Where do I start with ensuring payroll compliance?
25% of European companies do not seek legal advice from external parties when it comes to their HR policies.
For anyone with a basic understanding of how payroll works, it’s clear you won’t get far unless you prioritise regulatory compliance.
Non-compliance with payroll regulations has serious legal and financial consequences, including hefty fines, the risk of audits and lawsuits, and worst of all: permanent damage to your company’s reputation. You’re limiting sales potential, risking customer relationships, and breaking employee trust all at once.
To avoid all this, it’s essential to put a payroll compliance plan in place that ensures you’re always covered against risk.
Record-keeping comes first
The first place to start, as with any kind of tax or legal compliance, is to ensure you’re keeping meticulous records that are accurate, complete, and easily accessible for inspection.
In a payroll context, that should include details on hours worked, pay rates, and tax deductions for every employee, alongside all their relevant personal and account details.
No payroll strategy of any kind can be achieved unless this type of foundational record-keeping is in place. Managing it appropriately requires a payroll compliance specialist.
Selecting payroll support
Whether you choose to hire an internal specialist or outsource to an external provider, make sure to look for payroll people and providers with proven expertise, and a track record of maintaining compliance in complex environments.
For many companies, especially small and medium-sized organisations, it can feel easier to outsource payroll compliance completely. A lot of SaaS payroll software is even capable of adapting to legislative changes as they arise.
What the data reveals
But while three-quarters of European employers are getting some kind of external legal advice on their HR policies, it’s interesting to note that a full 25% of organisations don’t seek any external legal advice whatsoever when it comes to HR, including on payroll management.
That’s probably not because they’re ignoring the issue—especially since for companies with over 2500 employees, the figure rises to 36%.
The bigger your company grows, the more complex payroll compliance becomes, which means the growing expertise you need should become ever-more specific to your organisation’s unique methods and ambitions. It’s simply easier to nurture that kind of customised knowledge base in-house.
Alarmingly, only 55% of respondents to our survey agree their company can implement legal changes in payroll calculations quickly. That’s regardless of whether they’re managing payroll compliance internally or externally.
When it comes to managing legislative complexity across borders, the legislative reality also varies from country to country, significantly impacting the implementation of legal changes. For example, countries like France, Belgium, the DACH region, and Croatia serve as prime examples of the diverse landscape of legal intricacies.
From complex tax regulations to numerous exceptions and collective labor agreements, these regions, and many others, post unique hurdles for payroll management. This diversity underscores the importance of tailoring your compliance strategies to your jurisdiction's specific requirements.
Ultimately, the responsibility for compliance rests with your organisation alone, no matter which provider or expert you work with. If the process is slow, that leaves you at risk of non-compliance.
So, the most important thing? Make sure you’re always working on compliance, even when there are no legal changes to be made. Getting it right means continually looking for ways to make the process more efficient, even if that means switching up providers or ways of working completely.
Abdelkader Berramdane
Head of Legal Services France