The payroll industry is on the verge of a significant evolution, with a substantial 73% of payroll professionals predicting that AI will play a pivotal role in shaping the function over the next year, according to a recent study by MHR. 

MHR is a UK-based provider of HR, payroll, and finance software. 

The findings, published in MHR’s 2025 report titled ‘The Future Is Payroll’, coincide with National Payroll Week (1-5 September 2025).  

The report highlights a growing optimism surrounding AI’s potential, alongside an increasing concern about the risks of falling behind in technological advancements. 

The report indicates that more than half (52%) of payroll professionals have already experienced a significant impact from AI in their work over the past year.  

However; despite the eagerness to evolve the payroll function, the report reveals a counterintuitive trend: the reliance on manual, admin-heavy processes is on the rise. 

Specifically, the use of spreadsheets for payroll processing has surged from 30% to 63% year-on-year, while manual data input has increased from 35% to 50%.  

Additionally, the duplication of records across systems has escalated to 55%. 

While payroll professionals are keen to adopt new solutions to alleviate their workload, with 46% recognising that AI could significantly reduce errors, they face notable challenges.  

Concerns over data security were expressed by 48% of respondents, and 38% cited a lack of skills or training in adopting AI as a barrier. These challenges may contribute to the growing dependence on manual processes. 

Importantly, the report reveals that 88% of payroll professionals believe their companies need to invest more in order to fully realise the benefits of payroll technology. 

MHR CEO Anton Roe said: “Payroll is facing a paradox. Companies are embracing AI, yet employees are still spending hours on manual data entry. 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.” 

Roe added: “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.”