One of the less obvious, but critical issues of structuring a remote-working, fully internationalised business is how employees are paid – and what affect currency exchange rates may have on their actual salary amounts.
The work from home era: Here to stay
Covid-19 has forevermore changed the way we view our working lives. Google, Salesforce, Facebook and PayPal are among the companies extending remote working to at least 2022, while Japanese tech firm Fujitsu is halving its office space and giving its 80,000 employees in the country unprecedented flexibility.
Almost half (48%) of the US employees surveyed by communications consultancy the Grossman Group said they wanted to continue working from home after the pandemic and that the shift to remote work had positively impacted their view of their company.
But one aspect of remote working causes headaches for business owners who have to pay staff in different countries: Global money transfers and the foreign exchange exposure that accompanies it.
Paying your overseas workers: The impact of fluctuating exchange rates
Short-term and temporary arrangements present less of a problem, as extreme currency fluctuations typically occur over a longer time frame. However, as we have reimagined how and where we work for the foreseeable future, exchange rates can disproportionately benefit either the employer or the employee.
Using a specialist for foreign currency payments provides benefits to both the business and to remote employees. Expert advice allows you to compile, analyse and forecast your international forex payments, helping your company to better respond to market volatility. Choosing a forex specialist, in this way, is incredibly important as they can become a long-term partner and provide better service and rates that could affect your business’s growth.
International transfer options
Generally, business owners consult their accountants to ensure all international tax affairs are in order, and to get professional advice to cover all international legalities. However, few consider consulting a forex broker to mitigate the foreign exchange exposure and hidden costs of settling employee costs in multiple currencies.
Forex brokers will generally advise different ways to address these currency risk issues, depending on the size and frequency of exposure:
Fixed amount agreements
The first method would be to agree to pay your staff abroad in a fixed amount in your local currency, with their settlement amount varying depending on the currency fluctuations. This mitigates all of your currency risks and means you are not paying a variable rate. Although this option can be great for your planning purposes, more often than not, foreign workers will expect to be settled in their local currency. This means you may end up with multiple exposures in different judications. Currency brokers can assist businesses in settling foreign invoices quickly and cost-effectively, and help you to mitigate some of the risks through foreign exchange hedging tools.
Forward contracts can also be a particularly valuable tool for volatile currencies like the Polish Zloty or South African Rand. Due to the interest rate differential in these jurisdictions, forward contracts come with forwarding points, which means you are able to obtain a more favourable rate of exchange by locking it in far in advance.
Many businesses utilise these tools for planning and budget purposes and it ensures that the exchange rate they put in can be the actual exchange rate they have booked forward. Forward contracts don’t come at a premium and deposits can be as low as 5% of the transaction amount, ensuring you don’t have to secure the cash in advance.
Find your personalised forex solution
Having access to run multi-currency payroll can save you time and effort when making salary payments. Our Currency Solved platform is dedicated to helping those with cross-border payment needs. It enables you to settle directly with your staff without exorbitant bank charges and fees that tend to accompany the process. It also allows you to settle in multiple local currencies at a far more favourable rate of exchange.
In practice, you’ll either settle when an invoice is due or you can upload bulk payments directly onto a forex broker’s system for multiple payment runs. Foreign currency will clear into the beneficiary’s account free of bank charges, ensuring your staff abroad are always paid exactly what they expect to receive.
We can assist with cost-effective remote team payment queries and international transfers. Speak to us about your global money transfer needs. Email email@example.com or call +44 (0) 20 7759 7554.
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