What Happens When Payroll and Payments Are Split

People often refer to the payroll department as the neglected stepchild of HR and finance. They mean that those larger departments have modern, state-of-the-art tools like HCM and ERP, while payroll still uses software designed in the previous century – when payroll was less complex, remote work was minimal, and no one had even heard of a “blended” workforce.

The result is a stunning assortment of inefficiencies. For example, global payroll is typically processed on many local platforms, and payments are delivered through another, usually through an outsourced third-party provider.

That means your payroll payments are delivered by an all-purpose payment service using payment rails that were not designed for payroll payments. This could impact your business directly:

  • Payments may be late – Payment providers calculate delivery from the day they leave your account, not when they need to arrive. If payday follows a bank closure or other delays, the payment is simply pushed back.
  • Salaries could be short – Payment providers often lack global reach, so they go through several banks, each of which charges fees you weren’t expecting.
  • Unexpected foreign exchange rate adjustments – Most payment providers need to be funded earlier in the pay cycle, often as many as ten days before payday. That increases exposure to foreign exchange fluctuations, particularly during global economic instability.
  • More stress on working capital. Payment companies often require deposits as high as 30% of the payroll run, tying up capital unnecessarily. With better data, more consolidated prosses, payroll-dedicated rails, and fast delivery, the need for a large deposit drops dramatically.

These problems result from failures in the system that are clear and obvious. The real impact of a split system lies deeper under the surface. It’s time to take a look under the hood.

What ‘Payroll Automation’ Means to Payroll Companies

Payroll and payroll payments are not two separate processes. They are a single process that has been artificially split because payroll companies prefer to outsource the payments part.

It makes sense from the perspective of those payroll companies. Making payments requires building a global payment network, obtaining licenses to hold and transfer funds around the globe, adhering to bank-level security measures, and developing an automated payments execution technology infrastructure.

Oh, and then – embed it into an existing global payroll platform.

That’s a lot of effort, and they are under no real pressure to do it. But their gain is your loss. When two separate systems are involved, the process can never be fully automated end-to-end. Payroll providers claiming they offer “payroll automation” only refer to their half of the process. When the payments are outsourced, there is a manual handover between the two systems.

Managing two separate systems is time-consuming and increases the risk of manual errors. Data needs to be entered and reconciled between the two platforms, which can be a cumbersome and error-prone process.

When payroll payments are embedded in the payroll platform, all data is automatically synced. When you make payroll updates, before or after the payroll cutoff date, they all flow through the entire system instantly. Nothing falls between the cracks.

More importantly, it misses one of the benefits you get from an effective global payroll platform. Data that originates with finance may not always match data from HR. But a good payroll platform will connect these dots, standardize data, unify processes, and eventually serve as a single source of truth both Finance and HR can trust.

Additionally, using separate systems can make it challenging to see the complete picture of payroll and payment information in real-time. This causes data-driven budget and expense-related decision-making even harder to achieve.

Dedicated payroll payments technology can make the process faster, smoother, and more reliable, and it improves visibility and control. Payment data can be tracked from the very start of every payroll cycle.

Banking Fees Rise with Payments Outsourcing

When payroll companies outsource their payroll payments, the process is slower and more expensive. They use payment rails that were not created with payroll payments in mind, so even if they have global coverage, the pathway through the banks is not optimal.

The payments may still have to travel through multiple banks to reach their intended recipient. Each bank will charge a processing fee and may have to convert the currency to a different one, also for a fee. These changes are barely visible in an individual paycheck but can become significant when thousands of payroll payments are processed every month or every two weeks.

Banks carry out security checks for cross-border payments. When more banks are involved, more time is needed to complete these checks. That’s why proper payment rails are essential. They speed-up the process simply by guiding the payroll payments through the shortest possible path.

Enter Papaya Global, the First Payroll Platform with Embedded Payroll Payments

Papaya Global has built the first fully automated platform for global payroll and global payroll payments. The embedded payments capability is also the first technology designed specifically for payroll payments.

With Papaya, companies can process their global payroll and pay their entire global workforce, tax authorities, and benefits vendors – through a single platform.

While other payroll companies outsource the essential final steps of global payroll – the actual payments – Papaya built a payment network, acquired licenses to move and hold funds, and built an automated payroll payments execution platform within its existing world-class payroll platform. Papaya controls the payment rails through its own network, so payments are always optimized for their unique purpose.

Payroll data syncs automatically, allowing the Papaya Platform to serve as a single source of truth in matters of disparity between finance and HR. The self-serve payments platform runs ongoing simulations to identify any obstacles that could delay delivery or increase costs, calculating the exact amount of funding needed to complete the payment. It also offers currency management, accounting for FX fluctuations as late in the process as possible and reducing conversion costs.

All of this, and more, goes into building the world’s first global payroll payments technology and embedding it into a payroll platform. We did it because payroll payments needed their own solution. It wasn’t easy. But the good news is that it’s pretty simple to start using it. Drop us a line, let’s make this your team’s reality.

Schedule a demo today.