposit the right amount of money at the right time to your employees’ bank accounts will result in a lack of commitment to their job and decrease their loyalty to you as their employer. This refers to payroll processing in general but becomes even more significant when running global payroll.
With norms and customs concerning the 13th salary being highly location-dependent, getting it right in every single country you have employees in is a big challenge for global payroll processing. If you hire remote employees in a country where 13th pay is not mandatory but customary, it’s likely your employees expect you to provide it. The same goes for pay frequency. If employees in your new market are used to being paid on a biweekly basis and you decide to issue payments once a month to make matters easier for your payroll team, you will probably end up having unhappy employees.
However, employee expectations are only one aspect why respecting local norms and customs is important when it comes to pay frequency and end-of-year bonuses. The other is of course compliance. When hiring overseas and processing payroll on a global scale, complying with labor and tax laws in all hiring destinations is imperative as failure to do so could result in penalties and fines.
Now, it’s time to dive straight into payroll customs around the world. Below, you will find an overview of popular destinations for global expansion and remote hiring. For each destination, we will look at pay frequency and payday rules and discuss whether a 13th month salary is mandatory or customary - or not common at all.
Employees in Australia must be paid at least once every month. The exact payday is subject to the individual employment agreement. An end-of-year bonus is not mandatory, so it’s up to the employer to decide whether or not to reward employees with additional pay.
Employers who hire remote employees in Brazil have to make sure that pay frequency is not less than once per month and that payments are issued no later than the fifth day of the following payroll cycle. However, in many cases, the agreed payday is the 30th of each month. Paying remote employees in Brazil a 13th month bonus is compulsory. The payment is due at the end of the year in November or December.
In China, pay frequency is usually once per month. 13th month pay is customary but not mandatory. If offered, the bonus should be paid before the Chinese New Year in early February.
Payroll in Denmark is usually operated on a monthly basis. A 13th month bonus is not mandatory. What’s common is companies offering performance-based bonuses.
A typical pay period in France is one month, with payday being somewhere at the end of the month. Although there is no law that grants employees the right to a 13th month bonus, some collective agreements do.
The usual pay frequency in Germany is once per month. The employee’s payday is defined in his or her employment contract, with the last day of the month or the first day of the following being a common standard. A 13th month salary is not mandatory but very common.
Employees in Hong Kong are usually paid once a month. 13th month bonuses are customary and are normally paid either in December or before the Chinese New Year in February.
For your remote employees in India, payroll frequency must be once per month or less. The Payment of Bonus Act makes the payment of a 13th month salary mandatory.
Payroll frequency in the Netherlands is monthly. Although there is no law which stipulates the payment of a 13th month salary, employees usually receive an annual bonus between May and June to be used as holiday pay.
Biweekly or bimonthly payment is mandatory when hiring workers in the Philippines. 13th month pay is compulsory in the island state and should be issued in December or in two instalments in June and November.
The usual payroll frequency in Portugal is once per month but employers are free to set their employees’ payday as they please. Similar to Spain, workers in Portugal are entitled to a 13th and 14th salary which need to be paid in June and December of each year.
Employees need to be paid at least once a month - the latest is seven days after the pay period ends. 13th month pay in Singapore is not mandatory but customary. It is known under the term “Annual Wage Supplement” (AWS) and usually paid in December.
Remote employees in Spain need to be paid at least once per month - payday is usually at the end of each month. A 13th salary is mandatory as well as an additional 14th salary. While the 13th month bonus is due in December, the 14th month bonus is to be paid out in July.
Payroll in the UK is usually run once a month. In most companies, payday lies between the 25th and the 30th of each month. A 13th month salary is not mandatory but performance bonuses that are paid annually are quite common.
Regulations on payroll frequency vary from state to state. According to a survey conducted by the U.S. Bureau of Labor Statistics, the most common pay frequency in 2020 was biweekly (43 percent), followed by weekly (33.3 percent), semi-monthly (19 percent) and monthly (4.7 percent). There is no 13th month bonus in the U.S.
The more countries, the more complex global payroll. In every new market, there are different employment and tax laws to comply with and different payroll calendars for when to make payments and contributions to different tax and social security authorities. Don’t let the burden of global payroll keep you from focusing on your business’s growth!
Lano offers you a smart global payroll solution for your organization. Find local payroll providers in any of your hiring destinations thanks to our network of payroll specialists in over 130 countries. Then consolidate all your data in one single platform, allowing you to keep track of employment costs and payroll processes for your entire global team.
Already got several payroll providers you are working with? No problem! Bring them along and easily integrate them into your payroll system with our Lano API. Whatever your global payroll needs are, we’ve got you covered! Get in touch with us today to find out how to simplify your global payroll process.
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