Local Compliance Is Backbone of Global Payroll Success

Global payroll is all about thinking globally and acting locally. Local compliance has always been one of the most challenging parts of global payroll due to the distinct differences in rules, regulations, and practices across countries. This is underscored by a recent study, PwC’s global payroll complexity survey (June 2025). Other organizations have also rated and ranked countries based on their complexity, including Strada: 2023 Global Payroll Complexity Index Report and PayrollOrg (PAYO): 2025 Getting the World Paid Survey Report.

Together, these studies paint a picture of where complexities arise, which countries and regions are the most challenging, and what global payroll leaders must do to remain compliant, effective, and proactive in an ever-changing global environment. After all, as PAYO’s survey reveals, ensuring local compliance is the number one challenge global payroll professionals face.

Complexity Rankings Across Reports

While each report has its methodology and respondent profiles, they converge on a similar list of countries where payroll demands significant resources, expertise, and data requirements.

One of the clearest insights from these studies is the relative consistency in identifying the world’s most complex region: Europe, with the top challenging countries being France, Italy, and Germany. Europe’s legislative landscape is characterised as very employee-centric, layered legislation across the entire social and tax domain, cultures, and languages, and sophisticated data and filing requirements. While this landscape is usually good for employees, it can make it challenging to manage high-performing payroll operations.

Drivers of Local Compliance Complexity

Beyond Europe, complexities also arise in regions such as North America and Asia. Canada has experienced a sharp increase in payroll complexity, partly driven by unionisation and provincial legislative differences. Meanwhile, in Asia, Japan and China present moderate complexity due to social insurance requirements, language barriers, and strict onboarding processes, despite having a strong payroll infrastructure.

Across all three reports, similar factors consistently emerge as drivers of local payroll complexity:

• Regulatory Environment: Frequent legislative updates, collective labor agreements, and complex statutory requirements increase the compliance burden and the need for rich, timely, and accurate data.
• Complex Attributes: Social security, income tax, wage tax, and other statutory contributions often vary significantly by country and worker type, making it complex to ensure the compliant attributes of local pay codes.
• Reporting Requirements: Countries impose varying levels of mandatory reporting, often requiring granular data and strict filing timelines, sometimes combined in one “payroll tax filing,” but more often than not in many separate filings for social security, income tax, and wage tax.
• Data Management: Data quality and integration challenges remain critical pain points, regardless of technology investments, to ensure all local data fields are captured, validated, and transferred.
• Local Business Nuances: Requirements such as in-country bank accounts, currencies and money movement, physical document submission, company registrations, and language barriers add to operational complexity.

Besides these more country-specific complexity drivers, organisations themselves can drive additional complexity, such as unique pay policies, workforce dynamics, and the overall system and integration landscape.

Actions for Global Payroll Leaders

Despite these challenges, the message from the reports is clear: complexity can be managed effectively with the right strategies, investments, and, above all, education of payroll professionals. Alarmingly, 42% of organisations still lack a formal global payroll strategy. Poor quality of data inputs remains the root cause of decreased payroll accuracy. Additionally, 74% of organisations are struggling to find skilled payroll professionals. Finally, automating inbound data remains a big challenge despite technological advancements.

However, there is hope for overcoming these challenges when global payroll leaders and professionals focus on these key areas:

• Prioritise Data Compliance: Data requirements differ across the world and are often cited as the main challenge in ensuring compliance. Understanding what data is required and in what format, what event triggers the need for data, and the timeliness is crucial. Prioritising data should drive compliance and automation in the end-to-end payroll process.

• Invest in Compliance: Compliance is not optional. Investing in a compliance program ensures that all total reward and pay policies are assessed against compliance, and for instance, taxability matrices are maintained. In addition, whether payroll is outsourced or not, providing the right resources (like PAYO) to payroll teams about local compliance is paramount: you never outsource your compliance accountability.

• Choose the Right Partner: The right payroll provider(s) offering the technology, service levels (beyond the payslip), and access to local compliance expertise is an area to put enterprise-wide emphasis on. The balance between what compliance expertise is maintained in-house versus what is relied on when outsourced is a delicate yet crucial one, ensuring no balls are dropped.

• Audit and Monitor: Even the most perfect design can show operational inefficiency, ineffectiveness, and non-compliance. Risks should be properly identified, down to the local level, and properly mitigated by evidenced controls: period after period, cycle after cycle. In addition, monitoring in the form of internal and external audits ensures risks remain effectively mitigated. Lastly, compliance programs, like compliance health checks and cross-functional groups responding to legislative changes, are considered best practices.
• Quality Assurance Framework: Effective monitoring and data analytics are important tools to help reduce the time it takes to identify and resolve issues. However, equally critical is having a robust quality assurance framework in place, one that ensures the right people are performing the right tasks at the right time. It's not just about mitigating risks or implementing immediate regulatory changes; it’s about doing so efficiently, effectively, and with consistency.

Achieving compliance requires continuous monitoring and proactive action, starting with a thorough understanding of local requirements and working back through processes, technology, and people.

Closing Thoughts

The reality for global payroll professionals is evident: complexity is here to stay, and local compliance remains the cornerstone of successful operations. As shown across the PwC, Strada, and PAYO reports, the regulatory environment is evolving rapidly, and the stakes for getting payroll timely and accurately have never been higher. Yet with proactive investment in data quality, compliance and quality frameworks, skilled partners, and continuous monitoring, organisations can transform payroll from a compliance challenge into a strategic asset.

Ultimately, success in global payroll isn’t just about paying people; it’s about protecting the business, supporting employees, and ensuring readiness for whatever regulatory challenges come next. Global payroll leaders who take a forward-looking, disciplined approach will be best positioned to navigate this complexity and drive sustainable success.

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Max van der Klis-Busink, MCIPP, RPP, is the Owner of Passion For Payroll and Vice President of Global Strategy on PayrollOrg’s Board of Directors.