Four Core Ways Technology Saves You Time and Money With International Payroll
March 3, 2015
Four Core Ways Technology Saves You Time and Money With International Payroll
Global payroll can be challenging with many operational hurdles that can multiply overhead costs. Learn how the latest innovations in technology can provide significant ROI for your organization.
By Jeff Matheson
Every payroll manager needs to ensure that employees receive the right amount of pay, on time—it’s that simple. There are enough moving parts in this process to coordinate for a U.S. business with staff based at home, but for those with a global reach, the number of moving parts grows exponentially to a seemingly endless checklist, each item threatening to generate operational hurdles and multiply overhead costs. Consider unique tax and contractual rules that may need deciphering, in addition to cultural nuances around benefits, holidays, overtime, and payment cycles—all with the added complexity of language barriers. When dealing with multiple countries, you find a new layer of challenges around exchange rates and a need for foreign bank accounts. Then you must deal with the international regulations governing this payment process as you work to move money to employees securely and efficiently.
When you add up all these factors, you have to wonder how international payroll ever gets accomplished. Is there any way to make this easier? If you’ve been watching the latest trends in payment technology, you will have noted the industry is rapidly advancing; this is true for consumer solutions but also for enterprise. These innovations are changing the game for businesses, and payroll is one industry specifically that has significant ROI opportunities.
Just what is the potential of this technology for your payroll business?
Consider these four core benefits:
1) Currency Hedging
The foreign exchange market is one of the riskiest for companies making international payroll because of its inherent volatility; each currency is affected by ongoing monetary, economic, and sociopolitical issues. Any business with operations overseas will at some point face losses due to fluctuation. One key to success is understanding the cost in local currency well in advance of actually making the international payroll payments.
For example, if sending payments to employees in the Eurozone, take the opportunity to secure Euro rates on a monthly basis before each payroll cycle. Knowing your cost up front will allow you to adhere to your exchange rate policies and protect your expats as well as protect your organization from any risk due to currency fluctuation when you’re ready to initiate the payments.
Additionally, booking the consolidated Euro amount across all payments in your payroll cycle may offer better rates of exchange. Consider choosing a provider that demonstrates flexible risk management solutions allowing you to cover international payroll needs on both Spot and Forward markets. A robust online currency management system should provide visibility to positions and up-to-date balances of unused currency which can be rolled into next month’s payroll cycle.
2) Reducing Fees
There are a few ways that payroll managers succumb to unnecessary costs when making international payroll. First, rates are not always clearly defined and some providers are notorious for adding large markups on foreign exchange transfers as they look for new revenue opportunities. Consider choosing a provider that is willing to put costs together as part of your contract with them.
Another expensive part of international payroll payments is opening new foreign bank accounts. To simply maintain and operate these accounts presents a new set of fees altogether. Not to mention, many times those banks deal with intermediary institutions who are also looking for a cut of the funds, piling on more to the price of each payment.
With today’s payment technology, you can bypass this because payment providers typically have strong international banking relationships already in place. They can connect directly from your accounts payable or international payroll platform into their global banking network to facilitate payments in multiple currencies, through multiple channels. No new account creation is needed, and there is no need to work with multiple banks with their own various markups.
3) Improving Payment Accuracy
Every country has its own payment routing rules and regulatory requirements in place. These demand everything from having a correctly formatted International Bank Account Number (IBAN) to providing supporting documentation, purpose of payment, Tax IDs or contact telephone numbers with each payment. In some countries, if any of these key pieces of information are missing, the payment will not be credited to the employee’s account, causing delays and increasing time and manual overhead spent on investigations.
Thanks to today’s technology, systems used to collect employee’s banking information can be improved to collect all the right information at the right time. This can be made possible by real-time country validation tools, supported by your payment remittance provider’s operational and compliance teams. These validation tools can tell you exactly what pieces of data are required to deliver payments in each country, ensuring you have everything you need upfront, reducing time on investigations, and ensuring that the payroll payments arrive on time, every time!
4) Reducing Human Error
We’ve already discussed how complex payroll can be at the international level. With one single department managing every payment manually, there’s no doubt they will run into errors. What’s critical for efficiency is reducing these errors, or in fact preventing them altogether. This is where payment technology once again proves itself invaluable and it all comes down to integration.
Most payment remittance providers can integrate directly with your existing accounting software or international payroll platform, reducing overall hours of work spent reentering payment details and leaving you in good shape to make payroll on time with each pay period. Look for a provider that has combined integration solutions, allowing onetime development efforts to access a full range of currencies and payment channels regardless of the currency in which it’s denominated.
These key advantages demonstrate how today’s payment technologies can improve not only your operational functions but also, importantly, your bottom line. If you are looking to implement this type of solution, there are a few things you should keep in mind when choosing a provider:
First, you’ll want to work with a company that has well established global banking relationships. They should have a significant global footprint, which offers payments in foreign currencies in all your required jurisdictions. The footprint should also have access to multiple delivery channels including SWIFT, ACH, SEPA, or similar in country clearing channels in order to reduce the cost of each payment.
Next you’ll want to integrate to reduce time and manual errors of re-keying information. Look for a provider that has flexible integration solutions which can be tailored to your current systems workflow and technology limitations. Also, ensure the provider can allow you to book your foreign exchange in front of the payroll cycle. The integration for your payroll payments should draw down directly from your available foreign currency balances. Ask if your provider has validation tools in place to help you improve data integrity and achieve a higher standard in
straight through processing, and reduction of manual investigations.
Finally, 24/7 strong customer support and comprehensive compliance procedures are a must and will serve as the foundation for your success with this system, because no matter how sophisticated their technology is, you must be able to rely on your provider’s team to fix any complication or compliance issue that may arise.
Read the full article here: GPMI: Four Core Ways Technology Saves You Time and Money With International Payroll