Companies across the industrial spectrum often rely on a migrant workforce, with International Labor Organization data indicating that: about 169 million workers traveling abroad for work. But moving away from their national jurisdiction and financial infrastructure poses a host of challenges, including what is arguably the most important part for the employee themselves: how best to get paid.
From a company perspective, meanwhile, they may need to manage payments for employees who come from multiple different locations, many of whom are in temporary or short-term placements.
Managing all this administration and making sure the workers are compensated on time is more difficult than many outsiders may realize. And it’s a problem that German startup Kadmos sets to work with an end-to-end platform that helps employers eliminate the friction and many of the costs associated with paying their cross-border workforce.
Just four months after announcing a Starting round of $8.5 millionKadmos today revealed that it has added an additional €29 million ($29.5 million) to the pot through a Series A tranche led by Blossom Capital, with participation from Addition and Atlantic Labs.
Since migrant workers are — by definition — away from home for the specific purpose of work, they must also be able to spend what they earn. Sometimes they are paid in cash, meaning they can spend the money locally, but then they can incur exorbitant transfer fees when it comes to taking the money home. In addition, many migrant workers have to send money to their families, which is often the main reason they work abroad in the first place – again, they can face significant fees on out-of-pocket transactions.
Alternatively, a company may choose to pay their employees through intermediaries such as local banks, money transfer companies, agencies or other third parties, which involves not only a lot of costs but also a lot of paperwork and delays.
Just over a year after its founding, Kadmos is already partnering with shipping companies that are using an early iteration of its service to pay their seafaring personnel.
How it works
For employers, Kadmos offers a centralized payroll platform for making and tracking payments, regardless of where the employee comes from.
Of course, for the way this is all set up, an employee must work for a company that has decided to use Kadmos. The employer onboards them via their own dashboard and the employee receives a link to download Kadmos and sign up.
On the employee side, Kadmos offers an e-wallet-packed mobile app that contains employees’ salaries in US dollars or euros, while also allowing them to send money directly home, with predictable flat fees. Most importantly, Kadmos also provides employees with their own debit card linked to their digital wallet.
Instinctively, limiting payments to euros or dollars can be a little on the restrictive side, especially considering that migrant workers are likely to come from any number of countries in the world and travel to an equal number of countries. However, co-founder Sasha Makarovych noted that the shipping industry mainly pays in those two currencies.
“The current industry needs are mainly USD and EUR as these are the currencies used to pay seafarers,” Makarovych told australiabusinessblog.com. “For seafarers it is a great advantage to be able to keep their salary in ‘hard currency’ (ie a stable currency).”
Of course, this means that employees often have to transfer money, either when they spend it or when they send it home. And this is where Kadmos’s surcharge of less than 1% comes into play, which Makarovych says compares favorably with the typical 1.5-4.5% that traditional banks charge. So if they use their debit card to spend dollars/euros in a country with a different currency, they will be automatically charged at the Kadmos rate.
However, if the company expands into other industries in the future, is there room for Kadmos to offer employees options to get paid in other currencies?
“Yes, we are investigating these possibilities,” Makarovych said.
A modern fintech
In fact, Kadmos embodies the modern fintech movement. It has many of the benefits of a modern challenger bank like Monzo, in addition to cross-border payment features similar to those of Wise or remittance platforms like Remitly. But according to the other co-founder of Kadmos, Justus Schmueser, the main point of all this is that the not just another B2B or B2C fintech – it’s built to solve a very specific problem.
“Kadmos’s approach can be classified as B2B2C,” Schmueser said. “In that sense, our scalability and acquisition costs are much more efficient, because getting a few different employers using Kadmos to pay their employees can lead to thousands of new end users for the Kadmos app.”
By solving two problems at once – helping migrant workers get paid and easing much of the cost and administrative burden on employers – Kadmos is in a pretty strong position as the world continues to move out of lockdown and normal business resumptions.
“We want to make the payment process easier for businesses, while also making the process of receiving and spending that money easier for the employees,” added Schmueser. “Kadmos’s focus is really on using technology to address the severe restrictions imposed on the financial freedom of cross-border workers.”