By Veronique Lemaire
As the global economy undergoes rapid transformation, HR and payroll leaders are facing unprecedented complexity. More than a third (34%) of jurisdictions are predicting an imminent uptick in the complexity of HRP processes, according to TMF Group's Global Business Complexity Index (GBCI). These expectations are driven by real-time reporting requirements, cross-border remote work, and evolving employee expectations about how they work—and get paid.
These developments pose significant challenges for HR leaders, increasing operational burdens and the risk of costly errors. The ability to understand and react to these changes dictates whether an organization will sink or swim.
Additional Layers of Complexity
On top of frequently changing regulations, companies must also navigate comprehensive labor laws that differ by location and sector. Whether it's updates to overtime rules, worker classification or a change to tax brackets, this adds multiple layers to HR and payroll.
While accompanied by an inherent complexity, such changes are a "known" element as companies expect these areas to be updated regularly. Areas of difficulties include adjacent regulations, such as GDPR and other data privacy laws concerning how employee data is handled. This increases pressure because organizations must now demonstrate they’re abiding by these rules.
For companies with small teams in diverse jurisdictions, keeping pace with local regulatory changes can be especially challenging. Access to timely, accurate information, and local expertise is essential for maintaining compliance and minimizing risk.
The Changing Face of Work
Flexible and remote working arrangements, accelerated by the COVID-19 pandemic, continue to reshape the HR landscape. Legislation governing these arrangements is evolving rapidly, introducing new compliance and administrative requirements. For example, California's robust employee protection laws extend to remote workers, while EU member states are preparing for the European Working Time Directive (EWTD). While this provides a framework, each country will interpret and implement it differently. For example, France is particularly stringent when it comes to the right to disconnect.
While remote working allows companies to tap into the global talent pool, as well as the proliferation of gig workers and freelancers, managing payroll and HR across national borders involves intricate tax and regulatory considerations. For HR professionals, the challenge is not just understanding where employees pay taxes, but also how these calculations are made and reported.
For permanent staff, there is a growing divide between working from home and working on site. Younger generations in particular consider working from home a perk, but some industries—such as the U.S. financial services sector—are pushing back.
Both scenarios necessitate responses from the HR community, whether it’s organizing work remotely that’s efficient and where people don’t lose the cultural identity of the company, or preparing to face criticisms and concerns amid a blanket call back to the office.
Meeting Enhanced Employee Expectations
Global trends indicate a growing emphasis on employee well-being and work-life balance. Almost all jurisdictions (99%) are now legally required to provide paid vacation and time off. Singapore is promoting flexible working arrangements, while in the Mainland of China, the government has introduced more childcare leave and public holidays.
Employees—whether full-time or contingent—have enhanced expectations around customized benefits, including wellness programs and different types of time off, and this embeds further complexity in HR and payroll. Implementing new programs is an administrative burden, and then they need to be transmitted onto payroll.
There are associated reputational risks. If a corporation decides to implement a new flexible benefits platform, it must also invest in training and effectively communicate the proposition throughout the organization. Failure to do so results in low employee engagement and something that should be seen as a positive quickly turns into a negative.
Employees are also increasingly demanding immediate access to earned wages rather than waiting for the conventional monthly paycheck. This was prompted by the pandemic, with many finding themselves in dire financial situations, and is now driven by Gen Z workers seeing this as a new normal.
While supporting employees by providing funds when they need them most is the right thing to do as an employer, it has a significant impact on HR. The number of payroll runs per month is increasingly becoming a consideration for gross-to-net payroll (68% in 2024 to 72% in 2025).
Technology: a Double-edged Sword?
Technology is playing a prominent role in managing HR and payroll admin. It can either streamline compliance processes or present new barriers, depending on how well it’s implemented.
More processes are achievable online, which simplifies operations but has also introduced additional burdens. More than four in five (83%) jurisdictions now require monthly payroll reporting, mostly via digital portals. Deadlines are more stringent and many portals are in a local language and require a national ID in order to submit data.
With more systems coming into play, there is a need for interconnectivity. That flexible benefits platform needs to interact with existing payroll and annual leave systems, as well as data points for government initiatives, such as the EWTD. Connecting everything and making sure it plays nicely together will add to the burden of complexity.
Plotting a Path Forward
There’s much for modern HR business leaders to consider. Here are some best practices to consider.
Map out an impact analysis. The constant evolution of labor laws means businesses must proactively monitor regulatory changes and adapt their HR strategies accordingly. Map out what will specifically have an impact. Leverage internal expertise and, if necessary, seek external legal input to stay ahead of compliance risks.
Decide on the right culture and behaviors to guide business growth. When it comes to finding the right balance between remote work and working from the office, there's no right or wrong—just what works right. Set out values and the end goal and taking into consideration the well-being to employees.
Invest in a tech stack. Companies need global oversight, while also requiring data that feeds local requirements. This friction can be eased through digital transformation, but only if done right.
Stay nimble. Whether it's a pandemic prompting new legislation overnight, or a natural disaster disrupting operations, it's crucial to have appropriate mitigation plans in place. Set up structures that allow for agility. For example, a best practice is to conduct frequent "health checks" of the HR and payroll processes and artefacts to mitigate compliance risks and ensure operational resilience.
Veronique Lemaire is head of HR and payroll client solutions at TMF Group.