A growing number of UK companies now employ staff who are based overseas. Managing international payroll can prove expensive, complex and laborious. Businesses paying salaries to staff overseas, especially across several countries and currencies, must monitor several issues, among them:
- Reliability of money transfer
- Exposure to currency risk (for the company and/or employee)
- Country-specific legal and compliance issues
- Consolidation and cost of accounts and reporting
In response to these concerns, a variety of international payroll specialists provide assistance to businesses with overseas employees.
Offering cost reductions for executing, managing and analysing multi-currency payroll, with simplified processes and full technical integration with the client, these providers eliminate the need for their client companies to have full banking and administration in several countries in which they are employing staff.
Consolidating international payroll improves management’s ability to understand global salary costs, handle fluctuations in currency and the operating environment, and therefore to make strategic decisions for the business.
Supporting them are advanced, fully-integrated technological solutions, secure online access to data and sophisticated reporting, and often round-the-clock customer service.
These services can be provided more affordably by specialist companies than the traditional banks, and when taken in combination with routine currency transfer overseas, may involve minimal or waived fees altogether.
Additionally, savings can be made on accounting, legal and HR costs through outsourcing compliance and detailed reporting to a specialist. Care must be taken to select an appropriate and reliable provider for these critical roles, particularly as overseas employees are reliant on them for the accurate and timely payment of their wages.
How international payroll providers benefit employees
Other than the aforementioned benefits to the company, the improved ability to consolidate, forecast and execute is beneficial to an overseas employee too.
Instead of either leaving the staff member with exposure to fluctuations in foreign exchange, or perhaps being forced to price this risk into salary packages, a company can better predict and respond to movements in currency, and adjust accordingly.
Employees can be paid in local currency, avoiding high conversion costs and gaining an improved exchange rate if their salary is measured in the home currency. Alternatively this can be beneficial to the company if the salary is fixed in the local currency. In both cases, more certainty can be gained through assiduous planning against volatility in the relevant currency pair.
The speed of payment can also be improved when using an international payroll provider, which may be material to employees who would otherwise have to factor in the extra time involved in an international bank transfer.
Case Study – International Payroll
Issue – making global payroll payments from a central HQ
Objective – reduce admin costs, centralise operations, improve transparency and reporting, manage currency exposure, ensure regulatory compliance
- An engineering firm has long-term projects in more than a dozen countries around the world. It sends consultants from its UK headquarters to oversee each project. It needs to account for each project in local currency but pay these consultants their agreed UK wage plus certain adjustments for expenses and cost of living, which vary from country to country. Each project also conforms to local norms on tax and regulation, and has its own payroll execution timetable.
- Despite working with major accounting firms and payroll consultants, administrative costs remained high, consolidated global reports were inaccurate and did not permit detailed analysis of operations which might reduce overhead and permit hedging against currency exposure.
- An international payroll specialist helped with the reconfiguration of systems to manage payout and reporting across all jurisdictions, with consolidated monthly reporting in GBP to head office, and reporting in local currency to each project manager.
- Apart from reducing administrative and accounting costs through eliminating duplication and improving reporting to the appropriate standard, the company was also able to develop a currency hedging strategy which diminished its exposure to fluctuations in foreign exchange which could affect project profit margins.
You can find more detailed guides on some of the key international payments issues elsewhere on the economia International Payments hub, including how to raise margins by improving your foreign currency invoicing, how to manage your currency risk and future currency payments, how to save money and manage currency risk in your business, and how to manage international business travel expenses.
If you would like to find out more about how we can help on your international payroll improvements, please call us at FXcompared on +44 (0)207 871 5565 or email us at firstname.lastname@example.org.