The HR Research Institute (HRRI), powered by HR.com, released its 2025 Future of Payroll Report. This report gathers insights from 206 HR professionals in nearly all industries worldwide, with the majority in North America, and representing small to very large organisations.
The findings highlight that while most payroll functions strive to deliver compliant, accurate, and timely pay, the majority (two-thirds) do not respond to the organisation's call for a more strategic and transformative payroll function.
In a time of rapid technological advancement and changing employee expectations, payroll functions should no longer focus solely on compliance and accuracy. According to the report, while most payroll functions successfully meet compliance requirements, few have adopted a strategic approach to support broader business and organisational goals.
Utilising HRRI’s Payroll Maturity Model, the report reveals that only 25% of organisations operate at an “Optimised” or “Strategic” level of payroll maturity. Meanwhile, most remain in the “Managed” phase, functional yet far from transformative. A troubling 23% still operate in “Ad-hoc” or “Reactive” modes, beset by inefficiencies, compliance vulnerabilities, and outdated systems; engaging in daily firefighting.
According to the survey, technology (or more accurately, the lack of it), data availability, and integration lies at the heart of this divide. Organisations with transformative payroll functions are almost 16 times more likely to report high levels of payroll automation compared to transactional functions. These forward-thinking payroll teams are better equipped to adapt to economic changes. They are significantly more likely to enhance employee experiences, offer flexible pay options, and utilise data for workforce planning.
The research highlights how transformative payroll functions are differentiated by smartly deploying technology. Three-fourths noted improvements in automation compared to only 25% in transactional payroll functions. Transformative payroll functions, therefore, face fewer challenges in managing the overall technology stack, staying up to date with the law, and keeping payroll secure.
This frees up time to deliver payroll add-ons (such as direct deposit flexibility, discounts, and perks) and increases the likelihood of payroll functions delivering strategic business insights and supporting organisation-wide initiatives.
Moreover, they frequently evaluate and reconfigure their payroll strategies. Over 70% of strategic payroll teams have recently updated their approach or are currently in the process of overhauling it, compared to only 42% of transactional teams. This results in improved agility and ongoing alignment with business needs.
Despite the clear benefits of transformation, several hurdles remain. The top barriers include the lack of integration between payroll and HR systems, the high costs of upgrading payroll technology, limited automation, and poor data management. The results are in line with a prior news article by PayrollOrg (PAYO) covering ADP’s survey “The Potential of Payroll in 2025: Global Payroll Survey.”
The way ahead is clear: HR leaders point to an increased integration of payroll, HR, and attendance systems (55%), digitisation (43%), and AI-driven forecasting and analytics as the most significant trends for the next two years.
To close the gap between transactional and transformative payroll, the survey shared a blueprint for organisations to:
As Brent Skinner, Executive Community Leader at HR.com, notes: “Payroll is ground zero for the employee experience. When it goes wrong, it erodes trust. When it’s strategic, it becomes a powerful tool for engagement, equity, and efficiency.”
The report emphasises a commitment to ensuring that payroll teams possess the necessary skills and tools; organisations can transform payroll into a vital enabler of business success. Payroll professionals face both a necessity and an opportunity to become strategic, with their success reliant on the identification of modern, innovative solutions. Organisations' focus on enhancing their (global) payroll functions generates the need to adopt external best practices and to upskill towards a more strategic, transformational leadership style.
Based on this need and call to action, this is a great time for organisations and payroll professionals to review PAYO’s courses and conferences to equip themselves with the skills and knowledge required in 2025 and beyond. Of special interest are PAYO’s 43rd Annual Payroll Congress from 13 to 16 May in Orlando, Florida, and the Strategic Leadership Certificate Program.
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Max van der Klis-Busink, MCIPP, RPP, is the Owner of Passion For Payroll and Vice President of Global Strategy on PayrollOrg’s Board of Directors.