Global HR leaders need to cut through complexity

This article was originally published via People Management.

Leading an effective HR function is becoming harder in today’s international, interconnected business ecosystem. A third (35 per cent) of jurisdictions expect HR and payroll complexity to increase over the coming 12 months, with the figure increasing year on year, according to the latest Global Business Complexity Index report published by TMF Group. There are several reasons for this rise in complexity, encompassing both internal and external factors.

Many companies have increased their proportion of multi-jurisdictional payroll as they seek skills from overseas amid the intensifying war for talent. The vast majority of jurisdictions are experiencing difficulties attracting and retaining talent. In addition, geopolitical tensions are disrupting supply chains and making organisations rethink where they should place their workforce.

Employers are therefore becoming more exposed to different tax rules, social security regimes and statutory obligations, while hiring overseas workers is becoming more challenging because of complicated visa, qualification and immigration requirements across jurisdictions.

Companies are also juggling evolving labour laws, new reporting requirements and pay transparency regulations. Many expected the spike in regulatory changes seen during Covid to ease, but there are few signs things are slowing down.

There is a push for real-time reporting and greater transparency across businesses generally, and it’s impacting HR and payroll teams. Changes differ by region, country, province, canton – and even at city level in the US. The European Union’s Pay Transparency Directive, for example, creates an obligation for employers to have data and mechanisms in place to answer employee queries about the company’s pay structure, while California now also enforces strict pay data reporting through laws such as SB 1162. In Colombia, meanwhile, there has been a complete overhaul of rules relating to sexual harassment in the workplace, including putting protections in place for whistleblowers.

Faced with such far-reaching changes, how can HR and payroll leaders prepare?

Stop thinking of compliance as a necessary evil and get the data ready

Compliance is no longer that yearly report that needs to be produced – reporting requirements have become more frequent and more granular.

HR leaders should run data readiness assessments, review pay structures and policies, and standardise their sources to accommodate enhanced requirements. Data must be consistent, reliable and auditable, so needs clear governance structures and ownership.

HR leaders can’t work on this in isolation. They must collaborate with legal to understand and interpret emerging compliance obligations, and with finance, which will host much of the data, particularly relating to exchange rates applied to multi-jurisdictional payroll.

Reconsider the tech stack

HR leaders need systems that allow them to produce replicable reporting flows with accuracy, and across jurisdictions. The assumption is all multinationals now have a global HR system in place, acting as a single source of truth. But the reality is many still don’t, and struggle with data housed outside of a centralised system.

It’s crucial to get the right core system in place to manage a global workforce while fulfilling compliance obligations, and to then adopt a responsible approach to integrating new tools.

It can be tempting to just let AI loose on a pile of CVs, but AI can’t distillate how much chemistry you have with a candidate, or their ability to foster relationships within a multicultural team. There is still an essential role for human judgement in all recruitment activities. And let’s not forget, AI learns from data – emphasising the need to create a foundation of good-quality data before you start getting creative with shiny new toys!

Prioritise hiring for skills rather than jobs

Skills-based hiring models enable employers to think both across borders and across departments to plug talent gaps. I was speaking with one HR leader who has hired ‘AI ninjas’, who are catapulted into different departments – such as IT and procurement – to see where applying the technology can cut inefficiencies.

By weaving skills into existing job functions, a company demonstrates the value it puts on continuous learning and internal mobility. These traits appeal to those with in-demand skills, who know they will have room to innovate and experiment.

Act global, think local

On one hand, there is growing pressure for global consistency and standardisation of HR and payroll processes but, on the other, local knowledge and expertise are essential to stay on top of employment laws, visa requirements and statutory benefits in any given market.

Benefits packages illustrate this point well. We find the most successful companies have a global policy based on values they wish to convey, but know how to adapt it to local requirements – whether that’s legislation or cultural nuances.

By finding the sweet spot, and by thinking compliance first while attracting the brightest talent, HR leaders can help their organisations to sharpen their competitive edge.