[UK] 42% of companies currently use AI within their payroll function

New research has revealed that the UK is leading the way in AI adoption within payroll, with 42 per cent of employers - nearly 12 per cent more than the European average - currently using AI-powered agents or chatbots to support employee queries, HR News reports.

The research, from European HR solutions provider SD Worx, shows that this number is expected to rise, as the UK’s employers increasingly prioritise automation, efficiency, and employee experience in their payroll operations.

Year-on-year investment in generative AI has reportedly leapt from 14 per cent in 2024 to 22 per cent in 2025, reflecting a wider shift away from manual administration and towards more scalable, tech-driven solutions. However, only 28 per cent of employees report access to these tools, highlighting a disconnect between implementation and practical usage.

The rise in adoption coincides with increasing pressure to optimise payroll processes. According to SD Worx’s research, 18 per cent of UK employers now cite payroll optimisation as a top challenge, up from 13 per cent last year. Many organisations are therefore making a broader investment in modern payroll systems, with 51 per cent focusing on data security, 49 per cent on adapting to changing labour legislation, and 44 per cent on improving sustainability.

Self-service functionality is also rising, with 43 per cent of employers reportedly enabling staff to manage tasks such as viewing payslips or booking leave, compared to 35 per cent in 2024. From employees’ perspective, 59 per cent say they already handle a significant share of their HR admin through such tools. 

In the future, UK businesses reportedly anticipate increased use of external payroll support, with results finding that:

• 35 per cent of companies currently partially outsource payroll, a figure projected to grow to 41 per cent by 2028

• In-house software supported by external experts is expected to rise from 10 per cent to 14 per cent by 2028

• Traditional models appear to be in decline, with 22 per cent of UK companies currently managing payroll entirely in-house using their own systems and staff, but this is expected to drop to 17 per cent

• Use of SaaS payroll solutions is also projected to decline from 30 per cent to 24 per cent by 2028

Among UK businesses using their own software supported by external experts, 72 per cent report significant cost savings, while 60 per cent of those fully outsourcing report the same. The figure falls to 53 per cent for those partially outsourcing.

By comparison, the research found that only 27 per cent of companies using SaaS models and 52 per cent of those with fully in-house systems report significant savings.

Andrea Eschle - Chief Product Officer at SD Worx - said, “Payroll outsourcing is becoming increasingly important in a rapidly changing world. Thanks to technological innovations such as AI and cloud software from specialised developers, payroll is not only becoming more low-priced and more accurate, but also more transparent, user-friendly and personalised. Modern payroll solutions are scalable and meet the desire of employers to have the most accurate information at all times. But employees also get instant access to their payroll information and can get answers to all their payroll and HR questions 24/7 through smart technology.” 

Source: HR News

(Quotes via original reporting)

New research has revealed that the UK is leading the way in AI adoption within payroll, with 42 per cent of employers - nearly 12 per cent more than the European average - currently using AI-powered agents or chatbots to support employee queries, HR News reports.

The research, from European HR solutions provider SD Worx, shows that this number is expected to rise, as the UK’s employers increasingly prioritise automation, efficiency, and employee experience in their payroll operations.

Year-on-year investment in generative AI has reportedly leapt from 14 per cent in 2024 to 22 per cent in 2025, reflecting a wider shift away from manual administration and towards more scalable, tech-driven solutions. However, only 28 per cent of employees report access to these tools, highlighting a disconnect between implementation and practical usage.

The rise in adoption coincides with increasing pressure to optimise payroll processes. According to SD Worx’s research, 18 per cent of UK employers now cite payroll optimisation as a top challenge, up from 13 per cent last year. Many organisations are therefore making a broader investment in modern payroll systems, with 51 per cent focusing on data security, 49 per cent on adapting to changing labour legislation, and 44 per cent on improving sustainability.

Self-service functionality is also rising, with 43 per cent of employers reportedly enabling staff to manage tasks such as viewing payslips or booking leave, compared to 35 per cent in 2024. From employees’ perspective, 59 per cent say they already handle a significant share of their HR admin through such tools. 

In the future, UK businesses reportedly anticipate increased use of external payroll support, with results finding that:

• 35 per cent of companies currently partially outsource payroll, a figure projected to grow to 41 per cent by 2028

• In-house software supported by external experts is expected to rise from 10 per cent to 14 per cent by 2028

• Traditional models appear to be in decline, with 22 per cent of UK companies currently managing payroll entirely in-house using their own systems and staff, but this is expected to drop to 17 per cent

• Use of SaaS payroll solutions is also projected to decline from 30 per cent to 24 per cent by 2028

Among UK businesses using their own software supported by external experts, 72 per cent report significant cost savings, while 60 per cent of those fully outsourcing report the same. The figure falls to 53 per cent for those partially outsourcing.

By comparison, the research found that only 27 per cent of companies using SaaS models and 52 per cent of those with fully in-house systems report significant savings.

Andrea Eschle - Chief Product Officer at SD Worx - said, “Payroll outsourcing is becoming increasingly important in a rapidly changing world. Thanks to technological innovations such as AI and cloud software from specialised developers, payroll is not only becoming more low-priced and more accurate, but also more transparent, user-friendly and personalised. Modern payroll solutions are scalable and meet the desire of employers to have the most accurate information at all times. But employees also get instant access to their payroll information and can get answers to all their payroll and HR questions 24/7 through smart technology.” 

Source: HR News

(Quotes via original reporting)