For businesses that operate across multiple jurisdictions, managing local Human Resources (HR) and payroll operations is as complex as it is necessary. Things get especially complex in markets outside companies’ home and key markets, where the “long tail” of local and regional offices typically lack the in-house expertise, or bandwidth, to deal with complex and ever-changing employment laws, tax regulations, and compliance and reporting needs.
How can multinational companies ensure their local offices stay on top of shifting employment regulations and norms, and deliver accurate and timely HR and payroll support to their employees, wherever they are?
HR and Payroll Complexity on the Rise
Managing a global workforce is a complex challenge: Compliance with diverse labor laws, employment regulations, and cultural norms across borders requires a deep understanding of local context.
But as TMF Group’s latest Global Business Complexity Index (GBCI) sub-report for HR and Payroll shows, executives in almost one-third (29 percent) of jurisdictions expect HR and payroll to become even more complex over the next five years. This is a significant increase over the 25 percent who said the same in 2023’s report.
When asked why HR and payroll are so complex in their jurisdiction, TMF Group experts pointed to changing tax frameworks (33 percent), changes in labor laws (25 percent), and changes to compliance requirements (19 percent).
Reporting requirements in areas such as diversity, equity and inclusion (DEI) are a growing area of complexity, especially for smaller teams. According to the 2024’s GBCI, nearly a quarter (24 percent) of jurisdictions require regular reporting from all organizations about the make-up of their workforce, covering areas such as gender pay gap, demographic information, and data on minority groups, for example. The speed and frequency of reporting also is becoming more demanding, with two in five jurisdictions (39 percent) now requiring such reports every three months.
Multinational businesses operating in multiple jurisdictions not only have to navigate divergent requirements, they also continually must address the disruption caused by frequent changes to rules and regulations. Not doing so can cause missteps in payroll processing, tax compliance, benefits administration, or reporting—which can lead to frustration, poor engagement, and reduced loyalty among employees, as well as possible penalties and reputational damage.
The Business Cost of Complexity
One of the key impacts of HR and payroll complexity is high staff attrition. Our GBCI data demonstrates a strong link between the inherent complexity of a jurisdiction’s business environment and attrition rates. According to the data, approximately 12 percent of employees work in locations that have staff attrition rates of more than 20 percent and also rank among the top one-third of the world’s most complex jurisdictions.
In countries that have onerous rules for doing business, which are vigorously enforced, high staff attrition is more likely to lead to errors and compliance breaches.
When HR and payroll are managed effectively, they tend to go unnoticed by employees. But when errors arise, they have an outsized impact on employee trust and satisfaction. For teams in smaller offices, the impact can be especially frustrating. If an employee repeatedly has to escalate payroll issues, this can be interpreted as organizational neglect, and can lead to reduced engagement, lower productivity, and higher rates of attrition.
The cost of higher employee turnover in specialized or highly skilled fields can be especially high. It has been estimated that replacing a skilled employee can cost an average of six to nine months of their salary.
Given the potentially high stakes involved, how can multinational organizations address this complexity challenge? One way is through proactive investment in learning and development (L&D) initiatives for those responsible for HR and payroll, as well as for employees.
How Learning and Development Initiatives Can Help
When it comes to addressing global HR and payroll complexities, multinational businesses need to strike a balance between implementing top-down standardized policies and ensuring they adapt successfully to local laws and practices. The most successful global businesses have moved from centrally imposed policies to a more localized approach; they recognise the positive impact cultural sensitivity can have on business performance.
It makes sense, therefore, for multinational organizations to empower their local teams through a three-pronged approach to L&D that builds internal expertise, educates employees, and promotes a strong culture of feedback.
For companies that operate with limited HR and payroll resources in their “long tail” offices, it is especially important to upskill existing staff.
This may involve ensuring that in-market finance and administration teams are equipped with sufficient knowledge of local regulations and requirements through ongoing L&D programs. This could be achieved through partnerships with local consultants, online compliance certifications, or market-specific workshops. It also may involve rolling out modern HR and payroll technology and tools that automate processes and simplify compliance.
For smaller local teams especially, cloud-based HR and payroll solutions help by centralizing operations and automating compliance tasks. But the success of such solutions relies on local staff receiving adequate training. Investing in L&D initiatives in this area provides long-term benefits, including improved accuracy, faster processing, and improved employee experience. These solutions also can deliver real-time data analysis that helps improve decision-making and resource allocation.
Employees themselves can benefit from understanding the systems and processes that deliver their compensation and benefits. For example, onboarding sessions should familiarize employees with payroll systems, benefits portals, and compliance requirements. Employees also should receive regular updates about any changes in tax laws, benefits enrollment periods, and new company policies. They also should have clear channels to raise concerns or access timely assistance.
Having open communication channels between employees and HR and payroll teams is critical. Establishing regular feedback loops—whether through surveys, focus groups, or one-on-one check-ins—enables pain points to be identified and addressed before they escalate.
Addressing HR and payroll complexity is not just a matter of operational efficiency, it is a strategic imperative: Experience consistently shows that it leads to satisfied employees who are more productive, engaged, and loyal. By investing in L&D initiative in this area, perhaps with the help of an outsourced service provider, multinational organizations can reduce attrition, improve operational resilience, and protect or enhance their brand.
