Payroll has historically played a critical but perhaps undervalued role within businesses and has, to those outside of the profession, been recognised largely as a back-office function focused on paying salaries. In reality, the function is so much more than this, but it hasn’t been until recently that this external perception has changed. But what has driven this evolution, and how can organisations leverage the growing value offered by payroll to their advantage?

The three A’s

Perhaps unsurprisingly, the key facilitator has been the significant advancements in technology. Just as social media has transformed the ways businesses communicate with customers, modern, unified pay systems have drastically altered how employers interact with pay functions. More specifically, the rise of what have become known as the three A’s; AI, automation and APIs, has played a pivotal role.

AI is the buzzword of the moment and while its tangible uses in other industries are still unclear, in payroll and payments it is already offering real strategic value. Large language models (LLMs) are being leveraged to analyse lengthy documents for errors and to expedite previously time-consuming and drawn-out processes, to name just two areas. Equally, automation is driving smarter decision-making and supporting the reduction of tasks where errors have historically been made. It also provides more consolidated data streams which deliver better efficiency and other numerous benefits.

The third element in that triumvirate - more effective API integrations - enables real-time, bi-directional data flows which offer improved flexibility and control, as well as reducing the need to validate and double-check pay data, which has historically added significant time to the overall process. This value was quantified and recognised in CloudPay’s Tech Talent Equilibrium report, with the role that technology plays in aspects such as ensuring payroll timeliness (cited by 47% of respondents), adhering to compliance requirements (46%) and enabling process automation (41%) widely acknowledged by HR and pay leaders.

It’s clear that payroll technology is making the lives of the function considerably easier and more straightforward, but how does it benefit organisations overall?

Business benefits

One of the core ways modern payroll is adding greater value is through its role in supporting employee experiences and boosting retention levels, as well as providing more detailed insights into strategic workforce trends. Research shows that one in five adults in the UK is experiencing ‘high financial stress’. Modern pay data can be utilised to identify any trends in the workforce that suggest there is a pattern of financial wellbeing concerns emerging that businesses need to act on.

HR teams within organisations that offer earned wage access (EWA) models, for example, can leverage this information to identify early warning signs that suggest a portion of the workforce is persistently struggling to manage funds and accessing their wages earlier to help make ends meet. This insight allows firms to not only offer company-wide guidance and support to reduce financial stresses, but can also aid better retention, and improve the overall employee experience.

In addition, the use of AI-driven chatbots means that employees can receive instant responses to payroll queries which may potentially have taken human pay professionals hours or even days to

respond to. Access to previous payslips or tax codes for mortgage and other personal financial matters, for example, is far more efficient when handled through technology.

All of these factors combined contribute to a better, more personalised and rounded employee experience, which can support better staff retention.

Modern systems

However, this added value only applies to organisations that are using the latest generation of pay technology and indeed our research shows that many firms that utilise older systems are still facing challenges. In addition to not having access to the same data-backed insights, our studies have shown that 40% of payroll leaders have issues with their legacy platforms, and don’t experience the reduction in errors or faster pay runs, that those who have adopted newer systems benefit from.

Crucially, and in order to gain from its full potential, payroll technology must be supported by the expertise and insights offered by human pay professionals. Our research also revealed that while employers certainly value tech, they also recognise the role played by specialists.

Respondents recognised the ability of high-performing payroll people to review and improve pay processes (82%), while a further 80% indicated that their teams’ knowledge of country-specific regulations offers the greatest benefit. This shows that striking a balance between people and tech offers the best results for any business.

It’s clear that the role offered by pay functions has dramatically evolved, in line with advancements in technology, and the growing adoption of newer systems. Where payroll has historically sat in the back office, modern, forward-thinking firms are increasingly providing a seat at the table, and allowing data-backed insights, and specialist payroll professionals, to provide greater value than ever before.