The Hackett Group®: Payroll Emerges as a Priority for AI-Enabled Operational Transformation
Top payroll solution providers automate nearly 70% of payroll processes and reduce costs by up to 71% through Gen AI and emerging technologies
The research comes at a time when payroll organizations are grappling with rising demands. According to The Hackett Group’s 2025 Payroll Key Issues Study, teams face a 7% increase in workload alongside a 2% decrease in budget. Faced with that challenge, payroll organizations are turning to software solutions that provide enhanced automation and Gen AI capabilities to alleviate operational pressure and ensure uninterrupted payroll delivery.
The Payroll Software Digital World Class® Matrix provides an in-depth guide to the market’s most impactful payroll technology providers, including how their solutions enhance payroll operations through advanced automation, continuous calculation, anomaly detection and more. The report evaluated 18 providers for their capabilities and value delivered to customers based on vendor briefings and extensive customer interviews across 26 different criteria.
Capability ratings assess a vendor’s capacity to provide payroll solutions across critical operational areas, including automation, customization, analytics, compliance management, mobile enablement and earned wage access. They also assess core platform functionalities such as user interface quality, platform structure and data integration.
Value realization ratings assess a vendor’s impact across key metrics for payroll performance, including implementation experience, cost reduction, workload reduction, automation improvement, accuracy, employee onboarding, cycle time, process control, analytical forecasting, functional integration, overall satisfaction and business value, and pace of innovation.
The findings are clear: payroll organizations engaging with advanced software providers are realizing significant value. End users report that on average 67% of their payroll process is fully automated, dramatically reducing workloads for payroll administrators. Additionally, 60% of end users report cost reductions for payroll processing.
Leading payroll vendors are innovating rapidly to take advantage of the latest technological advances, particularly in AI, to improve payroll processing outcomes. While some applications are still in the nascent stages for payroll, other use cases – such as conversational chatbots and enhanced employee self-service – are gaining traction. Top use cases identified include automation improvement, content generation and intelligent collaboration capabilities.
The report also highlights the emergence of agentic AI – intelligent applications that can carry out multiple steps within a process autonomously. Early use cases are largely centered around compliance management and anomaly detection but are poised to expand even further over the next year. Other payroll software functions that are starting to see greater adoption include continuous calculation – which provides real-time gross-to-net processing – and earned wage access – which provides employees with easy access to their pay outside of traditional pay cycle processes.
“Payroll is a critical element of operation for any business, and the margins for error are slim,” said
Using this comprehensive analysis, payroll professionals can make informed purchasing decisions that are aligned with the strategic priorities and critical metrics they seek to impact payroll outcomes.
Payroll Digital World Class® assessments are part of The Hackett Group’s full 82-page report. The Payroll Digital World Class® assessments should be read in the context of the entire report. Download a complimentary summary of the payroll research with registration. Contact us for inquiries about purchasing the full research report.
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