Four considerations when getting to grips with international payments Four considerations when getting to grips with international payments

Four considerations when getting to grips with international payments
01 Oct 2017

As organisations increasingly send staff to work on international projects or employ them on a more permanent basis overseas, they generally find it necessary to wrestle with the task of making international payments in order to ensure everyone is paid in full and on time.

While many payroll managers assume that the most difficult issue here is likely to be navigating a foreign country’s financial laws and regulations, there are other factors that can throw a spanner in the works too:

1. The problem with names

Employees’ names can end up causing confusion. For example, payments to staff with particularly common names such as John Smith or Mohammad Iqbal can end up being temporarily halted by a bank’s compliance department until their identity is confirmed.

So to ensure payment happens smoothly, you should always check that you have a copy of the pertinent employee’s passport to hand. Full names and dates of birth are often required in such compliance requests so preparing this information in advance will help to avoid delays.

2. National holidays

Banks are frequently closed for public holidays, which can affect payroll. If adequate preparation is not made, national holidays have the potential to cause significant problems, especially if a small team is looking after a large number of locations or if holidays do not fall on a set date each year.

For instance, the date on which the festival of Eid-al-Fitr takes place at the end of Ramadan changes depending on the lunar cycle. As a result, it regularly catches payroll managers out if they have not paid employees in the Middle East before.

Failing to do the necessary groundwork to deal with these scenarios can result in delays, particularly if local holidays and customs are unfamiliar to you. As a result, it makes sense to plan well in advance and regularly consult a global calendar.

3. Global cut-off dates

The majority of US workers are paid on a biweekly basis, while payday for UK employees is a monthly occurrence, but these schedules do vary around the world. Therefore, if a business is just starting to employ staff overseas or is opening new offices in previously unexplored territories, you can suddenly find yourself juggling a number of different paydays and cut-off dates.


To avoid payments suffering as a result, preparation is key. Keeping a detailed log of when each international payment needs to be processed may seem like common sense, but given the varying amounts of time that payments in different countries take to clear, it really is the best way to stay on top of the game.

4. Local connections

In some countries such as Italy and Spain, local regulations require payments to be submitted to tax authorities locally rather than being made from outside the country. But because organisations do not always have local bank accounts in these countries, they must find other means of meeting the necessary compliance requirements.

Possible options here include either setting up local companies and bank accounts or finding a trusted partner that is already able to pay taxes, employees and social security payments within the country.

Conclusion

Making payments in different currencies, at different times and to different accounts in multiple countries can be challenging. As a result, if your company is considering sending people abroad, be sure to learn as much as you can about local financial regulations, brief employees who are about to be relocated on how local payroll functions, and guide them through any actions required on their part. The key to success is always to plan, plan and plan some more.

 

Sam Bennett joined Frontierpay in 2010, after completing a degree in economics. He became involved in all areas of the business from dealing and trading to risk management and is now in charge of the company’s operations and compliance. He is also the firm’s money laundering reporting officer.

As organisations increasingly send staff to work on international projects or employ them on a more permanent basis overseas, they generally find it necessary to wrestle with the task of making international payments in order to ensure everyone is paid in full and on time.

While many payroll managers assume that the most difficult issue here is likely to be navigating a foreign country’s financial laws and regulations, there are other factors that can throw a spanner in the works too:

1. The problem with names

Employees’ names can end up causing confusion. For example, payments to staff with particularly common names such as John Smith or Mohammad Iqbal can end up being temporarily halted by a bank’s compliance department until their identity is confirmed.

So to ensure payment happens smoothly, you should always check that you have a copy of the pertinent employee’s passport to hand. Full names and dates of birth are often required in such compliance requests so preparing this information in advance will help to avoid delays.

2. National holidays

Banks are frequently closed for public holidays, which can affect payroll. If adequate preparation is not made, national holidays have the potential to cause significant problems, especially if a small team is looking after a large number of locations or if holidays do not fall on a set date each year.

For instance, the date on which the festival of Eid-al-Fitr takes place at the end of Ramadan changes depending on the lunar cycle. As a result, it regularly catches payroll managers out if they have not paid employees in the Middle East before.

Failing to do the necessary groundwork to deal with these scenarios can result in delays, particularly if local holidays and customs are unfamiliar to you. As a result, it makes sense to plan well in advance and regularly consult a global calendar.

3. Global cut-off dates

The majority of US workers are paid on a biweekly basis, while payday for UK employees is a monthly occurrence, but these schedules do vary around the world. Therefore, if a business is just starting to employ staff overseas or is opening new offices in previously unexplored territories, you can suddenly find yourself juggling a number of different paydays and cut-off dates.


To avoid payments suffering as a result, preparation is key. Keeping a detailed log of when each international payment needs to be processed may seem like common sense, but given the varying amounts of time that payments in different countries take to clear, it really is the best way to stay on top of the game.

4. Local connections

In some countries such as Italy and Spain, local regulations require payments to be submitted to tax authorities locally rather than being made from outside the country. But because organisations do not always have local bank accounts in these countries, they must find other means of meeting the necessary compliance requirements.

Possible options here include either setting up local companies and bank accounts or finding a trusted partner that is already able to pay taxes, employees and social security payments within the country.

Conclusion

Making payments in different currencies, at different times and to different accounts in multiple countries can be challenging. As a result, if your company is considering sending people abroad, be sure to learn as much as you can about local financial regulations, brief employees who are about to be relocated on how local payroll functions, and guide them through any actions required on their part. The key to success is always to plan, plan and plan some more.

 

Sam Bennett joined Frontierpay in 2010, after completing a degree in economics. He became involved in all areas of the business from dealing and trading to risk management and is now in charge of the company’s operations and compliance. He is also the firm’s money laundering reporting officer.