Last year, industry analyst Pete Tiliakos predicted payroll would experience a “golden age” in 2025. Already, there’s mounting evidence that this is becoming a reality. Once relegated to the back office as a purely administrative function, payroll is emerging as a strategic force within organizations, powered by new technologies and broader recognition of its critical importance.
According to Tiliakos, several forces have converged to elevate payroll’s role. “The drivers are layered,” he explained in a recent interview with HR Executive, pointing to the mix of digital technology, globalization, intensifying compliance requirements and multigenerational workforce dynamics. These factors collectively highlight what industry professionals have long understood: Payroll is critical in both risk management and enabling organizational strategy, while being connected to nearly every people-related decision a company makes.
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This transformation didn’t happen overnight, says Tiliakos. For decades, he explains, payroll was undervalued—viewed as a required back-office function, perceived as simply “printing checks” and commonly last to receive investment or executive support.
Technology has been the primary catalyst for change. “The convergence of cloud technology, integrations and APIs, and the onset of AI and machine learning have collectively ushered in a new era for payroll,” he says.
He told HR Executive that augmentation and automation are enabling payroll professionals to leverage their expertise alongside data insights, allowing them to deliver greater strategic value to their organizations.
This is changing how payroll and compensation are handled in many organizations. Traditionally, payroll technology focused on the operational process of paying employees, while the compensation function and its technology addressed the broader, strategic management of rewards and incentives. Tiliakos says these areas are increasingly interconnected, and recent advancements in HR tech are bridging the gap between payroll and compensation, driven by the demand for efficiency, data accuracy and strategic responsiveness.
Related: How to build strong pay practices despite economic uncertainty
Erin Lierheimer, head of small market strategy at HCM platform Paychex, notes another significant shift: the evolution from secretive salary discussions to data-driven transparency. Organizations now recognize that understanding market rates for talent is essential for effective recruitment and retention strategies.
“Wages are only a piece of total compensation, and in many markets, getting a paycheck won’t cut it,” says Lierheimer. While traditional elements like retirement benefits, healthcare coverage and paid time off remain important, additional factors have gained prominence, including flexible work arrangements, remote work options and investment in professional development.
This trend means HR leaders must understand the cost of talent in their market and effectively communicate the value of their full benefits package, she says. And it’s a task that needs to be supported by payroll technology.
The automation revolution
Tiffany Paquette, director of people technology and operations at Puma North America, is among many who have witnessed payroll’s dramatic evolution firsthand. “When I first started in payroll, everything was manual—from timesheets to reconciliation, calculations on spreadsheets,” she says. “Now, real-time payroll and compliance automations drive everything.”
This shift enables Paquette to focus on compensation strategy and planning rather than calculations, transforming payroll from an administrative function into a strategic business partner.
“In the realm of compensation, salary bands and benchmarking can now be based on real-time market data,” which she describes as “another major game-changer.”
Doug Sabella, CEO of Payroll Integrations, which provides API integrations between payroll systems and benefits providers, observes that while many HR teams initially resisted introducing technology into their traditionally manual processes, they now recognize that meeting growing employee needs is impossible if too much time is spent on paperwork.
Importantly, automation improves data accuracy, Sabella says, which is critical given that one-third of employees have experienced payroll or benefits mistakes. And more than half of those workers report that the mistakes took a week or more to fix, he says.
‘Golden age’ to autonomous payroll operations
Tiliakos envisions an even more transformative future: “As we move ahead, the next phase for payroll is about fully autonomous capabilities.” He predicts that, from scheduling to payment, organizations will employ deeper automation through machine-enabled processing and AI-powered agents. The result will be operations in which payroll leaders largely oversee agentic AI processing payroll, he says.
This evolution will dramatically reshape the role of compensation professionals into “technology-enabled business leaders and change agents who operate as trusted partners and advisors,” Tiliakos says.
He predicts the role will evolve toward a “Big 4-style consulting model” where compliance expertise, data analytics, AI proficiency and emotional intelligence will be key to overseeing machine-enabled operations.
In this framework, payroll transitions from a reactive support function to a proactive strategic partner. “Payroll will need to lead their organizations versus being led and do so by leveraging their data sets in context with broader HR, operations and external data sets to predict and guide the business in its decision-making and de-risk its path,” says Tiliakos.
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Payroll and EX: ‘It’s about time’
One of the biggest changes is employee visibility into the professional expertise within the payroll department. “At the beginning of my career, payroll was considered better not seen or heard unless something went wrong,” says Paquette. “Now, payroll teams are intricately woven into the employee experience, helping employees understand how and what they are being paid.” She says this transparency allows employees to feel valued and remain engaged.
“At the end of the day, payroll is personal but also the most important job in any organization,” explains Paquette. “But for years, it was never talked about; now we are seen and heard for not just error resolution. It’s about time!”
Sabella says one major trend shaping compensation this year is a move toward personalizing how employees access their pay and payroll data.
“Between evolving employee expectations, economic uncertainty and changing work environments, HR teams recognize the need to meet the diverse needs of their workforce,” he says.
The challenge is finding time for this personalized approach when HR managers already spend more than a quarter of their workweek on payroll and benefits-related administrative tasks, according to Sabella. That challenge is driving many employers to invest in technology to bridge this gap.
Compensation and financial wellness
Rapid advances in technology throughout society are also raising employees’ expectations for workforce tools, says Shane Hadlock of payroll and HR software provider Paycom, where he is chief client officer. Compliance and accurate pay are now considered the bare minimum for payroll technology.
To address this shift, automated payroll systems are emerging that increase HR efficiency and transparency for employees. These tools pull live employee data—such as hours worked, approved expenses, benefits selections and compensation changes—directly into payroll each pay period.
“Employees can see their pay, address outstanding issues and fix errors before payroll submission,” Hadlock says. This increased visibility gives employees ownership of the process and confidence in its accuracy.
Financial wellness and pay literacy are increasingly linked to this level of access, he says, adding, “Employees 1746120294 have a complete view of their financial picture while identifying and resolving issues upstream.”
Reducing anxiety for employees
Sabella notes that when payroll and HR processes are handled manually, errors like misspelled names or incorrect deductions are more likely to occur, potentially affecting employees’ pay and financial security. And reducing avoidable errors is “an important first step” for employers focused on enhancing their employees’ financial wellness, he says.
In addition, as financial pressures mount for many American workers, the relationship between payroll, compensation and financial wellness is becoming increasingly important. Jim Colassano, senior vice president of product development and strategy at RTP operator The Clearing House, explains that with an estimated one in four Americans living paycheck to paycheck, according to the Bank of America Institute, even a single unexpected expense can cause serious financial hardship.
This is further complicated when something goes wrong with an employee’s paycheck. Not only does it interfere with an individual’s ability to meet their financial obligations, but it also initiates a trickle-down effect that can affect their work. “This financial strain creates anxiety, which can reduce workplace productivity as employees become more focused on personal financial concerns than their work,” says Colassano.
5 pillars of payroll for today
So, what does the ideal payroll function deliver?
A recent industry-wide benchmarking study conducted by Tiliakos, the 2024 Payroll Profession Confidence Index (PPCI), laid the groundwork to answer that question, measuring the confidence levels of payroll professionals and examining how payroll functions operate across organizations. Over 500 global payroll leaders and practitioners were surveyed to assess operational maturity, technology adoption and strategic impact.
From the research, Tiliakos and his team developed “The Five Pillars of Modern Payroll,” a framework through which payroll delivers strategic value. It identifies a high-functioning modern payroll function as one that:
- Acts as a compliance center of expertise. Ensuring regulatory adherence across the organization.
- Delivers the modern pay experience. Addressing total rewards, transparency and equity.
- Advises on strategic initiatives. Using data to guide business changes like M&A and global expansion.
- Facilitates compliant access to skills and talent. Enabling flexible talent engagement while managing compliance.
- Enables organizational agility. Creating scalable payroll operations that help anticipate change
The findings revealed significant disparities in payroll maturity across organizations. High-performing payroll operations demonstrated three key characteristics: adequate investment in modern technology, supportive leadership and integration into broader HR and business strategies.
“The PPCI found that payroll operations with adequate investment and modern tech, supportive leaders, positioning as a center of excellence (CoE) and integration into HR and business strategy delivered three times the strategy impacting value compared to peers,” says Tiliakos. This indicates that organizations that properly position and invest in payroll see measurable returns on their investment.
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Payroll trends in the pipeline
The employee value proposition will continue to evolve as workers’ priorities shift, Sabella predicts. As companies expand their offerings to align with what employees value most, they must also ensure their technology—particularly payroll integrations—can keep pace.
One emerging trend is the rise of earned wage access, which allows employees to access their wages before payday. More employers are offering or exploring these options, and as demand grows, new providers will enter the market. Employers will need technology to support these partnerships and integrate with them seamlessly, Sabella says.
Colassano agrees, noting that in 2024, flexible payroll options like earned wage access became a top use case at his firm. He says this trend highlights the growing demand for faster, more flexible payroll solutions that enhance employee financial wellness while helping employers manage cash flow more efficiently.
In response, financial institutions and payroll platforms are collaborating more closely to ensure secure, same-day fund transfers without disrupting traditional pay cycles.
However, earned wage access is not intended to replace standard payroll systems, says Colassano. It’s designed to complement them as an additional tool to improve employee satisfaction and support a more financially resilient workforce.
Lierheimer of Paychex agrees. “Paying your employees is a given—but payroll can be much more than that,” she says. “Working with an HCM partner allows your business to look at payroll as a recruiting tool and differentiator to attract and retain top talent—in ways that aren’t just competing on wages.”
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