New research from Information Services Group (ISG) shows that artificial intelligence (AI) is changing payroll. It’s moving from a back-office task to a key part of workforce value and business strength. The ISG Buyers Guides™ for Payroll Management show how modern payroll systems use AI, machine learning (ML), and automation. These tools help organizations improve accuracy, compliance, and employee experience. They also allow HR and finance leaders to make better operational decisions.
The report reveals that employers now see payroll technology as vital. It’s not just about compliance anymore; it’s an investment in workforce stability and gaining a competitive edge. As businesses deal with new regulations, changing workforce needs, and complex global payroll demands, AI systems provide the agility, visibility, and control they need. This helps them respond quickly while maintaining accuracy and speed.
AI Powers Payroll Beyond Processing
The ISG research evaluated 29 payroll software and managed service providers across key categories — from core payroll platforms to global payroll and managed service offerings — with top‑rated vendors including Zoho, Sage, Intuit and others. It highlights several key trends shaping the future of payroll:
Unified Data and Real-Time Visibility: Contemporary payroll solutions remove siloes between HR and finance/payroll data and provide decision-makers with one version of the truth for labor and rewards data. This benefits the enterprise in ascertaining accurate labor costs and having visibility into trends and budgets.
AI-Based Error Detection: Proactive anomaly detection applies AI and machine learning to detect errors before the payroll processing, thus avoiding the high costs involved in repeat payroll processing and also complying with tax and regulatory norms. ISG forecasts by the year 2028, the widespread use of AI to alert the management to payroll discrepancies.
Employee-Centric Tools: By enabling self-service tools such as personalized pay statements, on-demand pay, and simple dashboards, employee experience, which is an important aspect of employee retention, will improve.
Research director at ISG, Matthew Brown, emphasizes that “payroll technology is a strategic investment in business resilience and workforce stability.” He points out aspects such as the growing link between employee experience and payroll functionality and the financial and reputational implications of non-compliance.
Impact on the HR Industry
For the HR industry, the rising prominence of AI in payroll represents a major shift in how HR leaders perceive and leverage core workforce systems. Traditionally viewed as an administrative necessity, payroll is now becoming an integral part of strategic workforce planning. AI‑enabled payroll platforms can connect compensation data with broader HR metrics — such as performance, engagement and turnover — giving HR teams deeper insights into workforce trends.
According to related ISG findings, AI is also becoming essential across Human Capital Management (HCM) systems, helping organizations anticipate talent shortages, enhance employee engagement and align workforce strategies with business goals. This convergence of AI in payroll, HR and finance means that HR professionals must build fluency with data analytics and AI‑augmented workflows — a major evolution from traditional HR roles focused on compliance and administrative execution.
Broader Effects on Businesses
The implications of AI-powered payroll extend far beyond HR operations:
Operational Efficiency and Cost Savings: Automating routine tasks and proactively identifying errors reduces manual workload, minimizes payroll re‑runs, and cuts operational costs.
Stronger compliance stance: AI enables enterprises to manage complex, ever-evolving payroll legislation and regulations at each jurisdictional level, reducing financial risk and possible penalties.
Increased Employee Trust and Retention: On‑demand pay, intuitive self‑service-the host of new features seeks to drive employee satisfaction, increasingly linked with retention outcomes in competitive labor markets.
Strategic Workforce Insights: Integration of data drives better forecasting/scenario planning, true labor cost-to-revenue alignment for the enterprise, and prepares organizations for workforce needs in a time-increasingly dynamic environment.
As AI continues to reshape core business systems, payroll evolution into a strategic data-driven function paves the way for greater transformations in workforce management and competitive advantage. Adopting AI-enhanced payroll and workforce tools at the pace of business will likely provide benefits in terms of greater organizational agility, more effective financial controls, and an enhanced employee experience base-all building blocks required for growth and resilience in 2026 and beyond.
