More UK employers are trusting artificial intelligence to help with payroll, but not everyone agrees this is wise. According to a recent CloudPay poll, 21% of payroll professionals would let AI handle audits and compliance checks without any human checks. The company warned that this could cause problems in how salaries are delivered and how staff feel about their employers.
CloudPay acknowledged that automation and API tools can help make payroll smoother. But they did add that experienced professionals are still very important for things to run well. This was emphasised as more payroll teams begin using AI tools more often, as the worries about whether convenience is starting to come before careful review arise.
This change is also happening while many employers are trying to speed things up and save money. The risk, according to CloudPay, is that AI might make a mistake that humans could have caught. That could harm the trust between staff and employer, especially if something goes wrong with pay or tax reporting.
How Many UK Companies Are Already Using AI In Payroll?
Research from SD Worx shows that 42% of UK companies now use chatbots or agents powered by AI to deal with payroll questions from workers. This puts the UK 12% ahead of the European average. These tools often help employees with payslips, leave days, or tax queries. But many workers still say they cannot access these features. Only 28% of staff say they use them, even though many businesses have them in place.
YoY investment in generative AI has also grown in the UK. In 2024, 14% of employers said they were spending on it. That number went up to 22% in 2025. The main uses seem to be cutting admin work and making systems more scalable. At the same time, employers say they are under pressure to improve how they run payroll. Payroll optimisation is now a challenge for 18% of UK employers, which is an increase from 13%.
To handle this pressure, companies are putting money into payroll data protection, learning to manage new labour rules, and trying to run more sustainable operations. Self-service tools are another area getting more attention. Around 43% of employers let staff take care of simple tasks like viewing their payslips or booking leave. The number was 35% in 2024.
Is Payroll Outsourcing Becoming More Common?
UK businesses are turning to outsourcing to manage payroll more. Right now, 35% of companies outsource at least part of the work. This is expected to reach 41% by 2028. Hybrid models, where companies use their own systems but get help from outside experts, are also growing. Use of this mix is expected to go up from 10% to 14% in the same time frame.
Meanwhile, doing payroll completely in-house is on the way down. In 2025, 22% of UK companies still run payroll using only their own systems and staff. But that number is likely to drop to 17% within three years. SaaS-based solutions are also expected to become less common, falling from 30% now to 24% by 2028.
One reason behind this change is cost… Among companies using in-house systems supported by outside specialists, 72% report saving money. Full outsourcing helps 60% of companies cut costs, and partial outsourcing helps 53%. On the other hand, only 27% of companies using SaaS systems report savings, and 52% of those running payroll fully in-house say the same.
Sammy Molinaro, Solutions Director at CloudPay, said, “Artificial intelligence certainly has a role to play in streamlining and improving payroll and payments processes; however, it should never be relied on as a standalone tool without expert – human – verification and monitoring. Those who use AI for critical elements of the payroll process without human verification should quickly introduce some form of control and vetting.
“It’s all about striking a balance between people and technology, with AI essentially supercharging human capabilities, rather than superseding them. AI, when used correctly, can drastically reduce the need for manual, labour-intensive data inputs, which in turn reshapes the role of payroll experts, who can then focus more on verifying and validating information and ensuring its accuracy.
“A simple mistake in the delivery of payments can have a detrimental impact on individuals, their relationship with their company and the employer brand overall. Tech-enhanced tools can enable high-quality solutions, but they need expert human oversight. It’s clear that for some, the dynamic between AI and humans is still to be worked out, but we are confident that the strategic intelligence of humans, as well as the softer skills that AI can’t replicate, go some way to defining the role that payroll experts will play in the future.”
