Payroll trends 2026: the great strategic shift

What will the payroll landscape hold in 2026? We believe a fundamental shift will occur.

Payroll has typically been viewed as a back-office function, simply there to carry out one key task: ensure staff are paid correctly and on time.

However, this severely undersells the value payroll professionals can offer. 

By utilising advancing technology, payroll is stepping out of the back office and taking its rightful place as a strategic contributor to business success.  

To support your journey, this article will break down the key payroll trends you need to watch in 2026, exploring what they mean for you and your business.

Moving away from historic payroll processes

Payroll has historically been a rigid beast, defined by strict processes and even stricter deadlines.  

Well, things are now changing.

Through the use of smarter technology, payroll professionals are finding far more freedom; technology is loosening the reins, making the entire process more adaptable to real-life.

Here’s how this flexibility is playing out in three key areas:

1) Artificial Intelligence (AI)

Let’s address the elephant in the room.

AI is the buzzword on everyone’s lips.

In the last few years, AI has gone from a speculative ‘future trend’ to something we are being expected to understand, evaluate and deploy at pace.  

However, beneath the hype sits a more grounded reality: AI isn’t magic.  

Like all technology, AI is a tool, and its value depends entirely on how it’s used. 

The current state of AI in payroll

In a recent webinar, we asked our payroll experts their view on AI, to which they answered: “When it comes to Large language models (LLMs), they don’t deal very well with numbers – it’s getting better, but they don’t have an in-built calculator, so it learns how to do mathematical calculations based on written instructions. 

“So, if you’re going to ask AI what someone’s sick pay should have been, it’s not entirely accurate. 

“In terms of how we’re currently using it in payroll, one of the great use cases I’ve seen is when there’s a collection of standard operating procedures (SOPs) – your processes around payroll and how it’s done – that’s being used alongside Microsoft CoPilot. 

“All these files and folders are put into a SharePoint site, and the AI within CoPilot then finds the information, so you can ask it questions, really speeding up some of your admin tasks. 

“How I see AI helping in the future is that it’ll take away the routine tasks and mundane parts of the payroll process, so you can replace it with more value-added services, such as payroll advisory.” 

Payroll professionals are rightly cautious as implementing AI means managing change in a business area where error tolerance is extremely low. 

We believe the advantages of AI only materialise when payroll teams remain firmly in the driving seat.  

2) Automation

While AI is the future, automation is the powerhouse of the present.

Modern software has revolutionised the day-to-day of payroll professionals, taking care of the mundane tasks that used to eat up time.

Instead of spending hours on data entry and manual checks, automation handles things like:

• HMRC submissions: automatically sending Full Payment Submissions (FPS) after each pay run
• Tax code updates: automatically retrieving and applying notices from HMRC
• Occupational policies: configuring sick pay or overtime rules once, so the system applies them automatically

This shift reduces errors significantly and frees you up to focus on more value-driven work, rather than just data processing.

3) Faster Payments

The traditional three-day BACS cycle has massively restricted payroll professionals.

With providers, like IRIS, now offering Faster Payments integration, payroll professionals have much more freedom around when they pay employees.

This flexibility is a game-changer for handling last-minute adjustments.

Now, if you spot an error or need to make a late payment, you aren’t held hostage by banking processing times.

Championing Financial Wellbeing

There’s a massive opportunity for payroll teams to step up as the champions of employee financial wellbeing.

In a challenging market where businesses are fighting to keep their best people, the conversation around benefits has taken centre stage.

Consider stats such as:

• 69% of employees say a wide array of benefits would increase their loyalty
• 80% of people who are satisfied with their benefits report higher job satisfaction

Payroll sits at the heart of this shift.

Earned Wage Access (EWA)

Earned Wage Access, also known as On-Demand Pay, gives employees the ability to access a portion of their salary before payday – a vital tool for reducing financial stress.

The goal of EWA is to align pay with the reality of modern life, providing staff the flexibility to handle unexpected costs without resorting to high-interest loans or credit cards.

Now, we’re seeing a growing demand from workers for EWA.

Our recent research found that almost half (47.9%) of respondents said EWA makes a job more attractive.

This number skyrockets among younger generations, reaching 55.8% for those aged 16-24 and 65.5% for the 25-34 bracket.

Furthermore, two-thirds of people said they would use EWA if it were available to them.

Offering Earned Wage Access

To offer flexible pay, you need an Earned Wage Access platform that syncs with your current payroll software.  

Once implemented, employees complete their shifts as normal, accumulating earnings.  

Employees can then access their funds – often up to 50% of their accumulated pay – almost immediately or within a few hours via a mobile app or online platform.  

When payday arrives, the advanced amount is subtracted from their regular salary, along with any applicable fees.  

Evolving from processor to strategic leader

The evolution of payroll will stretch far beyond new tools, fundamentally shifting how professionals operate.

With technology automating the administrative burden, there’s an exciting opportunity for payroll professionals to step up and claim a well-deserved place at the leadership table.

Firstly, the job market has fundamentally changed:

• More employees are looking to work flexibly from abroad
• Employers are tackling skills shortages with overseas hires
• Businesses are expanding into new territories

While all of these scenarios make payroll far more complex, they also make the payroll function more strategically significant, with your expertise helping support compliance and growth.

Additionally, we’re increasingly seeing payroll leaders being relied on to bring vital insight into:

• Workforce costs
• Risk profiles
• Legislative changes
• Operational resilience

The power of payroll data

Your payroll data is unbelievably powerful.

When analysed proactively, your data can tell a compelling story about the business, revealing workforce trends, cost drivers and operational friction points.

For example, patterns in overtime can flag potential resourcing gaps, while recurring manual adjustments might point to a broken process that needs fixing.

Furthermore, payroll professionals are at the heart of promoting fairness and transparency.

Your data is crucial for supporting equal pay audits, gender pay gap reporting and wider Diversity, Equity, and Inclusion (DEI) commitments.

The role of technology

When used well, your payroll data allows you to play a meaningful role in long-term strategy.

The key phrase here is: when used well.

For many, reporting is a hugely manual task that involves pulling information from different sources and spending days manipulating it into a usable format.

This is where good payroll software makes a difference.

Modern tools provide access to dozens of off-the-shelf reports, covering everything from statutory requirements to strategic workforce analysis.

Additionally, when your payroll and HR systems are integrated, the data is updated in real-time, meaning your reports are always based on the most current information.

By leveraging this technology, you can spend less time building reports and more time analysing them to deliver the strategic insights that leadership needs.

A strategic future for payroll

A lot of change is on the horizon for payroll, but this isn’t something to fear.

It’s an exciting time, presenting a brilliant opportunity for payroll professionals to evolve, grow and step into more strategic roles.

The future of payroll is incredibly bright, but it requires preparation today.

By embracing these changes, you can lead innovation and thrive in a profession that’s becoming more dynamic and valuable than ever.