Payroll is becoming one of the more consequential risk functions inside large international organisations. It combines highly sensitive employee data, financial transactions and an increasingly fragmented body of employment and tax regulation – while many companies are simultaneously struggling to recruit the specialists needed to manage that complexity. New global research from ADP suggests that these pressures are changing both the technology behind payroll and its position within the enterprise. Artificial intelligence is gaining ground, but the more fundamental shift is organisational: payroll is moving out of the finance back office and towards becoming a strategic function in its own right.

Few corporate processes combine such a concentration of sensitive information and operational dependencies as payroll. Employee identities, salaries, bank details, tax information and employment records all converge in systems that must operate reliably across different jurisdictions and regulatory regimes.

That combination is turning payroll into a growing security and resilience issue.

ADP’s latest global payroll survey, The Potential of Payroll 2026, finds that 33 per cent of payroll leaders regard improving data security as a key global priority for the next two to three years. The study is based on responses from more than 1,800 senior decision-makers across 20 countries, including 700 respondents in Europe.

The findings point to three forces reshaping the function simultaneously: cyber risk is increasing, regulatory complexity is becoming more expensive, and shortages of skilled payroll professionals are accelerating investment in automation and AI.

Together, they are changing what organisations expect payroll to deliver.

Cyber incidents are becoming part of the payroll risk landscape

The security challenge is no longer theoretical. The proportion of organisations reporting at least one cybersecurity incident affecting payroll processes has risen from 57 per cent to 70 per cent within a year.

Almost one in four respondents – 23 per cent – experienced three or four incidents during the year, while a smaller proportion reported five or more.

Yet corporate preparedness has not advanced at the same pace.

Only 41 per cent of organisations have implemented a company-wide contingency plan. Others continue to rely on more limited arrangements or frameworks that differ from country to country.

Investment is nevertheless increasing. Almost half of organisations, 47 per cent, have already strengthened resources dedicated to data security, while others are introducing measures incrementally as they seek to make payroll operations more resilient.

The significance extends beyond protecting employee records. Payroll is a time-critical business process. A successful cyberattack can therefore combine confidentiality risks with operational disruption and potentially affect an organisation’s ability to pay its workforce correctly and on time.

That makes cyber resilience increasingly difficult to separate from payroll continuity.

Regulatory uncertainty has acquired a measurable price

Cybersecurity, however, represents only one dimension of the risk.

For multinational organisations, complying with employment and payroll regulations across multiple jurisdictions remains a substantial operational burden. Three quarters of payroll leaders – 75 per cent – describe managing employment legislation across jurisdictions as a major challenge.

Even more strikingly, 70 per cent say they have difficulty identifying non-compliance.

Companies are responding to that uncertainty in an unusual way: by deliberately accepting additional payroll costs.

According to the study, 69 per cent of organisations would rather overpay employees than risk breaching regulatory requirements. It is effectively a financial buffer against uncertainty.

But that buffer does not eliminate compliance failures. Despite taking a cautious approach to payments, 68 per cent of organisations still incur penalties for non-compliance at least once a year.

The complexity of implementing new regulation is one important source of the problem. Forty-seven per cent of respondents identify the application of new laws as one of the two main causes of payroll processing errors.

The result is a double cost: organisations spend additional money to reduce perceived compliance exposure and still face financial penalties when their processes fail to keep pace with regulatory requirements.

Compliance and cybersecurity are converging

For Thomas Zimmermann, Managing Director of ADP in Germany, the figures expose a weakness in the way payroll risk has traditionally been managed.

If roughly two thirds of organisations are intentionally overpaying because they are uncertain about local regulation, greater caution alone is unlikely to solve the underlying problem. Instead, Zimmermann argues that organisations need to redesign payroll risk management and bring compliance and security together within a common operating model.

That distinction matters increasingly as payroll becomes more digital.

A multinational payroll environment does not operate under a single regulatory framework. Employment legislation, taxation, reporting obligations and data structures vary between jurisdictions. The same fragmentation that makes human administration difficult also complicates the deployment of automation.

AI cannot simply be introduced in one country and then scaled unchanged across an international organisation.

Systems instead need to account for different labour laws, tax requirements and data structures. Zimmermann argues that this creates demand for platforms capable of monitoring regulatory changes in real time, embedding security controls directly into payroll workflows and supporting teams with both regulatory and technical expertise.

In that sense, payroll modernisation is becoming less about digitising an administrative process and more about designing a resilient control architecture.

The talent shortage is becoming an automation catalyst

The pressure to automate is also being driven by a more immediate operational constraint: companies are running short of payroll specialists.

Sixty-eight per cent of organisations say their payroll operation is affected by a shortage of skilled employees, up from 61 per cent a year earlier. At the same time, 64 per cent report difficulties recruiting external talent.

The response is not primarily about reducing headcount.

Instead, 72 per cent of organisations are reconsidering how they can maintain payroll performance as available talent pools shrink. Among them, 44 per cent are looking to AI to close the gap, making it the most frequently cited response.

Other measures remain significant. Forty per cent are automating manual processes, while 39 per cent are standardising processes across regions.

Organisations are also investing in upskilling and reskilling existing employees. The emerging model therefore appears to be one in which automation handles a larger share of repetitive processing while human expertise remains essential for judgement, exceptions and complex compliance decisions.

AI is already moving into core payroll processes

Artificial intelligence is not merely under consideration. Around a third of organisations already use it for several fundamental payroll activities.

Thirty-five per cent use AI for data entry, 35 per cent for error detection and 33 per cent for compliance management. Depending on the respective activity, a further 37 to 40 per cent are either actively assessing AI deployment or already implementing it.

These applications illustrate where the technology may deliver its most immediate value.

Payroll operations generate large volumes of structured information and contain processes that depend on identifying inconsistencies, exceptions and potential compliance problems. Those characteristics make the function suitable for automation and machine-assisted analysis.

But the international regulatory environment places limits on straightforward scaling. An AI system capable of identifying an anomaly does not automatically understand the legal significance of that anomaly across 20 different jurisdictions.

The likely direction is therefore augmentation rather than wholesale replacement: AI provides speed and analytical capacity, while payroll professionals supply regulatory interpretation, organisational knowledge and judgement.

Payroll is leaving the finance department

Perhaps the most consequential finding in the research has little to do with technology.

Payroll is changing its organisational status.

Within only one year, the proportion of companies operating payroll as a standalone function has increased from 13 per cent to 43 per cent – more than tripling.

At the same time, the proportion of payroll teams located within finance has fallen sharply, from 52 per cent to 21 per cent.

This represents a substantial restructuring of where organisations believe payroll belongs.

Historically, its association with payments, accounting and cost management made finance a natural organisational home. The new structure reflects a broader role spanning HR, technology, compliance, security and workforce intelligence.

The investment decisions reported by payroll leaders reinforce that interpretation.

Seventy-six per cent say they are expanding their payroll teams. The expertise they are seeking extends well beyond traditional payroll administration: 38 per cent require compliance expertise, 37 per cent data security skills, 37 per cent analytics capabilities, 35 per cent payroll expertise and 34 per cent IT skills.

The desired use of employees’ time is changing as well.

Forty-four per cent of payroll leaders want their teams to spend more time on data analysis and improving business processes, while 43 per cent want greater emphasis on strategic planning and the integration of new technologies.

From salary processing to workforce intelligence

The logic behind this transition lies partly in the data itself.

Payroll sits at the intersection of finance, human resources and compliance and consequently produces one of the richest workforce datasets available to an organisation. Once payroll is treated as more than a transactional process, those data can contribute to workforce planning, regulatory monitoring and the employee experience.

This changes the potential value of the function.

The traditional measure of payroll performance was comparatively straightforward: employees had to receive the correct amount at the correct time, and the organisation had to satisfy its statutory obligations.

Those requirements remain fundamental. But the emerging model adds another layer. Payroll teams are increasingly expected to identify patterns, provide management information, anticipate compliance risks and contribute to technology and workforce strategy.

The organisational shift from finance sub-function to standalone unit suggests that some companies are already institutionalising that broader mandate.

Resilience may become payroll’s defining metric

ADP’s findings ultimately depict a function being transformed less by any single technology than by the accumulation of risk.

Cyber incidents are becoming more common. International regulation is difficult to monitor. Compliance uncertainty is producing both overpayments and penalties. Skilled professionals are becoming harder to recruit. AI offers additional capacity, but regulatory fragmentation prevents simple global deployment.

The response is a payroll model that is simultaneously more technological and more specialised.

For large international organisations, the strategic question is therefore shifting. Payroll modernisation is no longer simply about processing salaries more efficiently. It is about creating an operating model capable of protecting sensitive information, absorbing regulatory change, compensating for scarce expertise and extracting useful intelligence from workforce data.

The defining development in 2026 is therefore not that AI is entering payroll. It is that payroll itself is becoming part of the enterprise risk, data and technology architecture – and companies are beginning to organise it accordingly.

About the study: ADP’s The Potential of Payroll 2026 is based on its global payroll survey of 1,816 senior payroll decision-makers in 20 countries, including 700 respondents from Europe. Participants work for organisations employing more than 1,000 people worldwide and hold senior leadership positions. More than 80 per cent of respondents are Senior Vice Presidents, board members or hold another senior decision-making role. Participants were selected on the basis of their direct involvement in, or detailed knowledge of, their organisation’s payroll operations and strategy. The sample covers major global regions and was designed to reflect different payroll models, regulatory environments and organisational structures.