Why Remote Work Should Drive Payroll Innovation
Hi all, Julie here.
Before we get started, wanted to share some media that Ian and I have been doing over the past few weeks:
•I was on Anthony Pompliano’s podcast this week talking about the state of fintech
•Ian was on Morning Brew’s Business Casual podcast talking about the role fintech companies played in PPP loans
•Ian’s also interviewing Brex cofounder and CEO Henrique Dubugrass this Wednesday, July 15th, for a new conference, The Treasury: New Rules, put together by Acorns cofounder Jeff Cruttenden, Betterment cofounder Eli Broverman, and RISE cofounder James Layfield. Here’s free ticket link to the event
Now, back to your regularly schedueld programming: This week I wanted to talk about the changing work environment and, more specifically, remote work.
According to a recent survey done by Dan Gross at Pioneer, only half of the founders that would have chosen San Francisco as their HQ two years ago would do so today. This was most pronounced with companies that have raised no money (64% decrease) and least notable in the $5-$50M range (39% decrease). There was a small sample size of founders that had raised more than $50M, but of the answers he got, none of them would pick SF if they could do it all over again.
In terms of shifts in the percent of employees in the office or working remotely, that goes from 41% pre-Covid to 70% post-Covid. When looking at where respondents thought their HQs would be in a couple of years, the top three spots were SF, remote, and unknown at 25%, 12% and 9% respectively. According to Dan, after filtering out some data, he had about 270 respondents.
On top of this, we’ve all been reading about the current state of immigration in the US. It’s becoming harder and harder for foreigners to work in the US, and many that went home during Covid are having one hell of a time getting back.
These two things combined brings me to my following theory: more people working for US companies will not be living in the US. Because of this, I think innovations around paying employees, contractors, gig workers and others more seamlessly in foreign currencies is going to see a sizable rise in demand.
Right now, the process of doing this kinda sucks. While we’ve seen a decent amount of innovation around P2P cross-border payments, the business side of things has plenty of room to improve. The cost structure is confusing, there are various rules that each locality enforces, security concerns, and managing your workforce becomes that much more complex. In 99% of cases, it’s nearly impossible for a company to do this efficiently on their own, and they have to use some sort of SaaS offering to help.
There are a few smaller companies working on this right now, and large firms such as Transferwise and Hyperwallet are involved in these types of transactions. Even so, these payments are still often slow or expensive (or both). The payment rails are old and there are far more parties involved in these payments than one would think (it’s not just your bank and the recipient’s bank sending the money back and forth…wouldn’t that be nice!).
Another thing you have to keep in mind is that there are a slew of places that the recipient might want the money to be deposited into. It could be a traditional bank, a wallet, or end up being a cash withdrawal. This adds yet another layer of complexity for a business trying to manage payrolls in multiple currencies.
This trend could provide a great deal of benefit for companies looking to hire the best without having to narrow down their search so drastically based on a select region. Now, it will be more common for an engineer in Tel Aviv to work for a company based in San Francisco without actually having to ever travel across seas. We just have to hope that the innovation continues to pick up, and this type of situation becomes easier to manage for the HR department as well.