How to manage consistent pay in countries with fluctuating currency rates
So where do you start?
Most multinational companies are now opting for a centralised strategy and structure that reflects local need. This brings with it essential elements of control, but also greater complexity. Trying to keep on top of currency fluctuations and the local tax and regulatory requirements of every country in which you have employees is no mean feat. And it can be made even harder when you outsource to a number of different specialist providers as there’s often little – if any – communication between them. A fully integrated payroll and payment solution from one source helps overcome all of this.
There are multiple strands to the issues that companies face – compliance with home and host country tax and social security representing another minefield – but, for the purposes of this article, we focus on the fluctuating currency aspect only, using a real-life case study.
Case study: Heriot Watt University
Heriot Watt University had around 100 employees living and working in Dubai and they wanted to separate them from the UK payroll.
The issue
- some of these employees were deemed to be UK nationals, others Dubai nationals. Employees become Dubai nationals if they either opt to do so or if they spend more than 52 weeks in the country
- more than 10 employees were paying UK National Insurance
- more than 10 employees were paying UK student loans.
Mary Doran, payroll manager at Heriot Watt University, explained: “Payroll for all was processed in GBP and the exchange rate that was used was a factor of 6.75, resulting in the employees [in Dubai] facing the problem of inflated amounts being deducted from their gross pay. In other words, they weren’t being paid the correct amount. Plus, they couldn’t use their payslips when applying for things like loans.”
The solution
The University introduced a combined global payroll and payments solution, setting up a separate payroll for the 100+ employees and converting GBP to AED (Arab Emirate Dirham).
This included the provision of payslips showing:
- net pay in GBP
- currency exchange rate
- net pay in AED
- provision of a payments service
- beneficiary payments.
“The employees are now paid in Dirhams and at the correct exchange rate,” said Doran. “They can now also use their payslips for loans if required.”
By Andrew Woolnough, director of HR Solutions at Equiniti.
This article is provided by Equiniti.
In partnership with Equiniti
Hi we are EQ; some may know us as Equiniti! We provide specialist reward, benefits and payroll solutions.