Managing a global payroll is no easy task, but someone has to do it.
In the age of remote work and the internationalization of the hunt for talent, companies that provide employer of record (EOR) services have to find their way through multiple bureaucratic labyrinths in order to successfully attend customer demand. The job by itself is challenging already, and the increasing demand for such services adds pressure to be swift without losing the rigor required by compliance.
Barros speaks openly and precisely about many of the headaches that haunt companies such as Remote. The picture he paints is that of a complex task that requires constant flows of accurate information, extra care in data management and an ironclad commitment to meet the agreed payday.
NSAM: Which are the major challenges that come with managing a global payroll?
Pedro Barros: You need to start by the most important part, which is people receiving their pay. We operate as a global company, and if you have dozens of thousands of employees, the question is how to make that happen in a timely manner, in a cost-effective manner, and not to fail our employees, because it’s critical for them.
But the challenges go beyond that. You have regulatory challenges. When you want to operate in a new country, you might need a certain license, or you might find a lot of complexity to achieve full compliance. You need to navigate that with care to make sure you’re never in a position in which you’re being non-compliant.
NSAM: How big is the payroll that you have to manage?
Pedro Barros: As I mentioned, we have dozens of thousands of employees in 72 operating countries.
Managing payroll is highly complex. There’s no universal way of doing it. It can be very nationalistic, or even narrowed down to state-level. The number of dimensions depends on the number of employees, the number of countries and states they’re in.
That puts into perspective the amount of touchpoints that we need to have just to process payroll for a specific individual.
NSAM: Does this complexity affect the timeliness of payment?
Pedro Barros: It does. You have many countries that are very protective of their banking system, of money flowing in and out of the country. So there’s a lot of steps that we need to follow to ensure that the money reaches our local operating entity and then that it is dispersed again in a compliant way to the banking system, locally. Certain countries have limitations, for example, for certain bank accounts, of the amounts that you can pay an individual. If it is above a certain threshold, you need to do it a different way.
Managing payroll is highly complex. There’s no universal way of doing it
We need to be very aware of all these nuances, so that we never fail to pay employees. We work with regulators to try to improve how things are addressed when operating locally.
NSAM: Do you handle different currencies depending on each country? How does that work?
Pedro Barros: The default payment method is the local currency. Obviously, we don’t hold cash in all those currencies, centrally. There’s a forex process that we need to go through to ensure we’re getting local currency to pay individuals.
We have alternatives in some countries, in which we are able to pay in US dollars or euros locally, which requires a whole different level of complexity from a regulatory perspective, from a reporting perspective. Operationally, that requires another local bank account, in a different currency.
We usually hold money centrally in G10 currencies. US dollars, euros; the main ones.
NSAM: Is there a particular currency that is difficult to deal with?
Pedro Barros: There are many. For example, the Brazilian real. Brazil is very protective of their banking system; there are high restrictions there. Indian rupees; there’s a very strict banking system that you need to abide by.
It isn’t as related to the currency per se, but to how the central banking system is structured.
NSAM: Do you use your own payment processing platform or do you depend on third parties?
Pedro Barros: It’s all internal. We have our proprietary systems connected to some of the largest global banks we operate with. We don’t rely on third party payment processors.
Despite the buzz, the large-scale demand for employees to be paid in crypto isn’t there, especially in the current environment
NSAM: Do you offer payments in crypto?
Pedro Barros: Yes and no. From an employment perspective, usually the default currency is not crypto, but a fiat currency. That’s generally the regulatory requirement; having the local currency as your main payment method.
What we see many times is crypto being added as an extra, a benefit in kind; something similar to an employee stock option plan. We allow that type of payment.
Despite the buzz, the large-scale demand for employees to be paid in crypto isn’t there, especially in the current environment.
NSAM: As a provider of EOR services, how do you manage the need for up-to-date, granular knowledge of local regulation?
Pedro Barros: From the beginning, compliance was paramount to us. We’ve tried –and I think succeeded– in building a global infrastructure of our own operating entities, where we have extensive regulatory, compliance, tax and payroll expertise.
Obviously we leverage very strong relationships with partners, but we try to nurture in our own team the ownership of that knowledge. Compliance is paramount, so we prefer not to outsource or over-rely in third parties to achieve total compliance.
NSAM: Why do you prefer the in-house approach?
Pedro Barros: Because you fully control it, you own it. It’s yours to make it as good as possible, to scale it as much as you can. You understand the risks and limitations. You can invest and make people accountable, which is not the case always when you work with third parties.
Compliance is paramount, so we prefer not to outsource or over-rely in third parties to achieve total compliance
We need to make that an internal responsibility, because the interests of third parties and partners are not the same as yours. We need to make sure that who’s involved, that who’s responsible is fully aligned from an interest and ownership perspective to the outcome.
NSAM: Are there any specific security risks to managing a global payroll?
Pedro Barros: There are many. We hold the employee relationship, which is very sacred, one that we should care for. We have access to very personal, confidential information. You need to take care as the highest priority. We take great pride in being SOC2 compliant; ISO27000 certified as well. We have the highest standards of security and IT certifications because we are obsessed with the security of employees.