Challenges facing International Payroll Payments equinitiglobal.com
CONTENTS Contents 1 2 3 4 Abstract Introduction Background/ Problem Statement Solution 5 6 7 Technology Conclusion Additional Resources 02
ABSTRACT 1Abstract The challenges facing the global payroll industry are substantial. As organisations are characterised by ever-increasing global workforces, payroll processes become more and more complicated. What s more, international payroll isn t strictly limited to a straight forward business transaction; it is an employee s livelihood, and it is therefore crucial to pay the right person at the right time. However, 57% of payroll professionals experience returned or failed International payments every month. EQ Global, part of the Equiniti group, is built on a 180 year heritage of payments and shares administration services. More recently, EQ Global has become a specialist provider of global payments services to payroll companies and operators. As part of its ongoing evolution and keen desire to have a deep understanding of the global payroll sector, EQ Global conducted industry research to find out the main problems and challenges facing the global payroll payments industry. A survey was conducted in conjunction with Payroll World and was distributed to circa. 15,000 payroll companies. This white paper aims to detail the challenges that were exposed in global payroll operations and the solutions which are available to address those challenges. 03
INTRODUCTION 2Introduction EQ Global, in conjunction with Payroll World, distributed a survey to over 15,000 companies and departments operating in the payroll industry, with the with the aim of uncovering the main challenges facing the sector when it comes to cross-border payments. The results revealed that a high proportion of companies experience problems with their global payment processing and delivery, and that in general, industry needs are not being sufficiently met by current crossborder payment providers. 57% of companies surveyed in the EQ Global payroll survey experience failed payments every month errors which will be costing organisations millions of pounds. This is an issue for domestic payments as well a report released in late 2015 revealed that in the UK, payroll mishaps are costing FTSE100 companies up to 30m a year. Errors are also damaging to a company s reputation, and are caused in part due to the significant labour-intensive administrative duties required to manually enter data into payroll systems. With 73% of companies surveyed unable to upload a single automated multi-currency payroll file both the cost of time and the error risk is high. Payment method is also one of the reasons for delayed payments. 66% of companies reported that they process cross-border payroll payments via wire transfer,which is a slower transfer method than ACH. Many payroll organisations are unaware that ACH is an available payment option and that it offers faster payment delivery than other payment methods. The problem herein lies with the cross-border payments industry being largely dominated by foreign exchange providers; a sector of the industry which doesn t necessarily fully understand the implications of international payments or certainly the crucial timeliness required for payroll payments, and as a result, the industry has suffered from a lack of maturity. Foreign exchange is a huge industry, with $5.3 trillion being moved around the world in currency exchange every day. However, foreign exchange providers and even banks often lack the specialist knowledge required to make global payments with speed and accuracy, and nearly 60% of payroll companies surveyed found local payment problems to be the most common problem. What s more, 79% of companies are not aware that there is a single vendor who can deliver cross-border payroll payments with some companies relying on a combination of foreign exchange providers and banks to deliver successful payments overseas. There is an apparent dissatisfaction with the industry s services with 42% of companies rating their existing payment provider between 1 and 5 (out of 10). 04
INTRODUCTION & RESULTS The results Nearly 60% 79% 57% 73% 42% found local payment requirements to be the most common problem were unaware there is a single vendor who can deliver cross border payroll globally experienced returned or failed payments every month of payroll administrators were unable to upload a single automated multi-currency payroll file scored their current payment providers between 1-5 (out of 10) in assisting with payment issues EQ Global carried out a survey in conjunction with Payroll World to discover the current problems and challenges facing global payroll payments. This white paper aims to address the many challenges which face the global payroll payments industry and outline the solutions which are available to companies to reduce the frequency of delayed or failed payments to global workforces. Nearly a quarter have to process payments for over 1,000 overseas employees each month 05
BACKGROUND/PROBLEM STATEMENT UK businesses are increasingly penetrating the global marketplace as the world becomes ever more connected. 06
BACKGROUND/PROBLEM STATEMENT 3Background/Problem Statement UK Chamber of Commerce research revealed that 43% of businesses have ambitions to grow internationally, and for those organisations that are already operating globally, a large number have plans to expand even further. For payroll professionals, this poses a rising number of challenges. Paying an employee the right amount at the right time is critical not only to the employee s livelihood but also to safeguard the reputation of the company. UK BACS offers the most efficient payment method for UK payroll payments, but as companies are now employing workforces from all around the world, the payroll challenge is significant. As the world becomes ever more globalized, payroll departments are facing problems with inaccurate or late payments, which is both costly for companies and can be damaging to an employer s reputation. 57% of companies surveyed reported failed or returned payments every month a staggeringly high statistic when employee livelihoods are at stake. Processing cross-border payments is a complicated task due to different financial jurisdictions in each nation, lack of in-country knowledge by the payment provider, slow delivery times on payments, volume of recipients and global spread of employees, and bank charges incurred as a result of bounced / failed payments due to incorrect data. Nearly a quarter of companies surveyed process payments to over 1,000 overseas employees each month, which can make for a highly complicated procedure. Manual data entry for each of these payments leads to a high error risk, and with 73% of payroll administrators unable to upload a single automated multi-currency file, it s a laborious task. Many foreign exchange providers and banks also offer limited access to certain countries, meaning that the payroll department or organisation may have to utilize payroll payments services from a number of different providers in order to reach the full global spread of recipients. The main problem is lack of awareness around the payment delivery services that specialist global payments companies provide because the industry has been dominated by banks and foreign exchange providers, there needs to be a culture shift towards more specialist companies in order to address the growing needs of the payroll industry. 07
SOLUTION 4Solution The main requirement when paying overseas employees is accuracy the right amount being paid to the right person at the right time. For payroll companies and operators, the need for operational efficiency and costeffectiveness is also a key consideration as part of a wider business objective to remain competitive and profitable. With an apparent lack of visibility for specialist global payments services and continued reliance on banks and foreign exchange providers, there needs to be a culture shift for the industry. It needs to be re-educated on where the main pitfalls are occurring and what crossborder payments services are available to close the gaps. Industry knowledge Knowledge of the payments industry is essential when making cross-border payments to multiple countries and in multiple currencies across the globe. The payments process can be complicated with different banking jurisdictions in different countries, and local in-country knowledge is a distinct advantage when searching for a specialist global payments provider. Understanding of financial implications such as legislation and compliance also help to smooth out the process and react accordingly in the event of any errors or delays. Sector knowledge is also advantageous understanding of the payroll processes ensure that a payments provider is far more than just a foreign exchange provider, but that employee livelihoods are at stake when processing payments in multiple currencies to multiple countries around the world. The ability to handle complex administrative tasks is paramount to a company s reputation. EQ Global is part of the Equiniti Group, a specialist payment provider that processes in excess of 90 billion in payments per annum, with extensive inhouse payroll competencies. Accuracy Payment delivery accuracy is what distinguishes one payment provider from another, and with the complexities and challenges involved in processing international payments being far more significant than a domestic transaction, accuracy becomes of even greater importance. Delayed or bounced payments come at a cost to the remitter as many providers such as banks charge additional processing fees for looking into the error. What s more, inaccurate payment delivery can come at a cost to a company s reputation. EQ Global offers we normally quote 99.6% accuracy on delivery of global payments where industry average is at just 57%. 08
SOLUTION Speed The majority of global payment providers have historically used wire transfer as the primary payment method, which involves third parties in the process and this can result in delayed delivery or incorrect amounts being received. In fact, many organisations are unaware that there is a more reliable alternative accurate delivery is of utmost importance when delivering payments on time. EQ Global accesses the (ACH Automated Clearing House) network in alliance with the world s largest transactional bank, resulting in delivery certainty for international payments. Global reach While many payment providers offer payment accessibility to multiple countries, there are often limitations to global reach. This can mean that a company can end up using a number of different payment providers for different payment requirements. Offering global reach to over 130 currencies and in 180 countries, EQ Global has one of the largest global payment networks available. Administration Managing global payments can involve hefty administrative effort, especially when sending a high volume of payments to different recipients around the globe. In order to maximize payment delivery accuracy, technology needs to be sophisticated and capable of handling complex tasks. The more human administrative intervention that is required, the more likely there will be errors in the data input. Using smart technology, EQ Global is able to integrate into almost any system, which enables straight through processing for international payments. This can be achieved through either an API link up (true STP) or via a file upload facility which manages high volume transactions to multiple countries and in multiple currencies with ease. Automated verification mitigates the risk of errors, and by reducing the need for human data inputting, our services have been found to reduce administrative errors by up to 51%. Legislative compliance One of the greatest concerns when transferring payments to recipients abroad is whether the payment is legislatively compliant. Failure to comply with changing regulatory environments can cause payment rejections and delay. EQ Global is an assured provider of international payments and offers a safe, secure and fully compliant system for transmitting cross-border payroll payments. Cost When paying employees, cost matters. Not only will simplification of payment processes help to reduce administrative costs, but by using a specialist payment provider there is less risk of potential charges levied by local banks and poor exchange rates offered by FX providers. EQ Global utilizes an in-house technology platform to transfer payments to international accounts, cutting out the need for intermediary banks and their fees. The payment platform also mitigates the risk of foreign exchange fluctuations by locking in exchange rates at the point of transaction. 09
TECHNOLOGY 5Technology The EQ Global service is powered by its cloud based, international payment and foreign exchange platform, PayFac. PayFac allows you to securely transact payments or convert currency online in just a few clicks. With built-in features that ensure compliance with in-country payments regulations, the PayFac platform ensures a high level of accuracy. Key features of PayFac: Full connectivity with your existing accounting system via an API or you can upload files from your accounting system (Sage, SAP, Pegasus etc.) directly into PayFac Transfers can be transmitted through UK BACS, CHAPS, UK Faster payments, SWIFT or SEPA Up front validation of bank details Notification to you and your recipient that the payment has been sent Tailored reports which are fully accessible online Direct access to one of the world s largest transactional banks, providing great scale in the most challenging of countries. 10
CONCLUSION 6Conclusion Accuracy of payroll payments is paramount to companies who are paying employees abroad, and in an industry which still needs to gain recognition for its available services, there are vast improvements to be made to global payroll operations. Streamlining these processes could be saving time, costs, and the company reputation while improving employee retention. This whitepaper has outlined the issues which have been raised by UK payroll companies operating globally, and the main solutions in addressing these problems have been outlined so that payroll operators are aware of the alternatives to traditional banks and foreign exchange providers when considering global payments. 11
7Additional resources Click here for the appendix Copyright information EQ Global 2016. All Rights Reserved. Contact Call us on +44 (0) 844 776 1836 or email us at eqglobal@equiniti.com equinitiglobal.com