Payroll is on the brink of its biggest transformation in decades with nearly three-quarters (73%) of payroll professionals expecting artificial intelligence (AI) to shape the function the most in the next 12 months, according to new research.

‘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%) 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, the report uncovers a surprising twist: manual, admin-heavy processes are increasing. Spreadsheets for payroll processing have more than doubled year-on-year (30% to 63%), manual data input has jumped from 35% to 50%, and duplication of records across systems has risen to 55%.

“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% recognise AI could most benefit the function in reducing errors. But challenges persist, with 48% expressing concerns over data security, and 38% 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% 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.”

*MHR’s 2025 report