ADP, a global leader in payroll and HR solutions, has published new research showing that payroll functions worldwide are grappling with rising cybersecurity threats, mounting regulatory complexity and persistent skills shortages, even as many organisations turn to artificial intelligence to help manage the strain.
The findings come from ADP’s latest global payroll survey, The Potential of Payroll in 2026, which gathered responses from more than 1,800 senior leaders across 20 countries, including 700 in Europe.
The research found that a third of payroll leaders (33%) now rank data security as a priority area for improvement over the next two to three years, while 72% are reconsidering how payroll is managed in light of shrinking talent pools, and 44% are looking to AI as part of the answer.
On the security front, the proportion of organisations reporting at least one cybersecurity incident affecting payroll rose from 57% to 70% year on year, with almost a quarter experiencing three or four such incidents. Response readiness remains inconsistent, however, as only 41% of organisations have a company-wide contingency plan in place, though nearly half have already bolstered their data security resources.
Regulatory complexity is also proving costly. Three-quarters of leaders view managing employment rules across multiple jurisdictions as a major challenge, and 70% admit difficulty pinpointing where they fall short of compliance. As a result, 69% say they overpay staff rather than risk breaching regulations, yet 68% still face penalties for non-compliance annually.
Talent shortages are a key driver behind AI adoption. Some 68% of organisations report that a lack of skilled staff has affected their payroll service, up from 61% the previous year, while 64% struggle with external hiring.
Roughly a third are already applying AI to core functions such as data entry, error detection and compliance management, with many more scoping further use cases.
The survey also points to a structural shift, with payroll operating as a standalone function at 43% of organisations, up from just 13% a year earlier, while its presence within finance departments has fallen sharply from 52% to 21%.
ADP UK & Northern Europe General Manager Jeff Phipps said, “When two-thirds of organisations are deliberately overpaying staff because they can’t confidently navigate local regulations, it’s clear the current approach isn’t working. The answer isn’t more caution; it’s to redesign payroll risk management. In a complex and fragmented global payroll environment, leaders should aim to unify compliance and security under a single operational model rather than treating them as separate lanes.
“Even as businesses turn to AI, it doesn’t scale cleanly across borders due to differences in labour laws, tax rules, and data structures. This highlights the need for systems that monitor regulatory changes in real-time, embed security controls within payroll workflows, and evolve team structures to ensure they have the regulatory and technical expertise required to navigate this complexity.”
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