4147
Views

The Ship Has Sailed for Cash-Based Compensation - Now What? 

Papaya cash

Published Mar 28, 2024 11:21 AM by Papaya Global

 

As of early 2024, people power remains the maritime industry’s biggest challenge, with labor shortages recently reaching a 17-year high

One major reason? Seafarers are not happy with how they’re being compensated – including factors such as fees involved in currency conversion, payment delays, and security concerns. 

In other words, it’s not just “what” or “how much” they’re being paid that’s bothering seafarers, it’s literally the “how." It starts with cash-based payments, the most common form of compensation in the maritime industry, which has brought about some frustrating consequences for seafarers. But it does not end there. 

In this blog post, we dive into the sources of these compensation concerns, as well as how to solve them. 

The origin of cash-based compensation in the maritime industry 

As a traditional industry, that is “global” in its nature and that has been that way long before wire transfers and credit cards ever existed, it’s first a matter of tradition. In addition, as an industry that is tackling complex regulations and connectivity issues, cash-based compensation, while not ideal, has proved to be the most straightforward method for paying seafarers even deep into the fintech era. 

Simpler salary delivery and administration, and fewer regulatory hoops are among just some of the factors that made this form of payment an industry norm – and often, the preferred payment method among seafarers. 

Here’s where the irony kicks in. While cash-based payments may be the average seafarer’s preferred form of payment, it’s far from ideal. In fact, cash-based salaries have brought on a multitude of issues for seafarers. 

Let’s break down the issues of paying cash: 

Convenience and accessibility 

  • Lack of stability: While cash payments can provide immediate access to the seafarer's earnings, they lack the stability of a direct deposit option and the convenience of being able to access earnings without the need for physical banking facilities. 
  • Limited financial services: Limiting seafarers to cash payments means they aren’t able to access a range of important financial services, like credit or investment opportunities, which require proof of income, and which cash-based compensation is unable to provide. 

Security concerns 

  • Risk of theft or loss: When a seafarer’s payroll is paid in cash, they’re forced to always carry around their salary. This can leave their earnings susceptible to theft and loss, especially since most seafarers’ time is spent either in transit or in remote locations. 
  • Lack of traceability: Cash payments can't offer the same traceability for seafarers that digital payments can, leaving them at risk of being financially invisible and negatively impacting their long-term financial stability and ability to plan ahead. 

 Impact on financial management 

  • Budgeting and saving difficulties: It’s much more challenging to track and budget spending when you’re paid in cash. Cash is both much easier to spend and much harder to save – with no automated savings capabilities or spending visibility to keep seafarers in the know.  
  • Remittance challenges: Many seafarers have family they’re supporting in their home countries. Remittance costs for transferring cash can be complex, lengthy and costly – with unfavorable exchange rates and high fees an unfortunate part of the process. 

Digital payment in the maritime industry 

Modern digital payments can provide seafarers with the freedom and flexibility to manage their salary regardless of where they’re based. They can also smooth out the remittance process and allow for better financial management. 

With that said, cash-based compensation has been a maritime industry norm for so long, that making the shift to digital payments requires more clear incentives. 

Here’s a breakdown of the benefits of modern payment methods: 

  • Enhanced security: Mitigating the risks of theft associated with cash payments. 
  • Improved financial management: With clearer spending visibility and tracking. 
  • Increased efficiency: With fewer human errors and a smoother overall payroll process.
  • Unmatched flexibility: As seafarers can enjoy split payments, pay-to card, and other modern variations. 
  • Smoother compliance: As compliance, AML, and other regulatoty aspects are baked into the delivery method. 

Barriers to Adoption 

With all the said benefits, there are still a lot of barriers maritime employers and seafarers are forced to take into account. Here are some of the most glaring ones: 

  • Limited internet access at sea: The use of digital payment systems can be limited by the connectivity issues that come with being at sea or in remote locations. 
  • Resistance to change: The maritime industry has relied on physical cash as a form of compensation for centuries. Making the change to a new form of payment requires extensive effort exploring and adopting new practices – taking up both time and resources that employers may be less than eager to use up. 

Regulatory Hurdles 

Adopting a digital payment solution means taking into account multiple jurisdictions’ laws and requirements. That means pinpointing and choosing a provider that’s up for the task. 

  • Infrastructure and Training: Adopting new digital infrastructure might take up a lot of time and resources – both in terms of the process of implementation and the resources put into training staff on the new technology. 
  • Financial Inclusion: Some seafarers lack the banking services needed back home to be able to receive certain forms of digital payments. The payment solution the maritime business chooses must be able to adapt to this situation. 

All aboard the digital payment ship 

As digital payments become increasingly embedded in the world's economy at large, the maritime industry will eventually have no choice but to adopt digital payments as their form of compensation. 

Luckily for them, now it’s easier than ever to find and implement such solutions. 

And beginning the process sooner rather than later is the best way to ensure a smooth transition process while choosing the best possible provider for the job. 

Papaya Global’s services are uniquely positioned to meet the needs of maritime employers. Here are some of the biggest takeaway offers: 

  • Pre-paid card system: Papaya Global offers a prepaid card system, which connects to a business eWallet and allows seafarers to get the flexibility they originally appreciated with cash-based payments – but without the risks.  
  • Agnostic system integration: Our series of connectors allows for agnostic integration, minimizing data siloes and improving visibility. 
  • Streamlined payment operations designed for payroll: Our proprietary payment rails, AI-powered screening, competitive fees and FX rates, funding currency flexibility and local payments in over 160 locations allow for more efficient payment operations with minimal additional costs. 

Curious to learn more?

Book a demo today and learn exactly how Papaya Global can transform your global operations and worker payments, regardless of where or how your workforce is spread. 

 

The opinions expressed herein are the author's and not necessarily those of The Maritime Executive.