Understanding SEPA and What it Means for Global Payroll: Part II
Jan 29, 2014
As mentioned in the first part of this series, the implementation of the SEPA initiative throughout the European Union will have a significant impact on how employers compensate their employees across the EU by streamlining the cashless payment process. Under this directive, organizations will benefit from paying the same payment transaction fees regardless of whether a payment is to an employee within the company’s own country, or to another SEPA country. Employers also benefit from robust payment instruments, such as SEPA direct debit, which allow them to charge from an account in one SEPA nation for services provided by employees in another country.
Despite the numerous advantages SEPA promises to bring to the global payroll function, employers must ensure that they can accommodate those changes and carryout a successful transition to the new requirements. Since each country has its own standards and processes for making cashless payments, there will be different steps employers must take when migrating their payment data and adapting to SEPA standards.
Regardless of the current environment and country-specific procedures, the first step in the process of migrating payment data is for employers to identify and confirm the name of their chosen financial institution in each SEPA country. The employer will then need to work closely with each bank to ascertain and confirm the following for each SEPA country:
- Type of payments made and the make-up of their payroll liability payments
- Whether the bank has already built support for SEPA-based payment transfers and whether it is SEPA compliant
- The version of the SEPA Payment Initialization (PAIN) specification with which the bank is working
- Whether the bank can accept basic SEPA payment instruction files
- If the bank has a single specification covering all countries or if there will be variances for each location
In addition to the above, employers should work with their payroll vendor to confirm if any existing SEPA capabilities they currently have in place will be compatible with their financial institution. If not, the company may need to perform additional testing to ensure they can pay their employees via the SEPA network.
The SEPA directive promises to bring significant improvements to how employers compensate their employees across Europe. But, as with any change, complying with these new standards can be a real challenge. Rather than trying to adapt to the changes introduced by SEPA on their own, any organization impacted by the directive can benefit from working with a global payroll provider familiar with SEPA and how it will affect the payroll function.