Speedy Payroll Payments: A Sign of Healthy Systems — And a Game Changer
Gur Biron| Mar 08, 2023
In business, everyone knows that time is money. This is especially true for payroll payments. The more steps your payment partner had to take to complete the delivery, the longer it takes for salaries to reach your global workforce. That means more banks, more fees, and more time for changes in currency exchange.
A slower process puts more pressure on your working capital. You have to fund your payment accounts earlier in the cycle and leave larger deposits to cover all the possible add-ons and rate changes along the way. That means a huge amount of money is tied up each month in payroll that could be used more effectively elsewhere.
Faster payroll payments put you in control.
Faster payroll payments means you can fund accounts later in the cycle and leave a smaller deposit – because there are no surprise fees accumulating en-route. Even your FX is more predictable within a shorter time frame.
That means more money stays in your hands for longer, so you can do more with it. Switching to faster payroll payments may be the quick win you need to gain an edge over the competition.
Why Are Traditional Payroll Payments So Slow?
Workforce costs account for about 60% of most companies’ annual spending. With such an enormous amount of money moving through the system every pay cycle, you think payroll payments would have held a privileged place in the hierarchy with a well-developed, efficient, and optimized system.
But no. Actually, the opposite is true.
Global payroll companies have traditionally outsourced the last step in the process – the actual payment delivery, leaving it in the hands of general, all-purpose payment service providers. Those payment companies use the same payment rails – the predetermined pathway funds take through the banking systems – for payroll payments as any other payments. The rails were never optimized for payroll payments and often take longer than necessary.
These payment companies typically don’t have a truly global payment network, relying instead on a patchwork of partners, often with sub-prime banks. They have no option other than to use payment rails that pass through an assortment of banks, each of which charges a processing fee.
When payments cross borders, banks need to run checks to ensure that there are no sanctions violations or money laundering operations, causing delays in the process.
Ultimately, as long as payroll payments are outsourced, there is no way to control the rails the payment companies use. Payment companies will look for rails that meet their needs, not the best interests of their clients. That means the process will be slower and more expensive than necessary. Payments might reach your employees late, and the amount might be smaller than they are expected because unexpected fees were paid.
Combining Payroll and Payments – How to Fix Payroll Payments
The solution for fixing payroll payments begins by bringing payroll and payroll payments together into a single platform, as it always should have been. It is the essential first step – the necessary building block – for fast, efficient, and accurate payroll payments.
When global payroll and global payments are unified, the system starts to come to life. Data syncs seamlessly throughout the platform whenever a change is registered at any point in the process. The system can be automated, end-to-end because it’s no longer two separate platforms. Payroll managers can track funds from the very beginning to the end of the process, providing visibility and control that was missing in the split system.
Once payments are embedded into the global payroll platform, it opens the door to other necessary innovations:
1. Global payments network - payroll payments needs a global banking network specially designed for the purpose. That means first-rate banking partners with true global reach so payments never need to be outsourced to a third party.
2. Optimized payment rails – payroll payments should be delivered through payment rails specially designed for payroll payments. Unlike other payment rails, payroll payments would focus on ensuring the payments are delivered on exactly on payday, taking all obstacles into account.
3. Money transfer licenses – being able to hold and money funds allows for flexibility in payroll payments. It also requires a great deal of reporting and government oversight, so there is no question about compliance in any location.
4. Dedicated technology – platform capabilities to automate payroll payments across well over 100 countries.
Bringing all of those elements together allows payroll payments to move through the delivery system seamlessly, saving you time and reducing costs.
The Papaya Way to Payroll Payments
Papaya Global is the first global payroll platform to embed payroll payments within the platform, creating the first system that can genuinely claim to be automated, end-to-end. It’s also the only one that offers full liability if something goes wrong – promising to sort extra fees and delays on its own, not waiting for other banks to do so or rolling costs to your or your employees.
We can do that because we built our own global payment network with partners such as J.P. Morgan and other major banks. We created payment rails expressly for payroll payments, allowing Papaya to guarantee payment deliver within 3 days. Papaya also acquired money transfer licenses in five major markets and developed advanced self-serve technology that sits within the Papaya platform.
The entire payroll process is a fluid whole. And that allows Papaya to do things differently with payroll payments.
In other words – being able to offer the fastest global workforce payments in the market is a symptom of a system built well, and it’s the result of years of hard work.
AI Chimes In
Additionally, unlike other payments, where the key date is when the money leaves the payer’s account, payroll payments require calculations to be done in the opposite direction – from the date the money needs to land in the employee’s account. That shift from “send” to “land” is unique to payroll payments and one of the principal differences in execution.
Because Papaya has access to data at every stage of the process, Papaya can run an ongoing series of simulations, taking into account the best rails, the need to account for bank holidays and other potential delays, and the standard rate of currency volatility.
The platform runs an endless series of “dry runs” from the start of the month to the payroll delivery date. These simulations let Papaya know exactly when the client needs to fund the account – which is much later in the process than when everything is estimated. It also knows exactly which rails will work the most efficiently.
These dry runs allow Papaya to deliver a Full Value Transfer, meaning that all of the funds that were meant to reach the employee are delivered to the penny. All fees are known in advance, so there is never a risk of salaries coming up short.
Payroll Payments for the Modern Age
Papaya’s new Payroll Payments service is transforming how companies handle payroll and payments in the new age of digitalization and globalization.
The system brings a new level of efficiency, replacing the slow, error-prone manual process that relies on outdated software.
Find out how your company can regain control of your global payroll and increase the speed and efficiency of the entire process.