In our ever-growing world, more and more businesses are handling cross border payroll payments. It’s something that organisations have do regularly. Managing global payroll has it’s challenges to overcome, and unfortunately cross border payments have their own set of challenges on top.
In this blog post, we’ll take you through what are cross border payments, how they work, and what all this means for you going into business.
First things first, what are cross border payments?
A cross border payment is moving money between countries, involving banks, businesses, or people in different places. This can be anything from paying suppliers, to paying business costs, to paying employees.
Every international business that deals with sending and receiving money across the globe uses some sort of cross border payment.
What are the challenges with cross border payments?
Exchange Rates:
Dealing with exchange rates can be a big headache. Especially when you’re paying people in different countries, and it’s important to get your teams pay right. You will have to convert your money to the local currency of the employee, and that can mean extra charges.
To make things trickier, exchange rates are always shifting. So, the amount your employee receives can vary based on the rate at the time of the transaction. This can make it hard to figure out the exact global payroll payment for your international employees, as well as working out what the cost of your global payroll is.
On top of that, there are tax and deduction concerns to think about because fluctuating exchange rates can mess with the taxes owed in both the employer’s country and the employee’s country. It’s a real balancing act!
You need to be considering the calculations for both net and gross pay for your employees, and making sure they match up with the expected deductions.
Payment rules vary by country:
Payroll payments in each country usually have their own set of rules to follow. For instance, some places insist on bank transfers or electronic payments, while others are okay with old-school paper cheques.
Not playing by these rules can lead to fines or other legal troubles.
And some countries get super specific, like having rules on how payments get handled — setting limits or mandating licenses for payment processors. How long it takes to process payroll money? Well, that can be a whole different story depending on where it’s headed.
It’s important to find out all this information when you’re considering cross border payments to your people.
Banking:
In some places, the banking setup isn’t as advanced, making sending payroll money across borders more complicated.
If the bank doesn’t have good safeguards for cross border payments, employees could get hit by shady moves. For example, cross border payroll payments can be vulnerable to payment fraud attempts, where unauthorized individuals try to divert payments or steal sensitive financial information. So, it’s really important you’re choosing a method which is going to protect your organisations data.
The banks are also watchdogs when it comes to rules about cross border payments. They need to double-check who’s sending or getting the money to keep things legit, following anti-money laundering rules and such.
And let’s not forget the bank fees for cross border payments! These can eat into what your people actually receive including charges for changing currency, making the transaction, using intermediary banks, and more.
The risks associated with using the banking systems in other countries can be daunting, so it’s important to choose a reliable global payroll provider that are able to help with secure payments.
Language barriers:
In a global business, you’ll often be faced with a language barrier in all the things you do. But when it comes to making sure your people are paid, you need to be even more cautious of what it means.
Setting up and processing a payroll comes with lots of forms and data which needs to be exchanged, when doing this in different languages it can be a recipe for disaster. Using a global payroll provider who is able to translate and communicate for you is often the easiest way to ensure that everyone gets what they’re due.
You’ll also need to make sure you’re optimising your payroll reporting to make the process run much more smoothly.
So, what does this mean for your company?
Cross border payments, when starting out, can be a lot of work and tricky to get your head around. It’s really important to consider how best to handle your global payroll and decide if doing it yourself or having someone to help would be the best solution.
Here at Just Payroll Service, we’re experts in handling payroll around the globe. We have a team of experts who do this every single day, so they really know how to ensure your people are paid compliantly, on time and what to them is probably the most important part – correctly!
Find out more about our international payroll services, and how they might work for you and your business. Get in touch!