ADP, a global leader in payroll and HR solutions, has published new research showing that payroll functions worldwide are being reshaped by cybersecurity concerns, regulatory complexity and a shortage of skilled staff, with many organisations now turning to artificial intelligence to cope with the pressure.
The findings come from the company’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 study found that a third of payroll leaders (33%) view data security as a key area needing improvement over the next two to three years, while 72% are rethinking how they manage payroll delivery as talent pools shrink, and 44% of that group are exploring AI as a solution.
Cybersecurity is emerging as a growing concern, with the share of organisations reporting at least one payroll-related security incident climbing from 57% to 70% over the past year. Nearly a quarter of respondents said they had faced three or four such incidents, and a further share reported five or more.
Despite this, only 41% of organisations currently have a company-wide contingency plan in place, though nearly half have already reinforced their data security resources.
Regulatory complexity is also proving costly. Three-quarters of leaders described managing employment regulation across jurisdictions as a major challenge, and 70% admitted difficulty pinpointing where they fall short of compliance.
As a result, 69% of organisations said they choose to overpay staff rather than risk breaching local rules, yet 68% still face compliance penalties at least once a year.
Skills shortages are a further driver of change, with 68% of organisations reporting that a lack of skilled staff has affected payroll delivery, up from 61% the previous year, while 64% said external hiring remains difficult. Rather than replacing staff, AI is increasingly being used to support existing teams: 44% of leaders rethinking their delivery models are turning to AI, ahead of process automation (40%) and standardisation across geographies (39%).
The research also points to payroll’s changing status within organisations. The proportion running payroll as a standalone function has more than tripled in a year, from 13% to 43%, while the share of payroll teams sitting within finance has fallen from 52% to just 21%. Alongside this shift, 76% of leaders said they are expanding their payroll teams, seeking expertise in compliance, data security, analytics, processing and IT.
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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