Payroll teams enter 2026 facing sharper regulatory pressure than in recent years, as governments tighten reporting rules, adopt structured digital tax data, and expand enforcement tied to worker classification and cross‑border work. European countries including Belgium, Croatia and France are rolling out mandatory structured e‑invoicing in 2026, replacing PDFs with machine‑readable formats under Peppol or national clearance systems.
In the United States, employers must also incorporate new reporting obligations under the One Big Beautiful Bill Act (OBBBA), which require tracking and breakout of qualified overtime and tips on 2026 Forms W‑2, following the end of 2025 transition relief. The year also brings ongoing changes in state‑level rules around pay transparency, leave requirements and AI‑related employment practices.
Across borders, oversight is increasing as France and Switzerland introduce new telework‑reporting rules for 2026 and prepare automatic salary‑data exchange beginning in 2027.
Against this backdrop, payroll experts say 2026 is a year for the profession to “meet the moment,” with stronger compliance discipline, better data governance and earlier involvement in workforce decisions.
Meeting the Moment: A Shift in Expectations
After years of gradual evolution, industry leaders say the payroll function has now reached a point of fundamental change. Dee Coakley, Head of Payoneer Workforce Management Europe, said payroll has moved “from back‑office processing to strategic risk management,” and is now expected “to provide data‑driven insight, flag compliance risks early, and spot problems before they escalate.” She added that expectations have risen faster than tools and data quality, leading to gaps where “things fall through the cracks.”
Fidelma McGuirk, CEO of Payslip, said meeting the moment in 2026 means treating payroll as “the front lines of compliance, data governance, and risk management,” with the expectation that teams stay integrated with finance and tax and remain “audit‑ready at all times.” She said the role now demands the right “data, tools, and partnerships” to handle evolving tax demands.
Rising Compliance Risks: Misclassification and Cross‑Border Complexity
The payroll experts point to worker misclassification as one of 2026’s most pressing risks. Coakley said misclassification “is still a big issue,” especially as remote and cross‑border work expands. She warned that payroll often learns of cross‑border arrangements too late, after key decisions have been made.
McGuirk agreed, saying “worker misclassification is a major risk,” particularly in the United States, where incorrect status can trigger significant penalties. She emphasized that payroll is often the first function to notice inconsistencies in worker data or payments.
The enforcement environment backs their concerns. U.S. regulators recovered more than $259 million for workers through wage‑enforcement actions in 2025, reflecting intensified scrutiny of pay practices that often overlap with classification issues.
Internationally, new telework‑reporting rules between France and Switzerland will require employers to track cross‑border work patterns more closely, feeding automatic salary‑data exchange beginning in 2027. Meanwhile, shadow‑payroll and social‑security compliance challenges are rising globally as authorities adopt real‑time data‑sharing protocols.
Accuracy and Real‑Time Readiness
Coakley said real‑time reporting and digital tax enforcement require payroll teams to “reconcile as you go, not just at month‑end.” She emphasized documenting decisions as they happen and maintaining clean data to support audit readiness. “None of it’s glamorous, but it’s the foundation,” she said.
McGuirk said “standardization is the key” to daily accuracy, urging companies to adopt centralized systems that validate data automatically, flag anomalies and integrate across payroll, HR and finance. She said standardization makes it possible to meet regulators’ expectation that payroll be audit‑ready at all times.
These priorities align with emerging digital‑reporting mandates across Europe, where structured invoices and real‑time clearance systems reduce tolerance for errors.
Global Workforce Management: Early Visibility Matters
Both payroll experts stressed that compliance risks often arise when payroll is not informed early enough about workforce changes.
“No one can know every country inside out,” Coakley said, urging payroll teams to build networks of local specialists and establish processes that flag relocations and remote‑work changes early. “Compliance questions need answering before decisions are locked in, not after.”
McGuirk said that as workforces become more distributed, payroll must work more closely with tax and legal teams to manage PE, social‑security and withholding obligations. She noted that payroll is “often the first to spot inconsistencies” and must be part of planning discussions rather than reacting afterward.
Technology and Automation: Guardrails Required
As automation advances, both experts caution that technology cannot replace oversight.
Coakley said automating flawed processes “just produces errors faster,” emphasizing that technology should support—not substitute—human review.
McGuirk said organizations must invest in high‑quality integrations, validation tools and approval controls, including audit trails that document who reviewed what and when. Without those controls, she said, automation can heighten rather than reduce compliance risk.
This aligns with broader 2026 trends as AI‑related employment rules gain traction across several states and in the EU.
Looking Ahead: Data, Flexibility and Faster Response
For 2026 and beyond, both experts underscore data integrity and adaptability.
Coakley said payroll must “get your data integrity right now,” and build flexible systems capable of adjusting to continual regulatory change. She said staying informed about new work models and tax frameworks is critical, because “the teams that do well are the ones built to move with it.”
McGuirk said future‑proofing is less about predicting the next regulation and more about enabling rapid response through standardized processes, scalable platforms and reduced manual work.
With OBBBA rules now in effect, state‑level regulations evolving, and international digital‑reporting mandates entering force, 2026 presents a layered compliance environment. Payroll leaders say the profession can meet the moment by tightening governance, strengthening data quality, and securing earlier visibility into workforce decisions.
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