Introduction

In an increasingly complex and competitive business landscape, payroll has evolved far beyond its traditional role of paying people correctly and on time.

It’s now a vital resource that can draw on people’s skills and experience and inform strategic decisions. Yet despite the growing awareness of its importance, many organizations continue to struggle to reap the full benefits of their payroll systems.

While companies are embracing technology and the move to the cloud, the results often fall short. Issues like a mistrust of data, ongoing manual work, and errors persist.

These challenges are no longer about inadequate technology alone. They stem from inadequate change management, the need to adjust processes, enhance people’s skills, and improve organizational alignment and governance. Without addressing human needs and requirements, technology transformation will inevitably lead to suboptimal outcomes.

Drawing together the insights and learnings from two comprehensive and authoritative studies – Strada’s 2024 Company Payroll Complexity Report (CPCR) and Workday’s Strategic Ascent of Global Payroll (SAGP) – Bridging the gap: From good to great in payroll explores the current challenges and opportunities facing today’s payroll industry.

We’ll look at requirements to ensure that artificial intelligence (AI) and machine learning (ML) excel, how businesses can strategically position payroll, and highlight how integrated systems and human expertise can deliver purposeful insights and elevate HR operations.

By offering businesses a clearer picture of the current state of play and providing practical insights and recommendations, we aim to help you transform your payroll operations and harness its full potential.

Executive summary

Executives in HR, Finance and Operations have a unique opportunity to use technology not just to solve problems, but to showcase their forward-thinking approach, all while keeping a strong emphasis on human connection and integration.

However, simply putting a new system in place isn’t enough. Many leaders may expect that adopting the latest technology will automatically resolve issues, but this overlooks the critical need for an ongoing, balanced approach.

While there’s a strong push for automation, including AI and ML, to truly tap into payroll's potential and ensure long-term success, stakeholders across the business must recognize their role extends beyond system selection.

It’s a process that requires constant evaluation, adjustment, and alignment with human expertise to ensure the technology is fit for purpose and enhances, rather than undermines, the employee experience. Without this continued commitment, even the most advanced systems can result in suboptimal outcomes and create more challenges than they resolve.

Our findings show that while payroll’s strategic potential is widely understood and recognized, many still struggle to maximize it.

In our 2024 Company Payroll Complexity report, we highlighted the importance of having a compliant, error-free payroll system – a ‘good’ system. This report aims to take those findings and go one step further, exploring the three pillars of what makes a payroll system ‘great’ – integration, insights, and scale.

A great payroll system should not only integrate seamlessly with the HR and Finance ecosystems, and be able to capitalize on advanced technology, it must be flexible and scalable enough to meet the diverse needs of different departments.

Although 79% of board-level respondents from Workday´s SAGP believe their organization operates on a single integrated platform, in reality, most companies use an average of five different systems.

This adaptability is key to supporting the evolving dual demands of both the organization and its people.

On average, payroll operations involve 26 employees and require 345 adjustments and off-cycle reruns each year. However, despite all the technological advances, CPCR identified that nearly half of all processes (47%) are still mired in manual work.

There’s also a disconnect between what senior people believe is true and what’s actually happening at the sharp end.

This fragmentation undermines data accuracy, reduces transparency, and makes it much harder to integrate AI, ML, and automation.

These challenges are often the result of a lack of payroll governance, insufficient internal skills, and processes that haven’t fully considered the human aspect. Despite the rise of automation, 99% of respondents in Workday's SAGP agree people need to be part and parcel of the payroll process.

At Strada, we’ve seen time and again that when the human element is minimized in payroll processes, the outcomes fall short. To truly unlock payroll’s potential, a balanced approach that values both technology and human insight is essential.