Sep 07, 2020 | Foreign Exchange
How might international payments and payroll change as a result of COVID-19?
As we start to move out of lock down, we are beginning to look at how life may change on a more permanent basis because of the pandemic. For businesses working on a global scale, international payments are fundamental to their operations. Whether this be payments throughout supply chains, for materials, travel or payroll, movement of money is everywhere but how, if at all, will these international transactions change in light of COVID-19?Looking back on the first half of 2020, we begin to see the start of a global economic downturn and how the markets have fluctuated in response to the virus. Despite this, in general the payments industry has remained resilient. Banking institutions adapted quickly to safeguard their staff and customers. Whilst we did see disruption across the globe, with some banks closing their doors entirely overall, the movement of money has remained steadfast and secure. Contactless payments for small business have in fact more than doubled since March, with CardFlight reporting that ‘transactions initiated either through a credit or debit card or smart phone were up 107.1% in the week of June 29-July 5 from their baseline week of March 2-8’.
Different industries have, unsurprisingly felt the effects more than others. For example, the travel and hospitality sectors, amidst the pandemic has seen large payment declines, yet e-commerce payments have seen a triple-digit growth. When looking at B2B, payments such as payroll and pensions have only but continued. With nearly one million people turning 55 this year across the UK, coupled with the fact COVID-19 has brought economic struggle for many, we could see a significant increase in people taking out their lump sum payment early. And as more people retire abroad, this would mean additional international payments.
How has payroll been impacted?As the virus swept through the nation, more people than ever were working from home.
Coupled with the fact new legislation rapidly came into play, the impact on the payroll function and how they operate was vast.
With furlough being brought into place, payroll software has had to change to accommodate and provide the necessary information and support for customers. In the UK, working with HMRC has been vital to ensure these payments are made accurately and to the correct recipients.
David Munn, Director, International at FMP Global, part of IRIS Software Group, said: “None of us have experienced a pandemic before and many things changed overnight. We had to assess how each country reacted and update our software accordingly.
“Our customers have one point of contact and all disbursements are managed centrally in the UK giving them peace of mind. We use Western Union Business Solutions to process our customers’ international payments which helps provide reliable and timely transactions.”
What does this mean for international payments and payroll?Dealing on an international scale brings forth its own complexities in ‘normal’ circumstances, without the added strain of a global pandemic. Our head of account management Ashley Phillips comments ‘arguably payroll is the most critical function’ of a successful business. Given the financial pressures that COVID has generated, ensuring employees wherever they are based, are paid on time in their chosen currency and in full is more important than ever.
Ashley goes on to say how at Western Union Business Solutions we thankfully ‘haven’t seen any impact or made any changes on how we are processing our client’s payments.’ And in some cases, improvements have been seen to payment delivery and support. Payments are being processed and reaching the intended recipient successfully in light on the situation.
Whilst working remotely staying connected has been crucial to this international payment success. Where we had seen payment corridors change or become affected, communicating this quickly to clients has been key to maintaining business continuity.
Has COVID changed the payroll process permanently?With the introduction of furlough and rapidly changing legislation, not only have payroll teams had to adapt but so too has the technology and software which supports this vital business function.
Stuart Stephens, General Manager for FMP Global comments ‘We are seeing an increase in companies inquiring about a managed payroll service for their company’ suggesting we may see a trend towards outsourcing in future.
With changes potentially coming into play for payroll processes and teams, what about international payments?
COVID-19 has highlighted how volatile the markets can be, with it spiking to levels last seen during the financial crisis of 2008. These unpredictable fluctuations can have impacts on a company’s bottom line. One month a GBP to USD payroll payment could cost £2,000, yet if the markets move the next month it could cost more. To help mitigate this risk businesses should look to implement a currency risk strategy if one is not already in place. As the markets move and bring forth unpredictability, having more control over your payments will help enable better planning and provide greater visibility and forecasting over costs.