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How many different nationalities have you spoken to in work with this week? How many continents has your Zoom travels covered in the last few days?
Now consider how all those people, in all those different countries with their own unique currencies and laws, are paid every month.
Scratch a little below the surface and it’s soon apparent that international payroll is a complex beast, especially when it comes to the local laws that every company must adhere to. From taxation to labor laws, social security obligations, foreign exchange regulations, anti-money laundering and anti-corruptions laws, all the way through to data security and privacy, there is a long list of compliance factors to consider when processing international payroll.
This is where Employers of Record (EORs) bring so much of their value to the table. They allow their clients to build a global workforce while removing all that complexity and risk.
The through-line of all this is the actual movement of money from one country to another – the employers bank account to the employees.
9 ways EORs are leveraging fintech’s to meet global payroll compliance requirements
How that money is stored and moved to meet payroll obligations, and the compliance laws around it, has been revolutionized by fintech’s. EORs can now partner with fintech’s and embed their software and global payments infrastructure into their own platforms and processes.
By partnering with fintech’s and using them as their silent payment engine, EORs gain significant benefits for themselves and their clients, including when meeting those compliance requirements with international payroll.
1. Easy-to-use software
A basic challenge for any EOR is having to use several different systems to process payroll in different jurisdictions, and then having to combine and reconcile them. The probability of errors becomes higher the more systems and platforms are stitched together.
As fintech’s have built software that is integrated into a single global payments network, much of this activity can be eliminated. These tools can then streamline processes, automate tax calculations, and generate accurate reports, minimizing the risk of non-compliance.
2. Currency Exchange and Cross-Border Payments
Operating globally often involves dealing with multiple currencies and complex foreign exchange requirements. Fintech payments providers offer integrated currency exchange services, allowing EOR companies to make cross-border payments efficiently.
The EORs can then take advantage of competitive exchange rates and ensure compliance with regulatory requirements, simplifying the process of paying employees in different countries and currencies.
3. KYC and AML compliance (knowledge and technology)
International payroll payments involve navigating complex anti-money laundering (AML) and Know Your Customer (KYC) regulations. There are two core challenges here. Firstly, these rules have to be implemented within the payroll processing system and, secondly, those systems need to be updated when the rules are.
With regulated fintech’s, these rules are strictly adhered to, and the technology to flag any potential issues quickly to a human operator are built in. To become regulated, a core activity is keeping up to date with these international laws and regulation - and implement them promptly.
4. Having a global network of local bank accounts
A classic requirement that many EORs face is that they have to have a local banking presence in the country they want to pay payroll into. This can mean that they can’t meet the requirements of a potential client, or the requirements of a new client who wants to pay into that country, without going through the arduous process of setting up a local banking presence.
As fintech’s have built global networks of local bank accounts that EORs can use, this problem is essentially solved through a partnership where they have that required presence.
5. Tax withholding and reporting
Adhering to tax regulations is a core component of payroll compliance. Fintech’s can help EOR companies calculate accurate tax withholdings, prepare necessary tax reports, and facilitate timely payments to tax authorities.
They ensure that EOR companies remain compliant with local tax laws while minimizing the risk of errors or penalties.
6. Data security and privacy
Processing payroll means handling the most personal details of the employee, including personal information, bank account details, and tax identification numbers.
Handling this sensitive payroll information requires robust data security measures. Regulated fintech’s need to meet the most stringent data protection protocols and build their systems around them.
7. Streamlined payment processing
The phrase ‘accurate and on-time’ is one every EOR and payroll provider has burnt into their brain from day 1. Missing a payment date or being inaccurate in the amount delivered into an employees’ bank account, can mean breaking multiple laws and regulations.
Fintech payment providers offer advanced payment processing platforms that seamlessly integrate with EORs' payroll systems. These platforms support multiple payment methods, such as direct deposits, wire transfers, and global payment networks, enabling efficient and timely salary disbursals to employees worldwide.
They also provide the ability to pre-fund accounts more efficiently into local jurisdictions, allowing for payroll to be released and delivered on the same day into the employees’ bank account.
8. Compliance monitoring and audit trails
To meet compliance requirements, EORs must maintain detailed records of payroll transactions and be prepared for audits. Fintech payment providers offer comprehensive reporting and auditing functionalities that track and record every payment made, ensuring transparency and compliance.
These systems generate audit trails that can be easily accessed and reviewed, facilitating compliance monitoring and mitigating potential compliance risks.
9. Scalability
With payments providers handling the complexities of compliance and cross-border payments, EOR companies can scale their operations globally without worrying about payroll-related obstacles. They can tap in to those massive global, proprietary networks to pay easily into pretty much every country in the world.
This flexibility and global coverage allow EORs to expand into new markets swiftly and efficiently.
An International Payment Engine
EORs allow their clients to rest easy when it comes to employing people internationally. By partnering with fintech providers, EORs can now rest easy when it comes to the payments engine they use to process those international payroll payments.
The coming together of these two entities makes the payment side of processing international payroll (almost) as easy as joining your latest international Zoom call.
To discover how TransferMate can help you upgrade your payment engine and meet international payroll compliance requirements, contact the team here.
