Global payroll emerges as growing financial risk as employers expand internationally: survey

Global payroll is increasingly becoming a financial risk management issue for employers as international hiring exposes organisations to foreign exchange volatility, funding pressures, regulatory differences and fragmented payroll systems, according to a new survey.

The survey found that 97% had experienced changes in cross-border payroll costs because of foreign exchange movements over the previous 12 months. Meanwhile, 77% said their organisations were exposed to payroll-related financial risk and 79% said cross-border payroll timing affected short-term cash planning.

The report’s findings represent the views of finance executives surveyed and were commissioned by a payroll and employment services provider, meaning they should be viewed as sponsored market research rather than an independent industry benchmark.

Jack Thorogood, founder and CEO of Native Teams, said the expansion of international workforces is changing the role of payroll within organisations.

“For a long time, payroll was viewed primarily as an HR or administrative process. That made sense when most companies hired and paid people within their headquarters country,” Thorogood said.

“Once organisations begin hiring across multiple jurisdictions, payroll becomes something very different. It starts interacting with multiple currencies, banking systems, settlement windows, tax regimes and employment regulations simultaneously. At that point, payroll directly influences cash planning, foreign exchange exposure, compliance and operational resilience.”

Currency movements emerged as one of the major sources of financial exposure. Among respondents, 47% identified currency fluctuations as a payroll-related risk, while an equal proportion cited compliance or regulatory differences.

Another 41% pointed to manual processing and reconciliation errors, 40% cited mismatches between funding and pay dates, and 38% identified fragmented regional payroll systems. Respondents could select multiple factors.

The survey found that 45% of finance executives experienced a significant impact from foreign exchange movements on cross-border payroll costs during the previous year.

Among organisations affected by currency movements, 53% reported typical monthly payroll variances of 1% to 2% against forecasts, while 45% reported variances of between 2% and 5%.

“It’s becoming a structural consideration rather than an occasional one,” Thorogood said. “That level of variability matters because payroll is one of the few costs companies simply cannot delay.”

The survey also found that 52% of respondents used partial hedging or threshold-based approaches to manage payroll-related currency exposure, while 37% actively hedged their exposure. Ten per cent said they did not hedge payroll-related FX exposure.

Cross-border payroll schedules are also influencing short-term liquidity planning. According to the survey, 79% of respondents said payroll timing affected cash planning over the following 30 to 90 days, with 27% describing the impact as significant.

All surveyed finance teams said they had moved funds at least once during the previous year because of cross-border payroll timing or settlement. Ninety-nine per cent reported changing transfer timing, while an equal proportion said they had adjusted additional cash buffers.

“Our research reflects that shift,” Thorogood said. “77% of finance leaders believe their organisation is exposed to payroll-related financial risk, and 79% say payroll timing affects short-term cash planning.”

Managing payroll across jurisdictions also creates challenges around employment and regulatory compliance.

The survey found that 46% of respondents cited compliance and regulatory differences as a challenge when managing payroll across multiple currencies. Currency-conversion costs were cited by 45%, reconciliation and reporting issues by 40%, and limited real-time foreign exchange visibility by 37%.

Thorogood said companies need to look beyond the mechanics of calculating and paying salaries when managing an international workforce.

“One of the biggest risks is treating employment and payroll as separate activities,” he said. “Many companies focus on making payroll work operationally but overlook whether the underlying employment structure is compliant with each jurisdiction’s laws.”

“Compliance isn’t just about calculating payroll correctly. It also includes worker classification, local employment obligations, statutory benefits, tax requirements and maintaining the right employment infrastructure in every country where people work.”

The complexity can extend to worker classification, tax withholding, social insurance contributions, statutory benefits, employment registrations and reporting requirements, depending on where employees work and which entity employs them.

Despite the increasing complexity of international payroll, many organisations continue to rely on manual processes to consolidate payroll information.

The survey found that 84% of respondents had visibility into total payroll liabilities across countries and currencies before each payroll cycle. However, only 33% reported having full real-time or near-real-time visibility, while 51% said their information was mostly visible but still required some manual consolidation.

Sixty-two per cent said they spent between two and five hours manually consolidating payroll and payment data during each payroll cycle. Another 13% reported spending between six and 10 hours.

“One of the clearest findings from the research is that many organisations still rely on manual consolidation despite operating internationally,” Thorogood said.

He argued that companies need to treat global payroll as an operational capability rather than a collection of country-specific administrative processes.

Contractor and freelance payments were the most frequently cited driver of multi-currency payroll, identified by 46% of respondents. Employee preference for local-currency payments and remote or distributed teams were each cited by 43%.

International hiring was cited by 42%, expansion into new markets by 39% and mergers and acquisitions by 29%.

As organisations expand their international workforce, the findings suggest payroll is becoming increasingly intertwined with treasury, finance, HR, tax and compliance functions.

“Organisations should start designing payroll with the same level of discipline they apply to treasury or financial planning,” Thorogood said.

“As global hiring becomes the default for more companies, payroll needs to be built around visibility, coordination and resilience, rather than simply processing salaries each month.”