When you have employees in other countries, paying them can be complicated. There are issues relating to taxes, exchange rates, employment laws and retirement pension contributions. To make international payments, there must be a way to convert and transfer funds from one currency to another that is both cost efficient and transparent.
Your company needs to implement an international payroll solution which will address most of these issues. Your payroll solution needs to take into account different time zones, languages and cultures. Using traditional banking platforms to send money overseas, makes it difficult to track payments, and unseen intermediaries often take out fees before the final beneficiary receiving funds. You need to be able to send the money, keep track of it, and know how much you it will cost to ensure that your employees don’t get shortchanged with banking fees.
Traditional Payroll Workflow
The typical payroll workflow for international payment consists of the sender manually uploading the details of an individual transaction for each employee every time payroll is issued. To reduce manual entry errors, businesses typically deploy additional human resources to review each payment detail to ensure outgoing payroll is correct.
The dilemma with the traditional workflow approach lies in the inability to scale. Scalability serves as the foundation of growth for any business. Implementing a process which allows a company to scale their operations to operate seamlessly, with the ability to handle increased volume, will eliminate roadblocks to success. Scalability needs to be applied throughout the organization's departments, which also includes both domestic and international payroll. It is not feasible for a business to flourish by tying up resources in lengthy processes when they can implement time- and money-saving solutions.
The stage of your business is irrelevant when it comes to implementing an intelligent payroll solution. The volume or the dollar value of payroll transactions do not need to meet a minimum requirement for a business to adopt automated workflows.
Even if a business only sends out a single payroll internationally, it is still worth adopting an efficient workflow. Companies have more control over their international payments, other than selecting the currency, beneficiary, and transaction date. Smart payroll solutions ensure that funds arrive in the recipient’s account within 24 hours, allowing businesses to maintain their credibility with payment receivers.
Businesses that adopt smart workflows for their international payroll solution can automate the process, reducing costs and use of resources. This eliminates the need for manual entry, diminishing the potential for errors.
Furthermore, a business can also operate from a single domestic account, which allows the option to segment funds into multiple currencies. This feature contributes to retaining more control over payment options, as businesses can decide to hold or send, from one or more of their foreign currency accounts. This leaves the company to determine whether payroll will be forwarded by using currency conversion or sent from a foreign currency account, eliminating the need for currency exchange.
Informed decisions based on currency conversion can be made using strategy, rather than market volatility. For instance, a healthy business relies on available cash flow for operations. Once at the mercy of the foreign exchange markets, businesses can now insulate their cash flow from exchange rate markets when sending money overseas for their payroll. Whether it is to lock in an exchange rate to structure a steady outflow of funds, or to capture favourable exchange rates when markets work in your favour, you can take advantage of a series of tools that are part of Risk Management Strategies. These include Forward Contracts and Market Orders. Businesses have adopted these strategies to preserve their cash flow for both incoming and outgoing international payments.
Accounting software is not required for refined payroll workflows. Accounting software and enterprise resource planning (ERP) can, however, be easily integrated with the sophisticated payroll processes mentioned above. If your business has reached a stage where an ERP or accounting software to manage payroll is beneficial, there are a few options to explore:
• Enterprise resource planning.
• Outsourcing payroll solutions.
• In-house payroll solutions.
The ERP Route
Dealing with just a few employees is more manageable, but if you have many employees, you may be able to benefit from ERP solutions. When employees number 2,000 or more, many companies take advantage of outsourcing. You can hire a group like The Hackett Group or ISG, and they can deal with the many complicated and changing factors that come into play when dealing with international payments. ERP solutions also fulfill an HR function.
The company using an ERP needs to be able to accommodate the software and be prepared to test new solutions and updates regularly. If your company has many employees in one country but only a few in another, you probably want to consider using an ERP solution for the larger group and another method for the country which has the smaller number of employees.
A comprehensive international payroll solution will require a company to deal with technology, compliance issues, data aggregation and security concerns. Many companies feel that it is more efficient to outsource, which can save them money because they will not have to invest in the hardware and the staff to take care of international payroll issues. They will also be able to find experienced, high-quality help, as the companies who offer these services specialize in dealing with all of these issues.
In-House International Payroll
If you choose to handle the payroll within your company, there are alternate solutions like software packages that handle the problems unique to international payments. The downside to managing the work in-house is that it can be time and work intensive, as it involves a lot of manual work. Employees will need to work closely with the details, spending time with each account.
The most significant advantage of an in-house solution is that it will give your company the highest level of control. You can be flexible and responsive so that you will be able to pay quickly when the situation demands it. If employees have a question, the answers will be contained within the company, and as such, the questions can be answered quickly. Trends toward shared technology and the proliferation of cloud technology also make in-house payroll a more practical solution for some businesses.
Dealing with international payroll used to be complicated, costly and time draining. However, incorporating a scalable global payment structure will strip away inefficient workflows with productive outcomes. Businesses will need to re-evaluate their processes with the newfound control and identify how to apply these benefits to maximize their profits while decreasing costs. Businesses engaging in international payroll need to adopt this solution.