Running payroll might seem like a simple administrative task — calculate wages, deduct taxes, send the money. But in reality, payroll is one of the most complex and risk-prone processes within any organization. It touches every employee, connects to legal and financial obligations, and can have serious consequences when things go wrong.
For small and mid-size businesses (SMBs), the challenges of payroll are amplified. Limited resources, evolving compliance requirements, and global hiring trends make it harder than ever to manage payroll effectively and accurately.
In this article, we’ll break down the main obstacles businesses like yours are likely to face — and offer insight into how to overcome them. So let’s jump straight in.
Payroll challenge 1: Compliance
Perhaps the biggest payroll challenge is keeping up with compliance, especially as the rules are constantly changing. These include:
- Tax regulations at multiple (i.e., federal, state, and local) levels
- Labor laws, such as minimum wage or mandatory benefits
- Social security and insurance contributions
- Withholding obligations and reporting requirements
Missing even a minor update — like a small change in state unemployment tax rates — can lead to underpayments, penalties, and employee dissatisfaction.
And the challenge only intensifies if you have a distributed team. Each state or country has its own compliance landscape, and this means handling different tax systems, public holiday entitlements, payslip formats, and termination procedures — all at once.
Solution:
Use automated payroll software that handles this for you. If you have people in different locations, ensure you choose a provider that has local, in-house expertise.
Payroll challenge 2: Accuracy
Accuracy is everything in payroll. Even small mistakes can have big consequences — from underpaying employees and losing trust, to overpaying taxes and damaging your company’s financial position.
Some common causes of payroll errors include:
- Manual data entry
- Misclassified employees (e.g., contractors vs employees, or exempt vs non-exempt employees)
- Incorrect timesheet data or leave tracking
- Unapplied bonuses or benefit deductions
These kinds of mistakes are particularly common in smaller teams, where HR often has to juggle multiple roles. This makes it harder to double-check every calculation — but the responsibility still falls on their shoulders.
See also: How to correct payroll errors
Solution:
Use that aforementioned payroll software to automate calculations wherever possible. Conduct regular audits, too, and ensure employee classifications are clear and up to date.
Payroll challenge 3: Timeliness
Payroll must always be processed on time, with no exceptions. If payday is missed, employees notice immediately, and it can quickly erode their trust.
However, keeping to a consistent payroll schedule is easier said than done, especially when juggling variables such as:
- Bank holidays and weekends
- Off-cycle payments (i.e., bonuses and terminations)
- Multiple pay frequencies (i.e., weekly, bi-weekly, or monthly)
- Different time zones (for global teams)
Even a delayed bank transfer can result in late pay — something that can significantly damage your employer branding and team’s morale.
Solution:
Set clear payroll cut-off dates, integrate time tracking and attendance systems, and work with a partner that offers reliable, on-time delivery — no matter the jurisdiction.
Payroll challenge 4: Scaling
Payroll processes that work for a team of 10 might break down when you scale to 50, 100, or 500 employees. Each growth milestone introduces more complexity, such as:
- More new hires and terminations
- New jurisdictions (states and/or countries)
- Additional benefit and compensation plans
- Greater demand for reporting and audits
Manual workflows don’t scale well, and patching together multiple local vendors can very quickly become a costly and inefficient bottleneck.
Solution:
Centralize your payroll management with a scalable platform that can grow with you, and ensure your processes are standardized across regions and departments.
Payroll challenge 5: Integration
Payroll doesn’t exist in a vacuum. It’s tightly linked with:
- HR management
- Finance
- Benefits administration
But when these systems aren’t integrated, payroll teams often waste time manually transferring data — increasing the risk of errors and delays.
Solution:
Use a payroll software solution that integrates seamlessly with your existing HRIS, accounting software, and benefits platforms to reduce manual work and improve data accuracy. Or, alternatively, use a provider that does it all for you in one eco-system.
Payroll challenge 6: Crossing borders
Global hiring is now the norm for many companies — and for good reason. But when you build a distributed team, payroll becomes significantly more complex. Challenges include:
- Navigating unfamiliar employment laws and tax codes
- Currency conversion and local banking processes
- Cultural expectations around payslips, holidays, and bonuses
- Reporting obligations across jurisdictions
What’s legal or acceptable in one country might be a violation — legally or culturally — in another. Managing this without local expertise or infrastructure can be overwhelming, and create unwanted risk for your business.
Solution:
Use a global payroll provider that handles local compliance, currency exchange, and in-country processing — without needing to set up a local entity. Learn more.
Payroll challenge 7: Security
Payroll involves sensitive personal and financial data. A breach doesn’t just result in reputational damage — it could expose your company to lawsuits and regulatory penalties, especially under laws like GDPR or HIPAA.
SMBs are especially vulnerable, as they may lack the resources to invest in strong security infrastructure.
Solution:
Partner with a payroll provider that offers end-to-end encryption, role-based access controls, and compliance with global data protection laws. How does Remote protect your data?
Payroll challenge 8: Transparency
Employees expect to understand how their pay is calculated — and rightly so. If their payslip is confusing or their deductions seem wrong, this can cause stress and frustration, and result in extra work on your end.
Solution:
Use a payroll system that offers an employee self-service portal, clear payslip breakdowns, and automated notifications. Educate your employees about how payroll works, too — especially around tax time or major life events.
How Remote can help
Payroll challenges like the ones described above are very real — but they don’t have to hold your business back. By understanding the key pain points and investing in the right tools and partners — like Remote Payroll — you can easily:
- Stay compliant and accurate
- Support your employees more effectively
- Scale your operations globally
- Save time and reduce manual work
To learn more about how we can remove all your payroll and compliance headaches, and make paying your people quick and painless, speak to one of our friendly experts today.