Payroll faces a “paradox” as manual processes surge despite AI simultaneously transforming the work of the function.
A survey of UK payroll professionals showed that 73 percent expect AI to have the biggest impact on payroll in the next 12 months, while more than half (52 percent) said it has already had a significant effect over the past year.
This was one of the key findings in MHR’s Future of Payroll report, published to coincide with National Payroll Week (1–5 September, 2025).
But rather than freeing teams from admin-heavy tasks, the use of spreadsheets for payroll processing has more than doubled year-on-year. The research from the HR, payroll and finance software provider shows that spreadsheet use has increased from 30 percent to 63 percent, while manual data entry has increased from 35 percent to 50 percent, and duplication of records across systems is up to 55 percent.
The figures highlight the conflicting forces shaping payroll, said Anton Roe, CEO of MHR. “We’re seeing a paradox in the payroll function. Admin-heavy processes have jumped to the top of the list of challenges payroll professionals are facing, and yet 52 percent of payroll professionals say AI has had a significant impact on their payroll function over the last 12 months.
“The rise in manual processes could be down to a lack of comfort with this pace of innovation, and payroll employees feeling as though they don’t have the right skills to fully leverage AI’s potential,” he told Benefits Expert.
Skills and training
Roe believes the answer lies in skills development and investment.
“Cutting reliance on spreadsheets and data entry will require prioritising training and development across the business.
“Adopting a skills-based focus, instead of pigeonholing employees to stay within certain roles and use the same tools, will increase expertise and ensure the business is growing in the right way. {This] also serves as a key business case for ensuring the payroll function sees more investment.”
He added: “Training people in the right way will also help mitigate data security concerns around AI, as payroll professionals will be better equipped to control how AI is used and the information it has access to.”
This dual focus, on technical capability and security awareness, is echoed in the report’s wider findings. Nearly half (48 percent) of payroll professionals raised data security as a concern when adopting AI, while 38 percent cited a lack of training.
Human oversight remains critical, Roe said, as he emphasised that AI shouldn’t be viewed as a cure-all solution.
“Leveraging AI in the right way also requires a careful balance between human and tech. AI can be used to reduce errors, automate repetitive tasks and reduce payroll-related stress or burnout, but it is not a replacement for the value humans in the function deliver.
“People are still needed to sense-check data and provide the empathy that is often needed when it comes to managing changing regulations and policies that impact people’s pockets.”
With payroll professionals reporting that they are ready to adopt AI, but also highlighting barriers, HR’s role will be paramount. HR can help narrow the skills gaps and reduce the reliance on manual processes that could undermine the benefits of AI.
Almost nine in ten (88 percent) respondents said their organisations needs to invest more to unlock the full potential of payroll technology. HR will need to build the business case for funding, support ongoing training, and position payroll as a strategic function rather than an operational back office.
The data for 2025 is based on a survey of 250 payroll professionals at manager level and above, while the 2024 data is based on a survey of 400 payroll managers and senior leaders.
