In the past 12 months, nearly a quarter (24%) of UK employers increased their investment in AI
The UK leads the world in AI adoption for payroll. 42% of employers are already using AI-powered chatbots or agents to assist employees – almost 12% more than the European average. This number is likely to increase, according to a new study by SD Worx, a leading European HR solution provider. British employers are increasingly prioritising automation, efficiency and employee experience when it comes time for payroll.
Investment in generative AI increased from 14% to 22% per year from 2024-2025. This reflects a shift from manual administration towards more tech-driven, scalable solutions. Only 28% of employees report having access to these tools. This shows a disconnect between the implementation and actual usage.
Payroll optimization is a growing concern
The rise of AI coincides with the growing pressure on payroll processes to be optimised. Payroll optimisation is now the top challenge for 18% of UK companies, up from 13% in the previous year. Many organisations are investing more in modern payroll systems. 51% of them focus on data security. 49% adapt to changes in labour laws. And 44% improve sustainability.
In addition, self-service functionality has also increased. 43% of employers allow staff to perform tasks like viewing payslips and booking leave today, compared with 35% in 2024. On the employee’s side, 59% of employees say that they handle a large part of their HR administration through these tools. Early results indicate that this approach delivers clear benefits. Many companies have already reported cost savings by embracing digitalization.
Expected rise in hybrid payroll models and outsourcing
Businesses in the UK are expecting to use external payroll services more often.
- 35% of companies are currently outsourcing payroll in part, and this number is expected to increase to 41% by the year 2028.
- By 2028, the percentage of software developed in-house with external expertise is expected to increase from 10% to 14%
- The traditional model of managing payroll in-house is on the decline. 22% of UK businesses currently manage their payroll in-house, using their own systems and personnel, but this figure will drop to 17%
- By 2028, the use of SaaS-based payroll solutions will also decline from 30 to 24 percent.
AI and outside expertise delivers cost savings
Modernising your payroll pays off. Businesses in the UK that use their own software with external support report cost savings of 72%. This figure is 60% for businesses that fully outsource, and 53% if they only partially outsource.
Only 27% of companies that use SaaS and 52% who have fully-in-house systems reported significant savings.
Payroll outsourcing has become increasingly important as the world changes rapidly. Payroll is becoming less expensive and more accurate thanks to the use of cloud software and AI from developers. It’s also more user-friendly, transparent and personalized. Modern payroll solutions can be scaled and are designed to meet the needs of employers who want the most accurate data at all times. Smart technology allows employees to have instant access to payroll information, and to get answers to any payroll or HR questions they may have.
The international survey
SD Worx is the leading European HR services provider. It helps smaller and larger companies with their HR and Payroll challenges. SD Worx conducts regular in-depth survey to keep tabs on employers and employees. The latest “HR & payroll Pulse” analysis provides valuable insights for organisations to focus their HR and payroll strategies and future proof them.
The SD Worx Research Institute conducted the survey in February 2025, in 16 European countries, including Belgium, Croatia Finland, France Germany Ireland Italy Netherlands Norway Poland Romania, Serbia Slovenia Spain Sweden United Kingdom. The survey was conducted by the SD Worx Research Institute. It included a total of 5 625 employers and 16 000 employees. The results give a good representation of the labor markets in each country.
About SD Worx
SD Worx is a firm believer that success begins with people. A healthy workforce not only builds a successful company, but also benefits society. SD Worx, together with its clients, sparks a successful HR that benefits life, work and society.
SD Worx is the leading European provider of HR and payroll software and services for organisations and employees. SD Worx offers a wide range of products, services, and expertise in payroll and reward, human resource management, and workforce management. SD Worx is a company with deep roots in Europe. It has led the way since the 1980s, together with employers of all sizes, to ignite employee engagement and success.
SD Worx is trusted by over 95,000 organisations in Europe, both small and large. Nearly 10,000 colleagues work in 27 countries. SD Worx is a leading company in the world for calculating the salaries of 6 million employees. In 2024, the company generated a revenue totaling EUR 1,180 billion.
Visit www.sdworx.com for more information or follow us on LinkedIn
The original version of this article, UK companies now use AI for payroll, first appeared at HR news.
