For employees, payday is probably one of their favorite days, but for most companies, the process of payroll - and getting that payment to their hardworking employees - can be a time-consuming and tedious task. Luckily, there are payroll services that can relieve the pain, but not all of them can provide seamless payroll payments when working on a global scale. For international employers, it's important to pick a provider that has the partnerships and technology in place to help significantly reduce financial burden and risk.
The Outdated Ways of Paying Foreign Payroll
When it comes to paying staff overseas, many companies aren't aware that there is technology that provides a more accurate, streamlined and cost-effective way to send payroll. Instead, they are following tradition and simply using a bank, or multiple banks.
The two most common ways companies pay employees overseas are by sending payments directly to employees' local bank accounts or by running multiple bank accounts in multiple currencies. Both of these options typically leave companies vulnerable to costly wire transfer fees and exchange-rate risk.
If a company sends payments directly to overseas employees from its local bank, it may have to pay a wire transfer fee per payment to the bank. It also may have limited visibility to the exchange rate used and could incur an additional fee to convert the currency. This could be compounded when a company has to pay employees in multiple countries with different currencies.
For example, if you own a company in the United States and have employees in The United Kingdom and Germany, you will have to pay your employees in British pounds and in Euros for your German employees.
A second option is to hold bank accounts in each country the company has employees. While this option allows a company to also pay suppliers or make tax payments from the local bank account, it may open the company up to two levels of bank fees - at home and abroad. When the money is sent from the company's local bank overseas to the other banks, it could incur wire transfer fees and may still not have eyes on the exchange rate being used. Once the money arrives in the foreign country bank, there could be additional wire fees to transfer the money to employees.
Back to our example. If your U.S. company has employees in the U.K. it may want to open a British bank account to make payroll payments, but the U.S. bank and the British bank could both charge fees to transfer the money. This is also an added step to get payroll to employees.
What's the Solution?
To arrange payments, a company can simply upload a file containing its international payroll details. The company then funds its account in its home currency and, using the file data, the international payments provider (IPP) makes the payments directly to overseas employees in local currency. At the same time, the company gets eyes on the exchange rates and any fees up front.
Beyond payroll, an international payments account with WorldFirst also enables companies to pay suppliers in other countries from the same account. If a company knows it is going to have to make continuous payments to a supplier and would like to keep the same exchange rate, the IPP can even set up forward contracts to lock in the current rate for an extended period of time.
An added benefit of working with international payments provider is the attention given to compliance and data protection. With more and more companies working across borders in an increasingly digital way, the concern regarding customer and employee-data breaches are increasing.
For companies already working with a payroll services provider, streamlining their global payroll with an international payments solution will simplify the process and could reduce costs.