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There are several problems you can run into when it comes to paying your remote employees who are based in different countries. Using a forex service to manage your global payroll can mitigate your currency risks.
When you’re a multinational company with employees in several countries, paying salaries in different currencies can become a bit complicated. There are a few issues you might run into, the two biggest concerns being currency risk and payroll accuracy.
Fluctuating exchange rates can disproportionately benefit either the employer or the employee. The conversion of funds from the host country to an employee’s foreign bank account can often cost a great deal of money and discrepancies on either end.
Payroll accuracy can also be affected because even though it’s every business’s responsibility to pay its employees their full and accurate salary, there are times when overseas employees don’t get the amount they are entitled due to negligence, oversight or just human error.
There are several ways that a company can pay their foreign employees, but not all of them are beneficial to all parties.
Fixed amount agreement
As mentioned before, issues can arise with payroll accuracy when making payments across borders. This is most often the case when a fixed amount agreement is in place between the employer and employee.
A fixed amount agreement is when you pay your overseas staff a fixed amount in your local currency, for example, a South African employee is paid a fixed US Dollar amount by their multinational employer. Although this option can be very helpful for your planning purposes and mitigates all your currency risks as you’re not paying a variable rate of exchange, in most cases, foreign workers run the risk that the amount they are paid will vary from month to month due to currency fluctuations. Not to mention the transfer and conversion costs they will incur when receiving the currency in their local account.
Foreign employees will likely prefer to be paid a fixed rate in their local currency. The problem with this kind of fixed amount agreement is that you won’t be able to plan properly, and it leaves you open to multiple exposures in different jurisdictions.
Use a forex and currency hedging specialist
If you would prefer to have someone to guide you through and oversee the process of paying your overseas employees, then a dedicated forex broker, who is knowledgeable and easily contactable is your best option. Global payroll is a complex endeavour and using a forex provider means you have the option of implementing several forward planning solutions for regular payments.
Because exchange rates can disproportionately benefit either the employer or the remote employee, a dedicated forex broker can help find a solution that will be beneficial to both parties. Forex specialists will handle the currency conversion, and transfer directly to your employees in their
local currency. They can assist businesses in settling foreign invoices quickly and cost-effectively and help to mitigate some of the risks through foreign exchange hedging tools.
Expert advice from a knowledgeable forex broker allows you to compile, analyse and forecast your international forex payments, helping your company to better respond to market volatility. Choosing the correct forex specialist is incredibly important as they can become a long-term partner and provide better service and rates that could affect your business’s growth.
Sable International is a fully regulated and registered financial services provider in South Africa, the UK and Australia. Our forex team deals with large international transfers in a fast and professional manner. They can discuss the exchange rates, the direction they have been trending in and compare the current exchange rate with historical levels, thus providing insight into current market events that are likely to cause rate movement. They can also suggest potential hedging tools and guide our clients on how and when to trade.
Why use Sable International?
Sable International’s forex department specialises and excels in international money transfers. We run fast settlements with no sending or receiving fees in selected jurisdictions, such as South Africa. From an employer’s perspective, there is minimal admin that needs to be done. Simply send us the payroll and we will process it. You will be able to get sent daily, weekly or monthly reports pertaining to all payments made.
As for your employees, we handle all aspects of remittance, and they will receive their full salary without delays or excessive bank fees.
Sable International has two platforms available to make global payroll easy for you. The first one is where you do all payments by yourself and the second is where we assist with all aspects of the process.
Some companies prefer to keep the payroll process in-house and have their accounting department facilitate the payments. While others would rather outsource the admin of this process. Sable International has the ability to assist in either one of these situations with personalised service or simply providing you with the secure platform to do so yourself.
Forward contracts
A forex broker can assist you in setting up a forward contract between you and your employee. This is a way to mitigate the risks for all parties and is an especially valuable tool for volatile currencies like the South African Rand and many other emerging market currencies, especially those in Africa.
Forward contracts are non-standardised contracts between two parties that regulate the purchase or sale of a currency at a later date at a price agreed upon when the contract is initiated. This strategy can limit the potential risk of exposure for your business.
In terms of payroll, this means that you agree to pay your employee at a future date, at the rate of exchange of the current date.
In terms of payroll, forward contracts entail establishing non-standardised contracts between two parties (employee/employer) that state that they agree to pay their employees at a future date at the current exchange rate.
Many businesses use forward contracts for planning and budget purposes because they are able to lock in an exchange rate for a future date.
Forward contracts don’t come at an additional cost and deposits can be as low as 5% of the transaction amount, ensuring you don’t have to secure the cash in advance.
Multi-currency e-wallet
If you want to manage your payments with a more hands-on approach, then a multi-currency e-wallet service, like Currency Solved, that gives you visibility and control over the payment process, could be the solution for you.
This makes it easy for multinational companies to solve all their currency problems using one platform. Especially for those companies who need to make payments in different currencies.
Currency Solved is a simple and easy-to-use platform that removes the complexity around currency conversions. The dedicated conversion and payment platform allows you to pay your overseas employees, in one or several countries, all from the one platform.
How Currency Solved works
1. Register
Register for a Currency Solved e-wallet by completing the basic application form to determine which of our services will best fit your needs.
2. Verify
Provide the required documentation to verify your business or personal identity.
3. Access to the platform
Once your application has been processed, you’ll have access to your own currency management platform, usually within one working day.
4. Walkthrough
One of our experienced brokers will contact you and guide you through the platform and answer any questions you may have.
5. Fund your e-wallet
Your multi-currency e-wallet works as a holding account, which is segmented into sub-accounts which hold several different currencies. Once it’s funded, you will have the option to convert and pay in up to 35 currencies globally.
The benefits of using Currency Solved
- Live currency conversions: You can convert your currency at exceptional exchange rates priced off the live currency markets. You are also able to secure exchange rates 24 hours a day, five days a week.
- Multiple currencies: You can hold multiple currencies at the same time, take in deposits at any time and keep track of your running balances for various currencies.
- Global payments: Global payment functionality gives you choice and control over your local and international payments.
- One platform. Multiple functions: You can use one platform to collect money from many countries and currencies, hold the money for as long as you wish, and pay put to recipients in multiple currencies.
- Global receipts: We help your employees get paid faster. Businesses can pay invoices locally, in their own currency, rather than with international transfers. The money is available quickly and can be converted before being paid into your employees’ bank account.
- DIY: You can book trades yourself using the interactive conversions and payments platform.
- Broker assistance: While the main benefit of Currency Solved is the sleek self-service, you will always be able to contact one of our dedicated forex brokers who are able to assist with any user problems.
Our forex team is on hand to help you take the stress out of paying your overseas employees in multiple currencies and to manage your currency risk. We’ve been helping clients transfer money for over 20 years. Call our team on +44 (0) 20 7759 7554 (UK) or +27 (0) 21 657 2120 (SA) or email us on [email protected] to get started.
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