B2B Payments

How Payroll Evolves Alongside Cross-Border Payments

Workforces are going global. Discovering and hiring talent from across borders is now easier than ever. For many businesses, hiring in other markets is not only more affordable, but can ensure that their global ambitions are supported via boots on the ground within those new markets.

International hiring inevitably brings new complications to payroll, though, as businesses are challenged to manage the different languages, currencies and regulations of their global workforces. Many businesses, however, continue to operate their global payroll as they would domestic, often with spreadsheets, as well as manual data entry and management. This raises the risk of payroll errors, noncompliance, and a lack of holistic visibility into funds flowing out of a company and into workers’ hands.

In a recent conversation with PYMNTS, Bjorn Reynolds, CEO and founder of human resources (HR) and payroll solutions provider Safeguard Global, explored the biggest hurdles of international payroll, and the opportunities for payments innovation to prevent corporates from stumbling over global payroll and international expansion challenges.

An Evolving Workforce

As barriers to global expansion come down, businesses are eager to not only step into new geographic markets, but take advantage of a talent pool that has suddenly become (almost) borderless.

“We are now in a global economy, and I can’t see that ever changing,” Reynolds told PYMNTS. “The role of the micro-multinational is here.”

Yet, the opportunity to reach across borders for key talent comes with its own hurdles. Traditionally, a business will establish a legal entity in a new market to hire employees, and obtain a local bank account to pay them. However, this is a lengthy, complex and expensive process, and, according to Reynolds, the weight of that burden can often catch businesses off guard.

To circumvent this process, businesses have also historically relied on hiring professionals as independent contractors when operating in new markets. Indeed, the proliferation of professional categories in today’s talent pool has introduced new compliance challenges for multinational firms.

“What we’re seeing today is a big barrier between the types of workers [that] multinationals will [employ],” Reynolds said, pointing to direct, contingent and contract workers as just a few examples. When it comes to independent contractors, he noted, “you’re seeing huge compliance risks around the world with the rise of the Uber economy.”

Meeting Employee Demands

Regardless of the location or legal categorization of a professional, there is one similarity across the board.

“We’re looking at the employee experience, and there are trends here,” he said. “Employees are requiring more. They’re digital. They want to have information. They want to receive money straight away.”

Multinational companies and their service providers must be able to adapt to that need for digital, on-time payments to their workforces. As such, Reynolds explained that global payroll solutions must have an emphasis on data integration (the capability for a company’s data across its own disparate systems worldwide to connect into a payroll service provider’s system), as well as efficiency in corporate processes, which may entail adjustments to the way a company has historically operated.

“The global payroll industry must take what is typically a very decentralized solution that a multinational will have today, and change [its] processes and working practices to drive efficiency through payroll,” he said.

On top of enabling data integration and efficiency, corporates must ensure that information is secure, and that operations are compliant.

Payments’ Payroll Opportunity

Cross-border payroll remains highly dependent on the existing banking infrastructure to get workers paid. While each country is different, Reynolds said he has typically seen employees require for wages to be paid into their bank accounts — a demand that, in essence, means an employer is reliant upon its worker’s bank account, and its own ability to receive funds across borders.

Yet, as the payroll industry evolves, and as service providers explore new real-time, cross-border payment technologies, the payroll service industry will be looking for new ways to lessen that reliance on legacy infrastructure.

“As a whole, the payroll industry is taking a consolidated view,” said Reynolds. Traditionally, the market has addressed global payroll friction on a market-by-market basis. Today, though, payments innovation is opening up the opportunity to address cross-border employee compensation on a holistic, global level.

With the ability to hire talent across borders (a critical strategy of growing businesses), retaining that talent will become essential, with on-time and accurate payroll an important piece of that puzzle. Reynolds said that service providers must remain agile to keep pace with the changing characteristics of a global workforce, and emphasized the role of industry collaboration to tackle the biggest global payroll challenges of today (and tomorrow).

“The process of getting money from Point A to Point B for a multinational is an area coming up for innovation and disruption,” he said. “It’s a really interesting space, because people are still trying to use legacy bank systems that suffer cross-border challenges. … Making sure people get money on time will be one of the big areas for the payroll industry and multinationals to look at, along with payments companies and the banks.”

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