AI Adoption In Payroll Increasing
A new report compiled by SD Worx has found that 42% of UK employers now use agents / chatbots underpinned by AI in dealing with payroll queries from workers. This is 12% ahead of the European average
Findings Of The Report
Other findings from the report were:-
- 42% of UK companies now use AI-driven payroll solutions, putting the UK significantly ahead (12%) of the European average in adopting these technologies. Across Europe, three out of ten companies use AI chatbots or agents for payroll queries, though staff awareness and access remain limited.
- Nearly one in four UK employers have increased their investment in AI for payroll over the past year, signalling a shift toward automation. Moreover, payroll optimisation is an increasing concern Europe-wide; up from 11% in 2024 to 14% seeing it as a leading challenge for next year.
- Despite rising AI adoption, only 28% of employees report having access to these tools, highlighting a gap between employer implementation and staff usage.
- Payroll process improvement has become more urgent, with 18% of UK employers identifying it as a major challenge, up from 13% previously.
- UK Companies are prioritising investments in payroll data security (51%), adapting to new labour laws (49%), and sustainability measures (44%), whilst Investments across Europe focus on compliance (47%), data security (46%), and eco-friendly payroll practices (38%) as top priorities.
- Self-service payroll features are expanding; 43% of UK employers now allow employees to handle basic HR tasks themselves, up from 35%, whilst over a third of European firms now invest in these tools for employee autonomy.
- A majority of employees (59%) already manage much of their HR admin through self-service platforms, showing widespread acceptance.
- Early adopters report clear benefits from digital transformation, including notable cost savings and increased operational efficiency.
- Payroll outsourcing is on the rise in the UK; 35% currently outsource in part, with forecasts suggesting this will grow to 41% by 2028. Moreover, half of European firms that outsource or combine internal and external payroll resources report significant cost savings compared to those relying solely on SaaS or full in-house setups.
- Use of hybrid models—internal software with external support—is expected to increase from 10% to 14% among UK companies by 2028.
- Fully in-house payroll management is declining, projected to fall from 22% now to just 17% within three years.
- SaaS-based payroll solutions are also expected to decline in popularity, dropping from 30% today to 24% by 2028.
- Substantial cost reductions are reported: 72% of businesses using internal software plus external experts see significant savings.
- Full outsourcing delivers notable savings for six out of ten companies; partial outsourcing benefits just over half at 53%.
- Only around a quarter of businesses using SaaS models achieve substantial cost savings, compared to over half with traditional or hybrid methods.
- Half of European firms that outsource or combine internal and external payroll resources report significant cost savings compared to those relying solely on SaaS or full in-house setups.
The Future Of Payroll
The rapid integration of AI into payroll processes is reshaping the landscape for employers and employees alike. With UK companies leading in adoption rates and investment, the benefits—ranging from cost savings to enhanced operational efficiency—are already evident among early adopters.
Nevertheless, the gap between employer implementation and employee access signals a need for greater focus on user engagement and awareness to fully realise AI’s potential. As priorities shift toward data security, compliance, and sustainability, organisations should balance technological advancement with robust governance and user empowerment.
The rise of hybrid and outsourced models suggests a move towards more flexible, tailored payroll solutions that can adapt to evolving business needs.
Ultimately, the momentum behind digital transformation in payroll points to a future where automation not only streamlines operations but also fosters greater autonomy and satisfaction for the workforce. Proactive adaptation will be key for organisations aiming to stay ahead in this fast-changing environment.
Bridging the Employee Benefits Knowledge Gap in a Hybrid World
New research conducted by Towergate Employee Benefits reveals a significant communication challenge: only 39% of employers believe their employees fully understand the benefits available to them. The shift to hybrid working has made it harder for 38% of employers to provide support, as remote work limits traditional channels. In response, 62% now increase the frequency of health and wellbeing communications, yet 43% struggle to tailor messages to specific workforce segments.
To address these obstacles, over half (55%) of employers are turning to digital solutions such as apps and platforms. These tools streamline access - allowing staff to view all benefits in one place, make informed choices, and access support anytime.
