How to overcome global payment processing challenges

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If you are researching cross-border payments to pay employees internationally, congratulations!

You’ve likely done one of the following:

1. Embarked on a new project
2. Identified a valuable business opportunity
3. Expanded your global footprint

How can you simplify global payment processing?

The thought of making cross-currency and cross-border payments can make an accountant sweat!

It is a complex process full of country-specific regulations. Ultimately, the goal is to pay employees correctly and on time. And given the intricacies of making global payments, it is important to understand the associated challenges fully.

There are several challenges to navigate

But, as with every challenge that cross-border transactions present, there are potential solutions for payment methods.

Many companies partner with providers specialising in making global payments when placing employees overseas.

Are you weighing up whether this is a viable option for your business? Here are a few obstacles to consider when handling international payments. 

Challenge #1: Entity set-up and compliance

A legal entity must be established in every country a company operates in.

This expensive and lengthy process can take up to a year. Additionally, the payroll, tax and labour laws vary by country.

Violations of those laws can carry civil penalties and fines. Thus, the risk is associated with operating in a country without a footprint.

Due to lengthy timelines, expenses and risks, many companies expanding into new markets decide to use an Employer of Record to manage the entire process.

Using an Employer of Record can be an efficient way to employ personnel in a new market. As an EOR will have an established legal entity, they can manage payroll, employment and immigration requirements and ensure that you adhere to local compliance requirements when setting up an entity.

Challenge #2: Moving money

This money movement is done through international wire transfers, with the transaction cost incurred by the company.

Costs can vary depending on the transfer provider and the negotiated rate between the provider and the company.

For each country where a company employs people, money must be transferred to foreign bank accounts for payroll payments.

A global payment processor will directly make payments from the client company’s bank account into employee bank accounts. This bypasses the need to initiate multiple international wire transfers.

Not only does this simplify the process, but a payment processing service is also more cost-effective. Typically, client companies are charged a minimal processing fee by payment service providers for payroll transactions.

Challenge #3: Calculating pay rates

This might sound easy if you are already processing payroll in your home county. However, this takes on another facet when paying employees internationally or implementing pay localisation.

Now, you must consider paying employees their contracted rate in the host country’s currency.

For example, a US-based company has an employee working in France with a monthly contract rate of USD 1000.

The sending date’s exchange rate must be calculated to ensure the employee receives the correct amount.

This ensures the correct amount is taken from the client’s bank account. It also ensures the employee gets paid exactly USD1000 in Euros.

A global payment system will automatically remove unnecessary calculations and reconciliation payments. This ensures employees receive the exact amount they’re expecting.

Do you need support to manage payments globally?

Airswift’s workforce solutions include Employer of Record and Global Payment Solutions.

Challenge #4: Ensuring timely payment runs

Remember that the goal is to pay employees correctly and on time.

Transferring money domestically is usually a very quick process.

Sadly, it isn’t the same for transferring money internationally.

That is because different sets of country-specific banking processes are required for funds to clear.

These processes vary by country and depend on the home country from which the funds are sent.

While transferring money to one country may take two days, transferring to another may require an extra working day. From a tracking perspective, ensuring payments are initiated with enough time to clear can easily get out of hand.

This confusion is easily removed using a payments industry specialising in this. They will set payroll runs by delivery date for business entities, ensuring enough lead time for funds to clear.

Challenge #5: Validating account details 

Paying to foreign bank accounts requires knowledge of each country’s banking system so that account details are formatted correctly.

Since each country’s required format differs, there is a greater chance of error in entering the details.

And, if the account information is incorrect, payment will be rejected, which most certainly means irate employees.

Global payment platforms have built-in logic for each country’s banking system. These platforms will reject incorrect account information, allowing errors to be rectified before a payroll run.

Additionally, many providers have employee portals into which employees can directly enter their account information. This reduces errors and eliminates transmitting sensitive data through insecure means such as email and text.

Overcoming global payment challenges

Partnering with a global payment provider streamlines the international payroll process by distributing funds using a secure web-based banking system.

This means your employees get paid the correct amount in the host country’s currency on the correct date.

Outsourcing this critical need allows you to keep a laser-like focus on the success of your expansion! 

To learn more about how Airswift can help with your global expansion, visit our Employer of Record services page.