What is the Society for Worldwide Interbank Financial Telecommunication (SWIFT)?

What is the Society for Worldwide Interbank Financial Telecommunication (SWIFT)?

With remote work options increasing worldwide, companies are no longer limited to the talent in their own backyard. More and more businesses are realizing the benefits of building global teams. But it’s much easier to pay local employees than employees across the globe.

SWIFT is one of many tools available that can help you manage payroll. But what is SWIFT, and how does it work with international payroll?

This article will provide you with the basics of what SWIFT is, how it works, and when it may help your global team.

What is SWIFT?

The Society for Worldwide Interbank Financial Telecommunication, or SWIFT, is a member-owned group that provides secure financial communications for members. SWIFT uses their global messaging platform to facilitate global financial transactions, including payments to international employees and contractors.

More than 10,000 banks in 200 countries use the SWIFT network to complete financial transactions. SWIFT communications facilitate more wire transfers than any other network.

How does SWIFT work?

SWIFT is a messaging platform through which banks send information about transactions. The banks themselves carry out the transactions. When you use an international wire transfer to pay an employee, your bank sends data about the transfer to the receiving bank using SWIFT codes.

If your bank doesn’t have an existing relationship that enables them to transfer funds to that bank directly, then one or more intermediate financial institutions may be involved. For example, your bank, Bank A, talks to Bank B, who talks to Bank C, who talks to the final destination, Bank D.

Think of it like stepping stones across a river. You might not be able to jump from one side to another, but you can make several small jumps to complete the distance. SWIFT connects the stones so transactions, like those from employers to employees, are processed.

What is a SWIFT code?

A SWIFT code is a unique code used to identify an individual institution involved in a transaction through the SWIFT network. Each code is composed of either eight or 11 characters:

• The first four characters refer to the institution.

• Characters five and six refer to the country.

• Characters seven and eight refer to the city.

• When used, characters 9-11 refer to a specific branch of that bank.

SWIFT codes may also be called a Bank Identifier Code (BIC), a SWIFT ID, or an ISO 9362.

Do you need your own SWIFT code?

Unless you are a financial institution initiating or receiving SWIFT communications, you do not need a SWIFT code. However, if you are paying your workers via international wire transfers, you will need to know the SWIFT codes of the banks involved.

Who uses SWIFT?

SWIFT is used by many banks and financial institutions, as well as brokers and others. If you are paying workers or contractors abroad via international wire transfers, then SWIFT would be useful.

How do you manage SWIFT payments?

SWIFT provides members with a dashboard to view and manage their transactions. If your bank plans to pay your employees using SWIFT, you need to gather the appropriate information as well as process, track, and manage your payroll.

Outsourcing payroll may be able to handle SWIFT payments for you. That way, you can focus on delivering value to your clients rather than on micromanaging payroll.

What do SWIFT transactions require?

You will need the following basic information for a SWIFT transaction:

• The name and address of the recipient

• The name and address of the receiving bank

• The bank’s SWIFT code

• The recipient's account number or IBAN (International Bank Account Number)

Incorrect SWIFT codes or other information can delay processing, which can mean workers don’t get their payments on time. This can have consequences if the delay violates the employment contract or local statutes.

What’s the difference between SWIFT codes and routing numbers?

Routing numbers and SWIFT both identify specific institutions and are used in financial transactions. However, they are not the same.

A SWIFT code is an eight- or 11-character code composed of letters and numbers that refers to an institution within the SWIFT network. A routing number is a nine-digit code composed of numerals that identifies a specific US bank.

What does SWIFT cost?

SWIFT is member-owned. Members pay a one-time initial fee and then annual fees thereafter. However, your bank or financial institution may charge fees and exchange rates on individual wire transfers.

How does SWIFT work with global payroll?

We know that SWIFT is used to process global payments, but where does it fit into a larger suite of global payroll tools?

How is SWIFT used to pay global employees?

If you don’t have a local legal entity, you can’t directly use SWIFT to pay your global employees and contractors. However, if you use an Employer of Record (EOR) partner, they can collect the necessary data and initiate transactions for you.

What’s the best way to pay international employees?

There are many ways to pay remote workers, including checks, ACH transactions, and wire transfers via SEPA or SWIFT. The right choice for your situation depends on several factors, including the currency and the location of participating parties.

If your workforce is fully distributed, you may have several different ways of compensating employees. Remote’s Guide to Managing Global Payroll has more information on paying international employees.

When is an employer of record the safest way to manage global HR?

Without a local legal entity, you cannot employ workers in a different country. The costs of setting up a local legal entity can be significant, and completing the process may take weeks, months, or even longer. Depending on how many workers you want to hire, these costs may not make sense for you.

But you still have options. An employer of record (EOR) allows companies to employ workers in other countries without having to open legal entities first. However, not all EORs operate the same way. Your EOR partner should be able to help you stay compliant with labor laws and statutes, as well as provide you with advice on the classification status of your employees.

Beyond payments, EORs can provide a wide variety of services for international teams. A robust EOR partner can help you:

• Track and manage leave and time off

• Remain compliant with local statutes wherever your workers live

• Put together a competitive benefits package specific to where your team lives

• Onboard your employees to ensure a seamless experience

SWIFT and your EOR help grow your global workforce

Business in 2021 is global, and with that international reach comes with a sea of complexity. SWIFT communications are an important part of many international payroll toolkits.

Of course, your workers need more than just paychecks. The right partner can help you provide a first-class experience for your global team. With Remote, you can sign up in minutes to begin onboarding international employees and contractors right away.