Finance leaders taking charge in digital transformation are finding ways to optimize workflows beyond accounting, accounts payable (AP) and accounts receivable (AR). Payroll, as it turns out, can be a strategic function of both the finance and HR departments.
No longer merely an avenue for capital outflows, payroll is a critical function of attracting and retaining talent, and emerging technologies can ease employers away from the inflexible legacy of the biweekly or monthly payday cycle.
But for employers to meet rapidly evolving employee needs on a global scale, a few more factors have to come into play beyond embracing early or instant wage access tools and a variety of payment vehicles. IRIS Software Director of International Payroll Services David Munn discussed with PYMNTS some of today’s most pressing cross-border payroll challenges as employers try to catch up to workers’ payroll needs.
Regulatory Patchwork
There are several factors driving the demand for cross-border payroll technologies, said Munn.
“We’re starting to see a rise again in terms of global mobility and in terms of companies supporting employees in countries whose talent pools they’ve not had access to historically,” he said. “It’s a combination of being a bit more flexible in how companies are looking at global talent pools, as well as companies expanding globally from an economic perspective.”
That global growth brings to the forefront some obvious predicaments. For one, businesses can anticipate the complexities of foreign currency conversion, or the headache of understanding local tax regulations. But Munn noted that more and more, service providers are witnessing organizations become caught off-guard from the cost of compliance.
“Compliance has always been a key issue for the global payroll industry,” he noted, highlighting how this particular pain point can be challenging even for businesses that are not actively hiring across borders.
Businesses that allow their professionals to work in other countries will still face the legal implications of cross-border payroll. While historically, this reality has meant expensive international wire transfers or the need for businesses to set up entities and individual bank accounts in various markets around the globe, payroll FinTech has quickly positioned itself to address these challenges on behalf of the employer.
That doesn’t mean that businesses can ignore the consequences of an internationally evolving payroll landscape, however.
Keeping Pace With Change
It’s one thing for organizations to hustle to keep pace with employees’ shifting payroll demands. Evolving technology has also supported the rise of early on-demand wage access, or the ability to pay employees in ways other than paper check or bank deposit.
But it’s an entirely other challenge for employers to support these innovations on a global scale.
Both the need for different payment methods as well as the migration away from the traditional payroll cycle are affecting the strategies businesses deploy when expanding across borders or supporting an international workforce, said Munn, who noted it is imperative for organizations to be sure that the technologies they do adopt can be flexible enough to address these needs.
Luckily, global payment infrastructure is catching up to these requirements, too. While faster and real-time payment networks are proliferating at the national level, ensuring interoperability between these networks on a cross-border scale has taken some time. Munn said it’s on it’s way, however, and will be instrumental in supporting the continued evolution of payroll.
“We’re already starting to see that in Europe, with real-time payments — it’s already here,” he said. “It’s a question of how quickly it’s adopted, to make sure you’ve got the technology in place, and that it can evolve and support that.”