AI & automation drive evolution in payroll operations

A newly released report from ADP has examined how payroll operations are evolving with the increased integration of AI, automation, and business systems.

The "Potential of Payroll in 2025" report by ADP surveyed senior payroll leaders from multinational companies with over 1,000 employees. The report highlights a shift in payroll functions toward more strategic roles, moving beyond traditional tasks and impacting global business practices.

One significant finding is the impact of skills shortages on payroll services. Despite 83% of companies expanding their payroll departments, 61% report that these shortages have affected their ability to deliver payroll services effectively. More than half of the respondents indicate they face challenges in sourcing skilled payroll professionals externally, prompting these organisations to focus on upskilling and retraining their existing workforce.

The advent of AI and automation presents a transformative force within payroll operations. According to the report, 58% of organisations are looking into AI-driven payroll solutions, with 50% focusing on automating manual processes to enhance efficiency. AI adoption has become a central focus, with 32% of leaders identifying it as a key driver of payroll transformation efforts.

Integration with business systems is another growing trend, as evidenced by the finding that 47% of organisations now connect their payroll functions with accounting and finance systems, a rise from 41% in the previous year. On average, IT teams are dedicating 25 hours weekly to manage data flows between payroll and other systems, highlighting a need for seamless integration to reduce overheads and improve accuracy.

Employee-centric payroll innovations are also taking centre stage. The report notes that more than 55% of businesses are planning to deploy digital wallets or pre-payment cards, and 43% are considering more frequent pay cycles. Other developments include investments in self-service tools, chatbots, and easily accessible payslips aimed at enhancing employee engagement and satisfaction with payroll processes.

These findings suggest a strategic evolution of the payroll function, characterised by digitalisation and the adoption of innovative technologies. The report proposes that companies investing in advanced payroll technology and workforce development are likely to experience a competitive advantage in areas such as employee retention, adherence to compliance standards, and the utilisation of business intelligence.

Sirsha Haldar, General Manager for UK & Northern Europe at ADP, remarked, "As payroll's role expands, organisations need to embrace innovation to meet evolving expectations. With AI, automation, and system integration at the forefront, payroll teams have an opportunity to transform business operations and improve employee retention, well-being and overall job satisfaction."