UK 
United States
More than a third of UK employers say that manual payroll processes are causing stress for their teams, according to PayFit research.
Payroll management poses significant challenges in its current form, with work to do on pay & compensation too, not to mention anxieties (as well as optimism) around future innovations.
That’s according to more than 500 UK businesses PayFit surveyed on the state of payroll, and how it’s being transformed by technological, economic and societal developments.
To have such a business-critical function still causing headaches for businesses in 2024 is a massive blocker to its effective operation. But there is cause for optimism, and the potential for change to come about, if the appetite is there.
The results illustrate a desire to change and improve things, but either a lack of awareness, budget or time (or a combination of these) to do so.
For small businesses keen to understand the state of play, and the opportunities to enact change within a business, PayFit’s UK Payroll & Society 2025 report is a must-read for those responsible for managing payroll.
It features expert insight and analysis from the CIPP’s Mathew Akrigg, industry thought leaders Luke O’Mahoney, founder of the influential People community, SapienX, and Dr. Melissa Carr, lecturer in International Human Resource Management at Henley Business School.
Here’s some of the key takeaways:
1. Manual payroll processes are causing ‘paralysis’ for UK employers
37% of respondents report that the time spent on manual payroll tasks is causing stress for them and their teams. The most common stressors identified include data entry, complex calculations, payslip distribution, salary transfers, and HMRC submissions. There’s also anxiety over recent legislation changes around National Insurance Contributions, Employment Allowance and the Employment Rights Bill, and how this will impact how payroll is managed.
However, over half don’t intend to invest in payroll software at all, with a lack of awareness around some of the benefits that automating elements of payroll can bring. This is symptomatic of some of the wider issues in HR teams concerning a lack of funding for investment, plus a tendency to create manual processes which don’t scale. Businesses should be looking at the most demanding tasks that can be automated, to free up time and resources needed to focus on strategic growth activities.
2. Businesses believe that payroll will become fully AI-driven over the next few decades
Many are seemingly optimistic about future payroll innovations, with 59% feeling that automation can help humans do a better job. 48% believe that payroll will become fully AI-driven by 2051, with just as many expressing concern about their roles being made redundant by AI. But in reality this is still a long way off, with tools that automate the headache-inducing stuff and help people do a better job being the best way to make improvements right now.
AI in payroll has immense potential to streamline complex processes, benefitting both users and internal operations by handling vast amounts of information with ease. However, it’s crucial to equip teams with the knowledge to harness AI responsibly, and to understand its necessary guardrails.
The survey also uncovered some interesting thoughts on how businesses feel the world of pay will develop over coming decades, with 42% predicting a bonus system linked to employees’ carbon footprints, and 30% believing that there will one day be an option for employees to choose their own pay!
3. The UK lags behind its European counterparts on pay & compensation
UK businesses haven’t developed their compensation or benefits packages in the same way that France and Spain have. The latter nation in particular is leading the way, specifically around supporting remote working, plus building in allowances or bonuses to their rewards strategies. Over half of UK businesses say that they have not implemented any pay or compensation measures since the COVID-19 pandemic.
Clearly, in these times of greater economic uncertainty, companies are being more cash-cautious. UK businesses should be looking to non-cash rewards such as greater support for remote working and additional annual leave, two elements being implemented with a greater abundance on the continent.
To read the full results of the study, download PayFit’s UK Payroll & Society 2025 report.
