The landscape of global payroll has evolved in the last decade as companies in Canada look beyond our borders to expand their business, either through acquisitions or organic growth. Similarly, many multinational organizations with a global reach have begun shifting away from the legacy model of working with in-country payroll providers, and are now centralizing their HR or payroll operations at company headquarters. This has been the result of cost-cutting measures and the need to achieve some level of standardization from a payroll compliance and process perspective.
Payroll practitioners are dedicated to the timely, accurate and compliant delivery of international payroll. However, how can their organizations keep pace with technology while delivering payroll in a consistent manner? According to a 2014 survey by Ernst & Young, the number of companies utilizing a fully outsourced model to deliver global payroll has more than doubled, with 12% of organizations surveyed doing so. While this figure is still low, it is clear that organizations want to find a single global solution with a scalable approach that delivers international payroll through a single platform, which will reduce human error, validate payment information, deliver payments in a timely manner and protect payroll against adverse currency fluctuation.
Mitigating foreign exchange risk
Volatility in foreign exchange markets is not a new phenomenon facing organizations. Payroll managers must navigate through currency fluctuations in a manner that protects the company, as well as employees — both local and expatriates — from being adversely impacted by a decline in their home currency. A proper risk management strategy employing the appropriate mix of spot and forward contracts that are matched with each payroll cycle can help mitigate such risk. Further, the chosen provider, through its online platform, should grant the company a bird’s eye view of positions held, affording the flexibility to roll any unused portions of the contracts to the following pay cycle.
Global footprint from mature markets to emerging markets
Most, if not all, payroll providers have the capability to deliver global payroll to mature markets such as North American and Europe. However, as multinationals branch out to emerging markets such as Latin America or Africa, organizations may no longer be able to rely on one sole provider. Typically, as organizations enter into emerging markets, they must open local bank accounts and deal with existing providers, potentially marking up their pricing on foreign exchange transactions. The ideal provider should be able to deliver payroll through a myriad of channels (SWIFT, IACH, SEPA or in-country channels) through their global banking relationships, thereby effectively reducing or eliminating intermediary fees. Similarly the provider should work with the organization to provide transparent pricing with no exurban foreign exchange (FX) fees as part of the service agreement.
Accurate delivery of payroll
To ensure the timely delivery of payments, an organization must navigate through the intricate web of payment routing rules for each country and satisfy these unique requirements before the payment can be credited to the employee. This translates into having valid supporting documentation by way of purpose of payment, tax IDs or contact information, as well as the correct International Bank Account Numbers (IBANs). A robust currency management system provides the organization with real-time country bank validation tools in collecting employee’s banking information, indicating the fields required to carry out the payment in a manner that will deliver payroll promptly and diminish time on investigations.
Payment 360 — enhanced straight-through processing
Perhaps the most significant determinant in selecting the appropriate outsourced solution is the ability to deliver a scalable solution that respects your organization’s workflow and the limitations of your Enterprise Resource Planning system or international payroll platform. Communicating with multiple international banks to manage payroll can lead to an increase in human error and complicated validation procedures. The right solution should offer the flexibility to facilitate international payroll management through different bank accounts by using a single file to incorporate multiple currencies — thereby reducing human error as manual payment entry is reduced. Equally important is the solution’s ability to maintain the integrity of your database. This can be done through a customized approvals process for payments that respects your existing workflow, along with 24/7 customer and compliance support to address impediments that may arise.
Ultimately, look for a solution provider with international payroll experience, scalability, data security and the customer service capability to help you efficiently achieve your goals. Your provider should have knowledge of different countries’ transfer requirements to ensure all payroll payments to international employees are completed accurately and on time. Utilizing a global solution with a single platform to manage payroll and vendor payments may be more cost effective than using in-country providers. Consolidating international payments allows multinational organizations to reduce manual information input, thereby minimizing human error and the need to validate payment information while ensuring timely delivery of payments and payroll protection against currency fluctuation.
“Cambridge Global Payments” is a trade name, which in this document refers specifically to one or more of these legal entities: Cambridge Mercantile Corp., Cambridge Mercantile Corp. (U.S.A.), Cambridge Mercantile Corp. (Nevada), Cambridge Mercantile (Australia) Pty. Ltd.
Cambridge Global Payments (“Cambridge”) provides this document as general market information subject to: Cambridge’s copyright, and all contract terms in place, if any, between you and the Cambridge entity you have contracted with. This document is based on sources Cambridge considers reliable, but without independent verification. Cambridge makes no guarantee of its accuracy or completeness. Cambridge is not responsible for any errors in or related to the document, or for damages arising out of any person’s reliance upon this information. All charts or graphs are from publicly available sources or proprietary data. The information in this document is subject to sudden change without notice.
Cambridge may sell to you and/or buy from you foreign exchange instruments (including spot and/or derivative transactions; both kinds are here called “FXI”s) covered by Cambridge on a principal basis.
This document is NOT: 1) Advice of any kind, or 2) Approved or reviewed by any regulatory authority, or 3) An offer to sell or a solicitation of an offer to buy any FXIs, or to participate in any trading strategy.
Before acting on this document, you must consider the appropriateness of the information, based on your objectives, needs and finances. For advice, you must contact someone independent of Cambridge.
Certain FXIs mentioned in this document may be ineligible for sale in some locations, and/or unsuitable for you. Contact your Cambridge representative for further information regarding product availability/suitability before you enter into any FXI contract.
FXIs are volatile and may cause losses. Past performance of a FXI product cannot be relied on to determine future performance.
This document is intended only for persons in Canada, the US, and Australia. This document is not intended for persons in the UK or elsewhere in the EEA. In Australia, this publication has been distributed by Cambridge Mercantile (Australia) Pty. Ltd. (ABN 85 126 642 448, AFSL 351278); for the general information of its customers (as defined in the Corporations Act 2001). This entity makes no representations that the products or services mentioned in this document are available to persons in Australia or are necessarily suitable for any particular person or appropriate in accordance with local law.
Fees may be earned by Cambridge (and its agents) in respect of any business transacted with Cambridge.
The document is intended to be distributed in its entirety. Unless governing law permits otherwise, you must contact the applicable Cambridge if you wish to use Cambridge services to enter a transaction involving any instrument mentioned in this document.
© Copyright 2018, Cambridge Mercantile Corp., ALL RIGHTS RESERVED. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, on any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of Cambridge Mercantile Corp. See www.cambridgefx.com for contact details.