Most businesses are managing modern compliance requirements with tools built for a different era.
Ten years ago, spreadsheets and email reminders could handle multistate compliance. Multistate compliance mistakes were rare because state payroll was simpler. Employees worked from offices. State compliance requirements changed slowly. And companies expanded more deliberately, usually one state at a time.
But that world no longer exists.
Today’s compliance management landscape is constantly shifting. Remote employees scattered across state lines overnight. Regulations update continuously. And what used to be manageable for employers has become a tangled knot of requirements that outdated tools simply can’t manage.
In fact, we surveyed several businesses on how they actually manage payroll compliance. Only 15% have achieved truly proactive management. The other 85% are trapped in reactive mode—not because they’re careless, but because their tools make it impossible to get ahead.
Let’s take a closer look at these and other multistate compliance mistakes that companies continue to make.
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Key Takeaways
- Outdated tools create inevitable failure: When you manage modern compliance with decade-old systems, reactive mode becomes your only option
- Disconnected data multiplies risk: Spreading compliance tracking across multiple tools creates blind spots that turn into expensive surprises
- Manual processes can’t scale: The acceleration of regulatory changes has outpaced what human effort alone can manage
- Compliance fear is blocking growth: Companies are leaving money on the table because expansion feels too risky with current tools
Mistake #1: The Compliance Knot Keeps Tightening (But Your Tools Don’t Adapt)
The compliance landscape has fundamentally changed in the last five years, but, as we said, most companies are still using the same tools they implemented a decade ago. This disconnect between modern requirements and outdated systems is the root cause of why so many organizations feel perpetually behind. Our research reveals just how dramatic this mismatch has become, and why it’s getting worse every quarter.
How Regulatory Changes Outpace Traditional Management Systems
The pace of change in state compliance requirements has accelerated beyond what most organizations can handle with traditional practices. It’s not just that there are more state laws. No, it’s that regulatory changes happen faster and interact in ways that create exponential challenges.
When remote work exploded, companies suddenly had employees in multiple states where they’d never operated. A quarter of all businesses we surveyed now span many states. And each new state adds another set of employment law requirements, multiplying the interactions between different tax obligations:
- State income tax triggers payroll processing changes
- Labor laws affect wages and benefit administration
- Entity registrations cascade into ongoing filing requirements.
Why State Payroll Complexity Breaks Old Systems
Meanwhile, state agencies keep updating their state regulations. California adjusts its discrimination laws and overtime rules. New York changes its harassment policies. What worked last quarter might trigger audits this quarter. And tracking all these changes across various states has become an administrative nightmare that overwhelms many—perhaps even most—HR departments.
The traditional response has been to work harder. HR professionals assign more people to compliance. They check local regulations more frequently. They create more elaborate spreadsheets for payroll practices. Yet, according to our research, even though companies use an average of four different tools to manage state HR compliance, over half still rely on spreadsheets for critical tracking.
The Real Cost to Employers and Their Workforce
Think about what this means for your workforce. Your state taxes requirements live in one system. Compensation compliance sits in another. Equal employment opportunity tracking happens in spreadsheets. And deadline reminders for certain states arrive via email. When your compliance data is scattered across disconnected systems, you’re not managing requirements, you’re just hoping nothing falls through the cracks.
The result is predictable. Our research found that 59% of companies only discover issues when they receive a penalty notice. They’re not being negligent. They’re using tools that were designed for when a single employee in another state was unusual, not the norm.
Mistake #2: Yesterday’s Practices Can’t Handle New State Requirements
Even well-resourced companies with dedicated compliance teams are struggling to maintain confidence in their compliance status. The problem isn’t a lack of effort or expertise, though. Instead, it’s that traditional approaches simply can’t scale with today’s requirements. When manual processes meet exponential complexity, the result is inevitable: constant uncertainty, expensive workarounds, and exhausted teams trying to do the impossible.
How Businesses Lose Confidence in State Compliance Management
The mismatch between current tools and actual state operations goes way beyond inconvenience. It’s creating a crisis that paralyzes growth across state borders.
Consider what we found: only 21% of leaders feel truly confident in their compliance status. The vast majority live with constant uncertainty about federal law interactions with local laws. They know their current approach has gaps. They just don’t know where those gaps are until a penalty notice arrives.
This uncertainty stems from a fundamental problem with how employers approach the regulatory environment. The tools most companies use were built for a static regulatory landscape. Update your spreadsheet quarterly, set annual reminders for payroll administration, and you were generally fine. But today’s requirements shift based on work location changes, remote work policies, and evolving state employment laws. And those all happen in a flurry.
The Hidden Impact on HR Departments and Employee Relations
Needless to say, the impact on teams is significant. HR departments dedicate an average of 28 hours per week just to managing compliance across other states. That’s approaching the hours of a full-time employee doing nothing but updating spreadsheets, checking requirements, and chasing down changes in several states. Yet despite this massive time investment, most companies still can’t quite reach out and grasp proactive compliance.
Why? Because manual tools can’t scale with accelerating change. You can’t spreadsheet your way out of exponential growth in requirements. You can’t email-remind yourself to success when specific policies shift faster than you can track them.
To that point, our survey found that 72% of companies now rely on outside specialists just to validate they’re compliant. It’s expensive insurance for a problem that compliance software should solve.
Download the 2025 report
Get your free copy of this year’s industry benchmark report outlining the strategic compliance insights from HR and Finance leaders.
Mistake #3: The Reactive Trap Becomes Your New State Operations Reality
Once you fall behind on compliance, traditional tools make it nearly impossible to catch up. Every day is more about damage control than prevention, creating a vicious cycle where problems compound faster than you can solve them.
Why Payroll Compliance Failures Compound Across State Lines
Like it or not, once you fall behind on compliance, catching up becomes nearly impossible with traditional tools. This is especially true for state payroll and tax obligations that vary across jurisdictions.
Every day starts with fighting yesterday’s fires. There’s no time to build better systems when you’re constantly responding to urgent issues about withholding taxes or state workforce requirements. And without better systems, you’ll keep having urgent issues. It’s a vicious cycle that traditional management approaches can’t break.
How Regulations Create an Administrative Burden That Blocks Growth
Our research found that 44% of companies had to make emergency budget allocations last year just to handle compliance surprises. Nearly half of all businesses are getting financially ambushed by laws they should have seen coming. And these aren’t small companies without resources. They’re established organizations with dedicated teams, multiple tools, and real budgets for compliance.
The growth impact might be the most damaging consequence of all. While 73% of companies say they’d expand faster without compliance fears, only 3% are actually pursuing expansion into new state markets. That gap represents millions in lost revenue.
Breaking Free: Modern Solutions for Multistate Employers
The companies that have achieved proactive compliance management aren’t working harder. They’re working differently. They’ve recognized that yesterday’s practices can’t solve today’s problems and made the shift to modern solutions. And that’s the path forward for everyone willing to let go of those antiquated compliance processes and systems.
The Path Forward: Modern Compliance Management for Today’s Businesses
Our 2025 Compliance Benchmark Report provides the complete picture of this crisis and the roadmap out:
- How companies your size handle regulatory changes across multiple states
- Which state regulations and labor laws cause the most problems
- The true cost of reactive payroll compliance beyond penalties
- What successful HR leaders prioritize for state HR compliance
- Data-driven practices for managing remote employees across state lines
How Mosey Transforms Compliance for Employers
This research led us to an obvious conclusion: businesses need compliance software built for today’s reality. Instead of adding another tool to your tangled stack, Mosey replaces outdated systems with unified compliance management.
One dashboard shows your status across all states. Proactive monitoring catches regulatory changes before they become legal pitfalls. Built-in expertise covers employment law, discrimination laws, harassment policies, and equal employment requirements across every jurisdiction.
And the difference is immediate. Companies using Mosey know exactly where they stand with state taxes, payroll processing, and labor laws. They’ve escaped the reactive trap that plagues multistate employers.
So, ready to fix your multistate compliance mistakes?
Download our 2025 Compliance Benchmark Report for detailed insights into state compliance requirements and modern solutions. And when you’re ready, request a free Mosey demo to see how the platform helps multistate employers achieve proactive compliance management.
Frequently Asked Questions: Multistate Compliance Mistakes
What are some potential threats to compliance?
The biggest threats to compliance include rapidly changing state regulations, disconnected tracking systems that create blind spots, remote employees triggering unexpected state tax obligations, and relying on outdated tools that can’t keep pace with regulatory changes. Our research shows that businesses operating in multiple states face exponential increases in compliance complexity with each new jurisdiction.
What is the biggest compliance risk?
The biggest compliance risk is discovering violations through penalties rather than prevention. Our data shows 59% of employers only learn about compliance issues when state agencies issue fines. This reactive approach costs an average of $16,000 per incident and creates cascading problems with payroll compliance, tax obligations, and potential audits.
What are key risk indicators in compliance?
Key risk indicators include: using more than three disconnected tools for compliance management, spending over 20 hours weekly on manual compliance tasks, relying on spreadsheets for tracking state compliance requirements, experiencing team burnout in HR departments, and having no automated alerts for regulatory changes. When organizations exhibit multiple indicators, they’re likely already non-compliant in some areas.
How do you measure compliance effectiveness?
Effective compliance measurement goes beyond avoiding penalties. Track proactive issue identification rate (catching problems before state agencies do), time spent on compliance management per employee, confidence levels among HR leaders, and growth enablement (ability to expand into new markets without compliance fears). The most effective businesses maintain real-time visibility into their compliance status across all states and can demonstrate consistent adherence to local laws, federal law, and state employment laws.
