Finance leaders deal with foreign currency payroll impacts

Finance leaders and CFOs are feeling the effects of foreign exchange swings in their payroll costs.

New market research from global payments and employment platform Native Teams found that, among more than 500 senior North American finance leaders at companies with 50 to 1,000 employees, 97% reported that foreign exchange costs directly impacted their payroll costs in the previous 12 months. (The survey took place in May and June.)

Indeed, 45% of those surveyed “saw payroll costs swing 2%–5% against forecast in a single month due to FX movement alone,” which Native Teams called a material variance.

“Payroll has quietly become one of the most exposed parts of scaling up to the global market,” Jack Thorogood, Native Teams CEO, said in the report. “Once it runs across multiple banking systems, currencies, and compliance rules, it stops behaving like a payroll workflow and starts behaving like a holistic financial infrastructure—and 77% of finance leaders now agree they’re carrying that risk.”

Offshore ventures. Karthik Krishnamurthy, CFO of tax, accounting, and advisory firm Smith + Howard, has seen this play out firsthand. Krishnamurthy told CFO Brew via email that the firm’s “near-term priority has been to build out our India office, where we’ve added more than 150 colleagues.”

The recent depreciation of India’s rupee—down about 10% from the end of 2024 against the US dollar—has been in the firm’s favor. “For a US-based firm with growing India operations, the depreciation has reduced our dollar-denominated compensation costs,” he said.

“Companies with a broad international footprint always have both forex and operational exposure,” Krishnamurthy said. “Mature finance and treasury functions are generally able to manage currency fluctuations, but the compliance and operational risk often end up with the finance teams that they are not fully equipped to handle.”

“This has become more relevant as teams within a company have often looked to hire part-time and full-time resources in smaller, less popular countries where knowledge about laws in that country are limited,” he added.

Choose wisely. Paying in foreign currencies could also add to the finance department’s workload. The Native Teams survey found that 62% of finance leaders indicated they or their teams spent two to five hours of manual work per payroll cycle to consolidate payroll and payment data across countries and currencies. Another 13% spent six to 10 hours.

“While most companies believe they have access to payroll data, a significant portion of that visibility depends on manual effort across systems. This creates inefficiencies in payroll cycles, especially for organizations operating across multiple countries and currencies,” the report said.

That’s not even considering the short-term cash planning required—like having to move funds “specifically because of cross-border payroll timing or settlement,” a task all the respondents to the Native Teams survey had to perform.

While Krishnamurthy said Smith + Howard expects “annual [rupee vs. US dollar] currency movement to normalize into the 2% to 4% range,” he warned against choosing international expansion markets based solely on currency favorability: “Macroeconomic factors can make a currency and country attractive at the current time, but a large swing in these markets is possible, which could completely change the business case.”