How to pay globally distributed teams
One question businesses are starting to ask as they consider scaling their team is how to pay globally distributed teams.
International expansion for businesses is often associated with making sales internationally. This is a great move, but hardly the only opportunity that a global presence can offer. Potentially, the more pressing need in your business is talent.
Is a global talent expansion an opportunity for growth and scale?
Why Businesses are Looking Global for Talent
Well, finding the right people (locally) is a challenge.
Depending on your location, it can mean that either you don’t have enough access to the expertise you need or that the job market in your area is crazy competitive, and your investment to hire can put extra stress on your budget.
And you are not alone, over 54% of companies worldwide report having trouble filling positions.
Fortunately, we live in a global economy. Connecting with talent all over the world is becoming commonplace. With the explosion of remote work, you have a variety of options for overcoming a talent shortage.
However, international expansion in your team can bring up new challenges - namely, paying your distributed team.
With globally distributed teams, you have to take into consideration fees, exchange rates, and additional payment platforms that allow you to put money into your team member’s banks, in a reliable way.
The Challenges in Paying Globally Distributed Teams
Being able to reliably pay your employees is the biggest roadblock to building a distributed team. Many businesses, big and small, don't have the necessary know-how to implement a payroll worldwide.
These are some of the main hurdles they come across.
If you look at commercially available solutions such as PayPal or Skrill, then you quickly realize how inefficient these platforms are for businesses.
Even though very popular and user friendly, using these solutions for anything more than a handful of employees is very time consuming since integrations with automated payroll software is not possible. It's the virtual equivalent of filling and signing checks manually to pay your team.
This poor integration makes using either of these platforms not practical. The amount of time consumed and potential errors from doing everything manually is not worth the effort for most businesses since it's not a scalable way to grow your team.
Expensive for Everyone
Even if you can get by with the additional work that processing payments with non-enterprise solutions can generate, the expense of processing payments can bring this initiative to a halt.
Fees can make a big impact on how much your employees receive or on how much you have to pay them. The reason for this is that when transaction and currency conversion fees are combined, they make a significant dent on how much money your employees end up receiving.
Let's take PayPal’s commission structure, for example. Depending on your region, you can expect to pay USD $5.00+ 3.4% on top of that. Then there’s the currency conversion fee, which varies between 4% - 4.5%. Also, keep in mind that PayPal does not necessarily have the best currency conversion rates, since it’s another area where they make a profit.
This puts you in a difficult position. If you add the fees, you’ll find that your employees end up receiving a significant pay cut by using these platforms.
The other option? You absorb the transaction costs and increase your overhead.
Compliance and Reporting
Manually processing payroll, besides tedious and expensive, has the other consequence of making compliance and reporting time consuming and error prone. If you have a streamlined accounting infrastructure, then not being able to integrate these payment platforms throws a wrench into your compliance and reporting engine.
The Best Solution for Paying Your Globally Distributed Teams
The previous section is not implying that PayPal, Skrill, and other online payment gateway are without use.
Their problem lies in that they have a different purpose. They were not meant for the use of global businesses, but rather to cater to the needs of individuals.
Luckily, today there are a variety of financial services, such as Airwallex, that are designed from the ground up to cater to the needs of growing businesses focused on expanding their global footprint. Here are some of the characteristics that a competitive global payment solution must have.
As mentioned earlier in this article, fees can make or break the feasibility of using any given platform. It is for this reason that having a competitive fee structure, that is easy to understand, is key to implementing it to your payroll.
One of the biggest challenges for users is understanding fee structures. They can often be complex and make your employees feel like you are not being transparent with them in regards to their remuneration.
Accessible and Scalable
One of the reasons that global teams were only feasible for large enterprises was due to the infrastructure costs that they represent. A high cost of entry made it impossible for smaller businesses to pay employees all around the world.
Airwallex has solutions that have a much more affordable entry point that can also scale easily. This makes the process of moving to a globally distributed team significantly more cost effective.
The most critical aspect of having a payment solution for a distributed team has to be its ability to service the countries and currencies where you’ll be recruiting your new team members.
At first glance, transitioning to a globally distributed team can seem like a logistical nightmare.
Many businesses don’t choose to go this route since the amount of time and resources that are needed to implement the right solution might seem impractical. But with access to the right tools for the job, there is really no better time to start building a worldwide workforce than today.
With all this in mind, you’ll find that having access to a worldwide pool of talent far outweighs the cost of the payroll infrastructure that you need to implement to make it all work.
Related article: 6 Reasons why your bank transfer might be delayed
Evan Dunn manages the growth of Airwallex's SMB business in the US through marketing avenues. Evan is a generalist with expertise in SEO, paid media, content marketing, performance marketing and social selling. He also enjoys slam poetry and waffle making.