Key Takeaways
- Recruitment agencies often arrange international placements paid in foreign currencies.
- Some international placement fees you receive may be subject to secondary FX conversions, raising the total cost of your transactions.
- You can reduce your costs by avoiding double conversions and with other strategies detailed below.
- Payset can help you avoid double FX fees and manage your expenses with transparent and competitive FX rates.
Double FX Conversions, Explained
Double conversions can quickly drive up your recruitment agency’s FX costs, and they happen whenever a single transaction undergoes more than one currency exchange.
If you operate a European recruitment agency, you’ll mainly send and receive euros, but you may be paid in foreign currencies when arranging talent placements outside Europe.
Often, any foreign currency amounts you receive will be directly converted to euros. But certain transfers may also be converted to an intermediate currency before you receive the final amount in euros. Each additional FX conversion means that you’ll receive fewer euros on the transfer in question, potentially adding up to high costs over time.
Double conversion doesn’t always happen, but when it does, it can be a challenge for your recruitment agency and its global network of partners and talent.
In short: working with a wide range of foreign currencies and international payment partners may increase your risk of double conversions, driving up FX costs.
Why You Might Pay FX Twice During Placements
The First FX Conversion
Your foreign exchange costs begin when you complete an international placement and the company that hires your candidate pays you a recruitment fee.
If you’re arranging placements outside Europe, you should expect payments to undergo at least one FX conversion, as foreign companies tend to make payments in their local currency.
This isn’t an issue for domestic payments, where both partners typically use the same currency. Similarly, euro payments among partners within the SEPA area may avoid currency conversions. But it’s typically necessary to convert payments sent from locations such as the US, India, and Southeast Asia, and other hiring markets that generally don’t use the euro.
The Double FX Conversion
Secondary FX conversions can occur if there is no direct route between the sender’s currency and the euro (or your other preferred currency).
This means that international placement fees you receive may be converted to an intermediate currency before you finally receive a euro-denominated amount.
Double conversion isn’t just an issue for inbound international placement fees. Outbound payments are also at risk of double conversion costs. If you pay staff, contractors, and partners internationally, you could see the same intermediate currency conversion.
What This Costs at Scale Across Multiple Placements
How much does FX cost at scale? Hiring Hub suggests that international placement fees across Europe generally range from 15% to 30% of the candidate’s first-year salary.
So if you’re handling hundreds of placements with salaries worth 50,000 EUR per year, double conversions could drive your FX costs into the tens of thousands of euros.
For example:
- One placement fee worth 20% of the above salary would be worth 10,000 EUR.
- If paid in foreign currency, conversion to euros would cost 200 EUR at a 2% margin.
- But if it also underwent an intermediate conversion to USD, it would cost about 400 EUR across both conversions.
- Over 100 similar placements, that’s roughly 40,000 EUR in total FX costs.
This is only an illustration, and your own costs may vary. The cost also scales with larger inbound transfers — so larger payments for high-value placements mean that you’ll lose more in absolute value, even if your FX rates are proportional to the transaction value.
Simply put, costs scale with your business. Small FX margins become larger as you perform more placements and collect larger international placement fees.
Where Recruitment Agencies Lose Money Without Noticing
We’ve explained how double conversion costs work, but that doesn’t mean that it’s easy to see how this affects your costs. Here’s why you might not notice it.
Providers May Have Hidden FX Costs
Some FX providers don’t make FX costs clear. The FX margin on each transfer isn’t shown as a line item, and you may only see how much money you send or receive.
Plus, the headline fee isn’t always the cost that you pay. Some providers offer 0% commissions with costs embedded in the exchange rates, and others simply don’t make the full cost clear.
Finding out the true cost requires understanding how your FX provider structures their rates.
Choosing a provider with transparent rates is an effective way to plan costs. Otherwise, looking closely at your past transfers can help you find out where the hidden cost usually sits.
Your International Placement Fees Aren’t Always Fixed
It can be especially difficult for you to know your FX costs if you don’t use a traditional billing or invoicing system. Your recruitment agency might instead charge a percentage of your candidate’s first-year salary, meaning the final amount isn’t always fixed in advance.
This type of arrangement may leave it unclear how many euros you’ll receive, in turn making it hard to see how much your recruitment agency is losing to foreign currency payments.
FX Costs Accumulate Gradually
Finally, FX costs and margins can start out small and may not immediately be noticeable. Though conversion costs tend to stay roughly proportional to your trading volumes, scaling up your transaction amounts will increase your costs in absolute terms.
It’s best to catch your recruitment agency’s FX costs before they start to accumulate and choose a cost-efficient payment option as early as possible.
How To Structure FX Around Placement Cash Flow
Double conversion is just one of many FX costs you’ll encounter. It’s impossible to avoid those costs completely, but there are a few strategies for saving on FX:
- Directly exchange currencies when possible: Payment platforms that offer direct exchange of your most used currencies are one way to avoid double conversion.
- Use transparent conversion options: Services like Payset allow you to view or estimate your FX costs before you execute a trade, helping you plan your costs.
- Take advantage of high-volume discounts: Discounts and tiered rates that reward high-volume trading can help you offset other FX costs if you qualify.
- Keep foreign currency balances: You may be able to hold inbound foreign currencies without converting to euros by using a multi-currency account.
- Find services with competitive FX rates: Alternative FX platforms like Payset aim to offer competitive FX pricing and rate transparency compared to traditional banks — and you can often switch without disrupting existing placements.
- Know when double conversion occurs: Some currency conversions are direct. Understanding which currency pairs and payments might involve double FX conversion can help you estimate your true FX costs.
- Track your costs: FX costs usually don’t show up as a line item. Calculate and monitor FX costs to better manage your recruitment agency’s foreign currency payments.
How Payset Can Help You Manage FX Costs
Your recruitment agency likely handles foreign currencies and international relationships on a regular basis, making it hard to see where your FX costs are adding up.
At Payset, we help you manage global payments by providing multi-currency accounts, transparent FX pricing, and tools to help you manage your global payment flows, avoiding hidden fees such as double FX conversions. Send, receive, and exchange up to 38 currencies in 180+ countries with our full suite of services.
See how much you might save on FX with our calculator — or get an estimate from us for free.
FAQs
Why do international placements have greater FX costs than domestic ones?
International placements usually involve payments in foreign currencies, leading to conversion costs and FX costs. Domestic payments typically involve only one local currency.
How can recruitment agencies reduce FX costs on cross-border placements?
Recruitment agencies can reduce FX costs by directly exchanging currencies whenever possible, by choosing tiered and transparent rates, and through other strategies.
Does currency conversion happen twice on international placements?
Yes, currency conversion may happen more than once if an intermediate currency conversion is necessary. This does not apply to every trade or transfer, but it is a possibility if there is no direct conversion option between the sender’s currency and your preferred currency.
