Understanding SEPA and What it Means for Global Payroll: Part I
Jan 21, 2014
Any organization operating in Europe, whether you employ workers or simply conduct business there, will certainly be familiar with the EU’s Single Euro Payments Area (SEPA) initiative. Developed to facilitate the credit transfer process across all 28 member countries of the EU, as well as Iceland, Lichtenstein, Monaco, Norway and Switzerland, the initiative will ensure greater efficiency when making cross-border payments to any of these nations.
So, how does SEPA work? The initiative establishes a common set of payment instruments, universal standards for all participating countries and a stringent legal basis for making payments. Overall, the regulations of SEPA were designed to provide companies with a fast and safe payment process, while reducing the overall costs involved with making cashless payments to businesses and individuals in the EU and other SEPA countries without incurring extra fees for cross-border transactions.
SEPA brings significant benefits for employers and the way they compensate their workers. For instance, once fully implemented, SEPA will enable employers to make payments in euros to employees located anywhere in the area via a single bank account. Moreover, the initiative makes it easier to compensate employees in EU member countries like Romania and Sweden that do not use the euro.
Although SEPA promises to bring numerous advantages to employers, organizations must still navigate the transition process. Compliance with SEPA requires an in-depth understanding of the directive and what must be done to implement it successfully. If your company will be affected by the SEPA initiative (which is any company that pays employees in euros), it is a good idea to familiarize yourself with the key legal provisions of this directive:
- Regulation 260/2012 establishes the technical and business requirements for all credit transfers and direct debits made in euros. This rule also sets the end dates for organizations to migrate their accounts to the SEPA regulations; while those companies based in the Eurozone must comply with migration by February 1, 2014, the SEPA Commission recently extended the transition period until August 1, 2014. In addition, those companies outside the Eurozone have until October 31, 2016 to comply.
- Regulation 924/2009 outlines the principle that charges for payment transactions in euros must be the same regardless of whether the payment is in-country or cross-border. As a result, this rule eliminates the differences in charges for euro-based cross-border payments and direct debits.
- Payment Services Directive 2007/64 has been in effect since November 2009, but is currently under revisions. This regulation establishes the terms and conditions of SEPA and sets the standards for transparency and information that organizations must meet.
Though complying with the standards of SEPA may take a lot of work, the directive promises to change the global payroll process for the better. But, to ensure a smooth transition to SEPA, organizations must fully understand the various requirements for migrating their payment data and meeting the directive’s standards. To learn more about SEPA and what it means for employers, specifically about what you can do to ensure a successful transition, check back here soon for our next blog post!