Payroll and AI are progressing, but people still want more

Payroll is no longer just an operational function

It’s a test of trust. In a climate where costs must come down and employee experience must go up, payroll is sitting at the intersection of efficiency and empathy—and often being pulled in both directions at once.

Top 5 Payroll Challenges for Employers

Reducing payroll processing costs

Improving employee experience related to payroll

Ensuring payroll accuracy and dealing with payroll errors

Ensuring payroll speed and reducing payroll processing time

Managing payroll data securely and ensuring data privacy

For many companies, outsourcing is the lever.

50% of organisations using Managed Payroll Services (MPS) or Full Business Process Outsourcing (BPO) report significant cost reductions. In contrast, only 37% of those managing payroll in-house report significant cost savings, along with just 29% of SaaS-only users.

The organisation has experienced significant cost savings.

In-house

SaaS

MPS

Full BPO

“Payroll is about people’s money. If that’s not right, everything else falls apart,” says Frauke Neels, Portfolio Director for Payroll, Reward & Expertise at SD Worx.

“But once it runs smoothly, it becomes a lever for trust, financial well-being, and even strategic cost control.”

Yet this drive for efficiency isn’t always felt on the ground.

Only 42% of employees say they have convenient self-service access to pay and benefits. And 39% report ongoing financial stress, while just 28% believe their organisation is doing enough to support financial well-being.

Frauke believes this is where payroll can play a much bigger role in supporting employee experience: “Even just showing people what’s in their package beyond net salary, or sending alerts when their payslip is ready — that builds clarity and reduces stress. Payroll should communicate, not just calculate.”

of employees receive convenient, self-service access to payroll and benefits information.

of employees are experiencing financial stress.

of employees say their organisation shows concern for their financial well-being and strives to reduce financial stress.

Payroll leadership strategies for HR

“Payroll has become a strategic concern, not just a technical one. If your processes can’t keep up with changing contracts, hybrid work, or international hires, the impact will be felt fast — in errors, delays, and employee frustration.

That’s why it’s essential to design for complexity without sacrificing clarity. Look for payroll systems that are flexible, scalable, and easy for employees to interact with. If people can’t access or understand their pay, even the best systems lose credibility. Above all, treat payroll as an opportunity to improve employee experience. It’s not just about getting the numbers right. It’s about creating confidence at scale.”

Frauke Neels,

Portfolio Director, SD Worx

AI adds another layer of complexity—and opportunity.

Investment is growing, with 38% of HR professionals now investing in AI (up from 33% last year).

of HR professionals now investing in AI compared to 2024

The organisation has already seen significant outcomes from using AI in HR.

It is unclear how AI will impact our HR functions and operating model.

But results remain uneven.

Only 31% have seen strong outcomes, and more than half (53%) are unsure what AI’s impact will actually be.

“Don’t start with the tool, start with the need,” advises Jan Laurijssen, Senior HR Researcher at SD Worx. “AI adoption only works when it’s tied to real goals: better insight, faster processes, or improved service. And it needs to be explainable. In payroll, especially, people can’t trust a black box.”

Jan also notes that companies often overlook a critical factor in adoption: understanding.

“Most executives don’t even know where AI is already embedded in their organisation. That’s the first step: mapping out what’s in use and making sure it aligns with your values and culture.”

— Jan Laurijssen, Senior HR Researcher, SD Worx

Employees feel that ambiguity too.

While only 27% believe AI could replace their job, nearly half (49%) of those already using it think it will transform how they work.

I am concerned that AI will make a significant part of my tasks redundant.

This points to a deeper truth: people don’t necessarily fear AI. They just want clarity on where it fits, what it changes, and how it will support, not displace, their role. “AI should empower people, not replace them,” says Frauke. “And in payroll, it must never come at the cost of trust, transparency, or control.”

In what ways do you think AI will shape your work within the next 3 years? (AI users)

AI will completely transform the way I work

AI will drive substantial changes in many aspects of my work

AI will moderately impact certain areas of my work

Full AI will bring minimal changes to my work

AI will have no significant impact on my work

The message is clear.

Digital transformation is not just about software adoption. It’s about trust adoption — and that means designing payroll and tech systems that are not only smart, but human.

How HR leaders should leverage AI

“To get real value from AI in HR, we need to shift the focus. It’s not about experimenting with the latest tool. It’s about solving real problems in a meaningful way. Start with the question: what process or decision are we trying to improve?”

Once the purpose is clear, the next challenge is adoption. Will people understand what the tool does? Will they trust it enough to use it? That’s where communication comes in. AI needs to be introduced in a way that feels human and helpful.

Training should happen in context, using real-world examples. Leaders must be transparent about how data is being used, especially when it comes to people analytics.

Used well, AI can support better decisions, reduce admin, and free up time for work that truly matters. But that only happens when HR aligns technology choices with business values and team needs.”

Jan Laurijssen,

Senior HR Researcher, SD Worx

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