Best Practices for Managing Employee Payments Across Borders

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Cross-border payments for your employees can feel like a minefield. Make one mistake and your company is in big trouble. Payments end up late, employees are upset and you have a big headache with compliance. With the global workforce growing at an unprecedented rate, cross-border payments are more important than ever.

Four out of five companies state they have some kind of challenge when it comes to paying employees who work for them abroad.

That's 4 out of 5 businesses, struggling with the exact same issues as you are.

There are strategies that work to make the process as smooth as possible and to ensure that your employees are happy and taken care of.

In this post, we break down exactly what those strategies are:

Why Are Cross-Border Employee Payments So Complex?

Businesses with remote employees across borders already know this. International payments are more complex than standard payments, and here is why...

First of all, standard wire transfers between different countries take way too much time.

Statistics show that domestic payments take 21 days on average to get processed, while cross-border transactions take 32 days on average. This is 55% more than the domestic ones. But it doesn't end there.

Every minute that you don't pay your employees, it impacts their life.

They are trying to pay their bills and their family. This is their living and if it doesn't get to them on time, their lives become more difficult.

When you have employees in different locations, and they speak different languages, it also leads to communication gaps and higher possibility of errors.

Some companies are experiencing errors due to communication gaps. When this happens, processes get slower, and there are more compliance challenges.

Choose the Right Payment Method

First of all, you have to know that there are many payment methods to choose from when it comes to paying your employees.

As we already mentioned, not all of them are created equal, some being better than others when it comes to the cross-border payments. The following are some of the most popular methods available right now.

Your business goals will determine which is the best method for you. For example, if you need to know how to send money to China, using a dedicated international payment service can help you avoid long delays and high costs that come with standard bank transfers. These platforms are tailor-made for sending cross-border payments and can make life easier for both you and your employees.

But there's more to the method that you need to consider such as speed, cost, and reliability, among others.

Manage Currency Conversions Strategically

Currency conversions are an area where businesses often lose more money than they should.

Exchange rates fluctuate all the time, and if you are not careful you can lose a lot of money. Some companies are losing thousands of dollars a month because of unfavorable exchange rates and hidden fees.

Here are a few strategies to minimize these losses.

Lock in good rates when possible by using forward contracts or setting up alerts. Most modern payment platforms have better exchange rates than your standard banks. Check for hidden fees – what looks like a good deal on the surface may have conversion fees in the fine print.

Paying your employees in their local currency can also be a smart idea. It will protect them from exchange rate volatility and show that you care about their financial wellbeing.

Build a Solid Compliance Framework

Compliance is an area where most businesses fall flat with their cross-border payments.

Each country has different tax laws, reporting requirements, and payment regulations. Get it wrong and you can end up with fines, legal issues, and bad relationships with your employees and authorities.

Understand the tax implications in each country where you have employees. This includes local tax withholding requirements, social security contributions, reporting obligations, and double taxation treaties that may apply.

Using an Employer of Record (EOR) or international payroll service is a great way to reduce this burden. These companies specialize in this area and have the compliance knowledge to manage multiple countries with ease. It will take the pressure off you and reduce your risk of compliance issues significantly.

Don't attempt to figure this all out by yourself – too much is at stake.

Automate Wherever Possible

Manual payroll processes are your worst enemy when it comes to cross-border payments.

Calculating exchange rates, tax withholdings, and payment schedules manually for multiple countries is simply asking for problems. Errors are inevitable and cost you money, time, and employee trust.

Automation is the solution. Modern payroll and payment platforms can automatically calculate payments in different currencies, do tax withholdings according to local rules, schedule payments to specific dates, and even generate compliance reports automatically.

It takes some time to set it all up but in the long run, you will save hours every pay period and reduce errors significantly.

Speed and Reliability Are Key

Do you know what matters the most to your employees?

Getting paid on time. Every time.

Data from a survey found that 49% of workers would have serious financial issues if their paycheck was delayed for just one week. This is almost half of your workforce under a financial crisis because of a payment delay.

This means speed and reliability are non-negotiable. Choose payment providers that have a proven track record when it comes to international transfers. Schedule your payments with processing time in mind and include buffer days for those that take longer to process or have to go through multiple banking systems or currency conversions.

Always have a backup plan too. If your primary payment method fails, make sure you have a second option that is ready to use immediately.

Create Clear Communication Channels

Payment issues are stressful enough without having unclear communication channels making everything worse.

Create clear communication channels for your employees to ask payment related questions or report issues. Ensure there is always someone available on your end who can quickly respond when needed. And be proactive about notifying them about any schedule changes or potential payment delays.

Communication builds trust. When employees know exactly when they can expect to be paid and can easily reach you with their questions or concerns, they feel more secure and valued.

Monitor and Optimize Your Process

Cross-border payments markets are growing at an unprecedented rate, with an expected value of $320 trillion by 2032 from the $194.6 trillion it's valued at in 2024. New solutions and technologies are being introduced all the time, which means better options are available.

Regularly review your payment processes to see how they are working. You can look at total cost including fees and exchange rates, the average processing times, employee satisfaction with the payment timing, any compliance issues or errors, and the new technologies that can improve the way you process your payments.

Don't be afraid to change providers or switch methods if something better becomes available. Your processes need to improve as your business grows and new technology comes on the market.

Bottom Line

Cross-border payments for employees don't have to be complicated.

The right mix of payment methods, automation tools, and compliance support will do the trick. Assess your current process and identify the pain points before implementing the strategies above, one at a time.

At the end of the day, your employees rely on you for timely and accurate payments. By putting solid international payment strategies in place, you're not just solving a business problem, you're showing your global team that you value them and their contributions.

It's time to take action. Review your current cross-border payment process, identify the areas you need to improve on and start implementing these strategies. You and your employees will thank you in the future.