85% of UK-Based Multinationals Say Cross-Border Payroll Sector Lacks Innovation

When PYMNTS speaks to business insiders, especially entrepreneurs looking to grow their companies, they consistently cite finding the right talent as among their top priorities. They also frequently list the modern possibilities of remote working as a key way to address the talent question.

But as Ian Rand, CEO of U.K.-based FinTech Monument Bank, told PYMNTS in an interview, remote and hybrid employment models bring “one set of challenges if you’re a huge organization has been around for 100 years, [but] if you’re hiring quickly, it brings up a whole other set of challenges as to how you build that culture and train people.”

Besides culture and training, managing international payments can also create difficulties for businesses.

A recent PYMNTS survey of 250 U.S. and U.K. firms published in collaboration with Nium found that most businesses showed some interest in innovating payment methods for their international workers and 24.4% of those asked indicated they were “very” or “extremely” interested.

Get the report: Meeting The Demand For Cross-Border Hiring: Innovating International Workforce Payment and Management

What’s more, high interest in cross-border payroll innovation was observed on both sides of the Atlantic.

Thirty percent of U.S.-headquartered firms were much more likely to respond as “very or extremely interested,” while 58.7% said they were “slightly or somewhat interested.”

Looking at U.K.-based businesses, the level of interest is concentrated in the “slightly or somewhat” group (69%), which is reflected in a lower percentage of respondents (16%) reporting the highest level of interest.

In neither country did more than 15% of businesses surveyed indicate little or no interest in novel payroll solutions for their international employees.

While all companies surveyed employ more than 20% of their workforce outside of the country they are headquartered in, managing international employees poses different challenges for U.S. and U.K. businesses.

How Legislation Affects UK Business Hiring

While the U.K. has now left the European Union, it remains aligned with Brussels on many issues, including employment law. And under the terms of the Brexit agreement’s “non-regression” clause, neither can the U.K. diverge significantly on workers’ rights enshrined in EU law if it would give the country a competitive trade advantage.

For U.K. firms, this regulatory alignment has the advantage that hiring from within the EU isn’t drastically different from hiring U.K. workers when it comes to legal obligations. The eurozone also provides a vast talent pool that can be paid in a currency most large U.K. businesses will have to deal with at some point anyway.

Read more: Multicurrency Payrolls Simplify Compliance, Improve Global Workforce Experience

The similarities between EU and U.K. employment laws mean that regulatory compliance for U.K. firms employing EU-based workers is less of a headache than it can be when hiring in other jurisdictions. Overall, compliance was cited as a major concern among the companies PYMNTS surveyed, with 44% listing it as a challenge and 19% considering it their biggest challenge when it comes to hiring internationally.

The threat of cross-border legal complexities for U.K. firms isn’t just limited to workers’ rights, either.

When working from home was forced upon the world by the pandemic in 2020, the thousands of frontier workers who reside in the Republic of Ireland but are employed in Northern Ireland found themselves in tax limbo, theoretically liable to pay taxes in both the U.K. and the Republic.

Related: As Remote Work Goes Global, Paying Workers Gets Complex

In response to the issue, the Irish government’s National Remote Work Strategy temporarily waived taxes for frontier workers. But with the reintroduction of pre-pandemic tax rules, many Irish employees working across the border have faced uncertainty as to their tax requirements, and the cross-border workers’ alliance has called for the government to clarify the status of remote workers employed by U.K. companies.

On this issue, the PYMNTS survey found that managing taxes and exchange rate fluctuations was more of a challenge for larger companies with revenues between $500 million and $1 billion.

Interestingly, however, the very largest companies surveyed, with annual revenues of $1 billion or more, were the most likely to say that they experienced no challenges paying international workers (31%). A similar observation holds true for firms that spend at least 50% of their payroll budget on international workers, a group in which 25% had no issues making these payments.

The latter group also showed a higher rate of interest in innovating payment methods for international workers, with over 90% of those surveyed showing some degree of interest.

The fact that firms with more international workers seem to have fewer issues paying wages across borders but also show the most interest in exploiting new international payroll solutions suggests that openness to novel technologies is related to a smoother payment experience.

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