Payroll is on the brink of its biggest transformation in decades with nearly three-quarters (73 per cent) of payroll professionals expecting artificial intelligence (AI) to shape the function the most in the next 12 months, according to new research from MHR.
MHR’s 2025 report, ‘The Future Is Payroll’, released to mark National Payroll Week (1-5 September), reveals that optimism about AI is growing fast, but so are the risks of falling behind. Over half (52 per cent) of professionals say AI has already had a significant impact on their work over the last year.
However, despite the desire to see the payroll function evolve, MHR’s 2025 report uncovers a surprising twist: manual, admin-heavy processes are increasing. Spreadsheets for payroll processing have more than doubled year-on-year (30 per cent to 63 per cent), manual data input has jumped from 35 per cent to 50 per cent, and duplication of records across systems has risen to 55 per cent.
“Payroll is facing a paradox. Companies are embracing AI, yet employees are still spending hours on manual data entry,” says Anton Roe, CEO at MHR. “The increase in manual processes is draining time for payroll professionals and limiting what they can achieve. They’re calling for new ways of working. Business leaders are responsible for providing payroll teams with a fix to the admin-heavy processes they are currently working with, which has jumped to the top challenge payroll is facing this year.”
Payroll professionals are ready to embrace new solutions to help with their workload as 46 per cent recognise AI could most benefit the function in reducing errors. But challenges persist, with 48 per cent expressing concerns over data security, and 38 per cent with a lack of skills or training when it comes to adopting AI – challenges which could signal the reason for an increased reliance on manual processes. Crucially, 88 per cent of payroll professionals believe their company needs to invest more to feel the full benefits of payroll technology.
Roe adds: “Business leaders must act now to champion unsung payroll heroes. They need to connect their people’s readiness for change with the technology and skills needed to untap the payroll sector’s full potential. But they must remember AI is not a fix-all and consider improving ways of working and harnessing the full capability of their payroll investment. New solutions must still be complemented with the human touch to sense-check data and have final oversight across such a critical function. By enabling the payroll function through a balance of the right solutions and training, leaders can empower people to work smarter.”
To mark National Payroll Week for 2025, MHR is hosting PayFest ‘25 across the week, with webinars discussing the power of People First payroll, the latest on legislation, and the skills and mindset needed to succeed in a career in payroll. MHR’s 2025 report, ‘The Future is Payroll’ is also being released as part of PayFest ’25. More information on how you can take part can be found here.
