Artificial intelligence (AI) is being introduced rapidly across industries, and a key question is how it will impact the payroll profession.
In recent years, the payroll profession has undergone substantial changes due to modernisation and digitisation. RTI and payroll software have improved the efficiency with which mechanical payroll tasks are performed, allowing in-house payroll staff to focus on more complex issues related to strategy and compliance, and enabling payroll bureaus to expand their services and handle a greater number of clients. AI will further accelerate this trend by transforming processes, increasing efficiency, and enhancing capabilities.
AI is set to dramatically improve existing solutions, such as error correction and chatbots. Error correction is already a valuable tool in payroll software—mistakes are costly, requiring labour-intensive corrections and, in the worst cases, incurring financial penalties. Some payroll software includes error checks that aim to prevent mistakes by analysing data input using predefined rules. AI, however, operates differently. It adapts by learning from past errors and corrections, not through explicit instructions but by detecting patterns in the data. By identifying subtle mistakes that humans might overlook, AI can catch errors that even seasoned payroll professionals might miss.
Basic AI, such as chatbots, is already making its way into payroll. The percentage of UK companies using chatbots to handle queries grew sixfold, from 2% to 12%, between 2020 and 2022. At this rate, AI is on track to become as ubiquitous in payroll as traditional software.
Large language models (LLMs), such as ChatGPT, challenge the perception of chatbots as rigid, ineffective imitations of human support agents. The magic of AI is not that it surpasses human capabilities but that it often mimics them. These models not only provide realistic, human-like responses but can also process vast amounts of data quickly and communicate in plain English. When equipped with payroll data, chatbots can answer client queries instantly, providing information that would otherwise require a human to painstakingly sift through payroll databases. LLMs’ ability to seamlessly transition between raw data and natural language paves the way for a transformation in the payroll profession.
In a similar fashion, AI chatbots can assist payroll professionals. Rather than manually going through large documents, chatbots can summarise payroll information just as they would for clients. When customer support does require a human touch, AI can still enhance agent performance. Training AI on the best-performing support or sales personnel has been shown to “level up” the performance of average agents, dramatically improving their effectiveness.
AI’s ability to acquire technical expertise challenges the idea that payroll professionals will primarily focus on complex, detailed issues. Instead, the role may shift towards greater emphasis on strategy and HR-related tasks. This aligns with the current direction of the profession. A recent survey revealed that, even among companies that perceive payroll as a back-office function, more than a third believe this perception is already changing. Many department heads now sit on executive boards, contributing to strategic decision-making. Payroll is also well-suited to handle compliance, with payroll professionals often being highly educated and experienced in this area.
The pandemic has accelerated a trend where employees expect more support from their employers, particularly in areas like financial well-being. This shift affects payroll, where employers may be expected to help employees develop financial prudence. Modern, technologically complex arrangements like pay-on-demand can increase the risk of financial mismanagement, highlighting the need for employer support. AI can assist employees while also flagging potential financial issues to employers before they escalate into bigger problems.
With access to employee payroll data, AI can guide employer insights and predict factors like an employee’s longevity at the company or likelihood of promotion. In larger organisations, this data would provide invaluable insight into resource allocation and improve decision-making for payroll professionals.
In the background of this innovation is the question of how it will impact in-house staff versus payroll bureaus. There may be a concern that payroll bureaus won’t offer the same range of support as in-house teams. However, bureaus that use the time saved by technological innovation to expand their services could become increasingly valuable in the modern marketplace. For individuals within the profession, developing skills in emerging areas like compliance, strategy, and HR will be crucial for staying competitive. As more people recognise the value of AI, companies that adapt will be well-positioned to harness this incredible tool, transforming their processes and products.