When a bank crashes, it can throw all your financial operations into disarray. The most pressing problem you’ll face is making sure your global workforce is properly paid.
Your employees rely on you to deliver accurate payroll payments every payday, even if your bank can no longer process those funds. The tax authorities and other stakeholders are the same. They expect to be paid no matter what.
That’s why it’s essential to have a payroll contingency plan for all eventualities. Despite the fact that payroll is the biggest expense at virtually every company, most organizations have no plan in place for the possibility that their bank can suddenly not be in a position to undertake what it needs to.
And if it happens, they’re left scrambling for solutions.
Building a payroll contingency plan
Many companies have contingency plans in their IT departments to make sure they continue to function – and meet the needs of their clients – under any circumstances. A payroll and payment contingency plan is just as important because an inability to pay your workforce can be equally damaging to your company.
The following three elements will help you establish a resilient payroll operation that can overcome any obstacles.
1. Distribute your funds among several banks
No single bank can be relied on 100% of the time. If all your available resources are tied up in one account which becomes inaccessible for any reason, you’ll have to look elsewhere for the funds to pay your workforce. This is non-negotiable; to avoid it risks a severe attrition. Even late payments can cause a drop in morale that threaten to spoil your hard-earned organizational culture and loyalty.
Make sure your funds are spread around in different places. That way you always have the money you need to meet your payroll obligations, and no one disaster can block you from paying your employees.
2. Use a payroll and payment provider flexible enough to work with multiple banks
Even if you spread your company funds across numerous financial institutions, choosing a payroll provider that can only work with one bank means your payroll is in jeopardy if that bank goes under.
Planning for payroll and payment contingencies means choosing a global payroll provider that can connect payroll data to multiple banks. In today’s world of automated payroll and payments, businesses need providers whose technology ca
3. Develop the tools to pay even without a local bank account
If you’re working through your own payment network, you need a bank account in every country where you have employees to pay. If you’re in a contingency situation, it’s extremely difficult (and often impossible) in many countries to open a bank account quickly enough to make payments.
A better alternative is to work with a payment provider that is licensed to distribute funds across the globe. Such an entity can set up a virtual wallet for your company in any currency and move money across borders to pay your entire global workforce. And, unlike banks, licensed payment providers are obligated to keep your funds segregated, so you always have access to your money – even if the payment provider nosedives.
Important questions related to payroll contingency
1. How is an e-wallet different from a bank account?
A bank account is an all-purpose financial instrument that allows you to take loans, write checks, use credit cards, earn interest, and more. In many countries, your money is insured by the government.
An e-wallet is more limited and more specialized, which makes it more useful for payroll payments. You can store money in an e-wallet and use the money to make payments across the globe (as long as the provider has a license to do that – see below).
2. What is a money transfer license?
Companies that provide payment services need authorization from a regulator in specific jurisdictions. A company can acquire licenses in numerous jurisdictions, covering all major markets across the globe.
When a company acquires a money transfer license, it comes under intense regulation. It’ll often need to maintain a certain level of capital and comply with reporting requirements and other measures to prevent fraud and money laundering.
3. Is your money safe when using an e-wallet?
A company with money transfer licenses that operates e-wallets is regulated and supervised by relevant authorities and in many cases, connected to tier-one banks, which maintain their own lofty standards. Reputable companies use high-level security features, including encryption, two-factor sign-in, and fraud detection.
In addition, clients’ funds are segregated, meaning kept separate from other funds of the company.
4. Why should you use payments solutions and e-wallets?
When it comes to payroll and payments contingency plans, technology is more reliable than people. Technology works any time of day or night and is far less error-prone than human calculations.
Transfers from e-wallets can be optimized for payroll payments using rails designed especially for the purpose. The payments are also tagged as salaries, which helps employee credit ratings and speeds up the approval process.
Banks don’t guarantee when a payment will arrive. But for payroll, on-time arrival is essential. With e-wallets and advanced technology, payroll payments can be guaranteed to arrive on time. In fact, the best companies that specialize in payroll payments take liability for payments arriving on time and accurately – a great step beyond any bank.
Plan for any contingency with Papaya Global
Papaya offers the payroll and payments automation companies need to stay ahead of any payroll contingency.
Papaya holds numerous money transfers licenses across the globe, maintains a payment network with top tier banks, including J.P. Morgan Chase, and built the world’s first Workforce OS dedicated specifically to payroll payments.
Schedule a demo today to learn how Papaya can ensure your workforce is paid under any circumstances.