Having a remote workforce is now commonplace thanks to technological advancements and modern work practices. Yet those who work overseas for a period as contractors or employees are facing losses in earnings due to poor foreign exchange (FX) management. A leading FX firm is calling on businesses and individual employees themselves to do more to curb such losses and subsequently overcome what is currently an insufficient overseas salary payment process.
Many companies are realising the rewards that come with enabling staff to work overseas, including it being attractive to prospective employees and keeping key members of staff on board. A remote workforce can encourage greater collaboration, develop leadership skills and enhance company loyalty. Employees are also seeking more opportunities, which working overseas can provide through experiencing new cultures, travelling and establishing global relationships. Political influences like Brexit are also having an impact on workforce mobility.
Despite the benefits, there are numerous stumbling blocks that arise when employees move overseas, one of which is paying salaries. Brett Thomas, Head of Dealing at Swansea-based Godi Financial, explains when working overseas, naturally employees might be getting paid in the domestic currency of the country in which they work, resulting in currency exchange exposure. Losses can be incurred due to an unfavourable exchange rate and lack of FX strategy implemented by themselves and their employer.
According to Thomas, the default is often to set up a bank account in the new country and simply convert earnings via that same bank before sending funds onto their Sterling account. This typically incurs dreadful exchange rates, with many banks applying a spread/margin upwards of 2%-3% to each trade. Another typical scenario is where the employer pays their employee’s or contractor’s salary directly into their bank account in the UK, whereby the receiving bank again converts the funds at an adverse exchange rate. The individual therefore has no control over the exchange and can be left out of pocket.
However, Thomas shows there are solutions that enable companies to pay their workers overseas so that they can maximise their earnings. By using a specialist FX broker like Godi, individuals stand to save vast sums on the exchange rate itself, as well as gaining greater control over the timings of the exchange. Employers can further implement various currency tools including market orders and forward contracts to better manage their exchanges. For example, through using a forward contract, a company could mitigate the risk of currency fluctuations by locking in an exchange rate at the outset for the duration of a staff member’s or contractor’s employment.
“Foreign exchange volatility can drastically impact the salaries of employees. However, making better use of hedging for foreign exchange risk could ease these losses and boost employee satisfaction.
“Overseas workers are often receiving their wage after it has been hit by a very poor exchange rate resulting in them losing out on a significant amount of their earnings. As this is out of the control of the employee, it can cause frustrations with their employer.
“Employees want to be assured that their earnings are not being worn away by currency fluctuations. Organisations can solve this problem with a robust FX strategy that takes into account the payment of overseas workers. It is about the creation of some certainty for staff and their employers through a solid FX strategy so that nobody is losing out.”