Payroll and Global Payments

One of the most frequent questions I get from prospects, clients, and even my friends is “Aren’t all payments the same?” and?“Aren’t all the banks and fintech payment service providers the same?”

The answer is that in some basic areas, yes, there are some similarities.?However, in the most important elements of providing payments specific to payroll, the differences can be quite significant.?Global payroll payments carry a very unique set of attributes from all other payments which require special attention to ensure successful deposit.????

Payroll and the payment of wages are at the foundation of every economy.?A compelling argument could be made that it is one of the most important financial transactions that takes place.?Discretionary and non-discretionary spending capitalized by payroll directly impacts business activity and economic movements.?People make money and then they spend, invest, save, etc.?

Also, given that payroll includes required taxes and other statutory obligations, it provides the necessary funds for governments to continue programs that should benefit the wider society.

Everyone wants to get PAID!

The fundamental relationship between an employer and an employee is that the two parties have engaged in a relationship built on mutual assurances.?The employee is offering their skill, time, and expertise to help the business grow and flourish.?In return, the company will compensate the employee for their efforts and services on a specific date outlined in an employment agreement.

?Companies will spend countless resources to build a fantastic employment brand, develop a dynamic culture, and offer additional benefits to attract the best talent.?All of these are vital to creating a working environment that reflects the values of the business and incentivize employees, but at the end of the day people want to be paid.

It goes without saying that people around the world rely on payday to meet not only their basic necessities but also to fuel their dreams and ambitions.?Recent data shows that close to 75% of Asia lives paycheck to paycheck, 60% in the United States, 50% in Australia, 40% in Europe, and 30% in the UK. Households across the globe set monthly budgets to pay mortgages/rent, utilities, loans, school fees, daycare, and even groceries based on their payday.??

Late or missing payroll payments have a cascading effect impacting each of these areas and creating friction in the relationship between the employer and employee. ?These payment failures could result in late payment fees, interruption of services, adverse credit ratings, and potential litigation.?A breakdown in payroll payments is the fastest way to destroy company culture and create discontent within the workforce.?

The same level of trust exists within the payroll service ecosystem.?If a business offers EOR services, outsourced managed payroll, expense reimbursement, or pension payments, that business’s reputation relies on their payment service provider delivering payments on time successfully. Failure to do so can have an adverse effect on the business relationship and could create some very unpleasant conversations with clients.?

How to get PAID!

Outside of what payroll payments represent for the beneficiaries and the business, they also present a unique set of parameters for execution.?A network of reliable, global payment rails are required to facilitate global payroll payments.?Partnering with multiple, well capitalized liquidity providers is necessary not only to deliver funds efficiently but to also provide reliable access to international currencies.?

Reliance on a single payment corridor can spell disaster for a global payroll.?Not only is there little flexibility to mitigate exchange rate volatility but funds are relegated to payment rails that may not be optimized for payroll purposes.??Inevitably there will be delays and rejections.

Proper classification of the payments and testing to validate the beneficiary details are fundamental steps leading up to payday.?A payment that has been incorrectly classified could result in the funds not reaching the beneficiary in time but also run the risk of being rejected.???

Without proven options for routing funds, payments could be deposited into the beneficiaries account late or after an intermediary bank has taken a fee leaving the deposit less than the intended full value.?And trust me….these fees matter to employees.

Once the payments have been released for payments, the work has only just begun.?A dedicated operation and service teams who understand payroll and payment infrastructure are required to monitor the payments and quickly resolve any delays.? 2-3 day response times simply aren’t acceptable when it comes to global payroll.

Work with partners that share your mission!

For over 15 years I’ve been fortunate to work with some phenomenal companies within human resources and global payroll.?In my experience, the best partnerships are a result of two key underlying principles:

1.??????The businesses are aligned in product offering and the service has been tailored to meet the goals of the customer.?Resources are wasted on vendors who either don’t understand their customer’s business or have priced their service so low that it makes it nearly impossible to say no.?One of my favorite sayings is “if you pay peanuts, expect monkeys” and the same is true in payments.?The first casualty of cost cutting is usually service.

2.??????The two companies share the same vision.?I'm proud that my job allows me to play a role in helping people enrich their lives through payroll payment services.?I’ve shared this with my clients in payroll and they all feel the exact same way about their role in the payroll process.?We have a shared passion for the service we provide and a responsibility to the people that have entrusted their payroll to us.?This “business bond” yields a collaborative environment that produces the best outcome.?We can discuss candidly any challenges, requirements, and expectations without apprehension because we share the desired outcome and have built a level of trust through performance.

To pull all of this together, here is a list of 10 questions that I believe would be helpful when examining a payment provider for global payroll:?

1.???????What has the payments provider done to customize their solution specific to payroll payments??Is it a “one size fits all” solution or has it been specifically optimized to handle payroll?

2.??????What percentage of their operation and support staff are dedicated to payroll payments?

3.??????Does your provider have multiple payment corridors to ensure payments are delivered in the most efficient manner (local settlement) or are you confined to a single set of payment rails?

4.??????Is your service offering aligned with the core offering of your payments provider?

5.??????If you are using a third party to manage employee and/or contractor payment calculations and are providing funds for payments, do they have the proper licensing to handle client money for the purpose of payments to individuals??Also, if they are using a fourth party to make the payments, what are their licensing credentials and what is your level of acceptable risk to AML exposure?

6.??????What measures does the service provider put in place to help mitigate your exposure to currency exchange volatility?

7.??????In the event there is an error in the payment details or a delayed payment, what is payment provider’s response time to help remedy the situation?

8.??????What is your level of counter party risk with your payments provider??Do you have access to alternative means of payment delivery in the event they are unable to make your payments?

9.??????Are payroll funds held in segregated, ring-fenced accounts or are they co-mingled with other assets that are exposed to the rest of the business?

10.??What is their commitment to AML and compliance screening??Is your company protected by a robust screening infrastructure? ?