AI, Data Management Drive Enterprise Payroll Innovation
Service providers help companies strengthen compliance, improve accuracy, personalize employee experience, ISG Provider Lens® report says
Enterprises are adding AI features to their payroll systems as cross-border employment and other trends make payroll processes more complex, according to new research reports published by Information Services Group (ISG), a global AI-centered technology research and advisory firm.
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Payroll is still a business-critical process that needs to be fair, accurate and adaptable. Service providers must strike the right balance between automation and human oversight.
The 2025 ISG Provider Lens® global Payroll Managed Services report finds that payroll technologies and services are being transformed as organizations invest in AI and adapt to changing workforce dynamics. Amid these changes, enterprises continue to prioritize service quality, responsiveness and expertise when choosing payroll services. The 2025 ISG Provider Lens® Payroll Managed Services report for the U.S., also published , finds that a surge of new federal and state laws over the past year has made payroll even more challenging for U.S. companies. Many are relying on advanced systems and service providers to keep them compliant.
“Payroll is still a business-critical process that needs to be fair, accurate and adaptable,” said Stacey Cadigan, partner, ISG Human Capital Management and Enterprise Transformation. “Service providers must strike the right balance between automation and human oversight.”
AI systems in payroll are evolving beyond automation to form a strategic intelligence layer that enhances compliance, fraud detection and data accuracy, the report says. While automation reduces manual errors and shortens processing times, AI can also carry out advanced tasks such as forecasting, scenario planning and hyperpersonalization of payroll services. To prevent fraud, AI tools can identify inflated overtime claims and send real-time alerts.
Data quality is increasingly important as enterprises integrate payroll software with HR, finance and time-tracking platforms, so AI is taking on a central role in reducing data issues, ISG says. Payroll managed service providers are increasingly aware of ethical considerations, including the possibility that algorithms could unintentionally reinforce pay inequalities, and are ensuring responsible oversight.
Many organizations have a growing need to personalize payroll services for employee preferences, the report says. Having workforces in multiple countries further complicates personalization, because employers need to comply with different rules on taxation, pensions and allowances. Providers are developing multicurrency solutions, automated tax residency tracking and AI-driven classification tools to address these challenges. In the U.S., companies are adopting AI tools to meet demand for more personalized earned wage access (EWA) features, which give employees access to their earned wages before payday.
Enterprises now favor payroll platform longevity and integration over the convenience of technology bundled with services, ISG says. They are embracing standalone platforms and adding services and local expertise from providers of their choice. By decoupling critical systems from service contracts, companies increase control over data and digital infrastructure.
“Companies are taking a more modular approach to payroll that emphasizes agility, interoperability and data ownership,” said Rachel Anderson, lead analyst, ISG Provider Lens Research, and lead author of the report. “Standalone platform providers aim for long-term client relationships that outlast changes in service partners or moves from in-house to outsourced models.”
The reports also explore other payroll technology and service trends, including automated compliance checks to prevent misclassification of employees or gig workers and pilot introductions of EWA outside the U.S.
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