This article is about Justworks EOR (Employer of Record). What product am I using?
What Is Forward FX?
Forward FX (Foreign Exchange Forward) is a tailored agreement between two parties that allows them to exchange currencies at a predetermined rate on a future date. This tool is designed to lock in an exchange rate, providing protection against potential fluctuations in currency values over time.
For companies utilizing Justworks’ Employer of Record (EOR) services to employ international workers, Forward FX helps maintain predictable payroll costs in foreign currencies by reducing the impact of exchange rate volatility.
Why Forward FX Matters for Justworks EOR Clients
When Justworks acts as your Employer of Record, we handle the payroll disbursements for your international employees on your behalf. If these employees are paid in local currencies that differ from your company's base currency (for example, USD), fluctuations in exchange rates can impact your total payroll costs each month.
To help stabilize your expected expenses and eliminate the effects of exchange rate changes, we offer Forward FX contracts. These contracts allow you to lock in exchange rates ahead of payroll cycles—whether monthly or semi-monthly (as in Canada).
How Forward FX Works in the Justworks EOR Context
Forecasting Needs
You anticipate the amount of foreign currency needed for upcoming payroll (e.g., CAD for Canadian employees). This will be visible on your International invoices from within Justworks.
Rate Lock
The exchange rate used to convert your funds for international payroll is locked in at the time of the invoice funding cutoff. This ensures that your payroll costs remain consistent and are not affected by any currency fluctuations that may occur after the cutoff date.
Payroll Execution
Your payroll funding is debited at the locked-in exchange rate determined at the invoice cutoff. This means you’ll know the exact amount in your company’s base currency that will be debited for international payroll, providing predictability in your payroll expenses—even if currency markets shift between the cutoff and the employee pay date.
Example
Suppose your company needs to pay $100,000 CAD to your Canadian employees through Justworks on the 15th and 30th of each month. Justworks secures the forward foreign exchange (FX) rate at the time of payroll cutoff, typically about five business days before the employee pay date. This means you’ll know the exact amount in USD that will be debited for payroll, regardless of any exchange rate fluctuations that occur after the cutoff.
This approach is particularly beneficial for companies with strict budget controls or those managing large international payrolls.
Disclaimer
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. If you have any legal or tax questions regarding this content or related issues, then you should consult with your professional legal or tax advisor.
Descargo de responsabilidad
Este material ha sido preparado únicamente con fines informativos y no tiene la intención de proporcionar, ni ha de ser considerado como, asesoramiento legal o fiscal. Si tiene preguntas legales o fiscales sobre este contenido o temas relacionados, los debe consultar con su propio asesor legal o fiscal.