By Grant Tasker, Senior Director of Global Payroll at CloudPay
It’s no secret that payroll, once largely seen as a back-office, often siloed function, is growing in strategic value and can offer far more to businesses than at any point in the past. But what is driving this evolution, and how can organisations capitalise on the increased value provided by their internal teams and external partners?
As with so many other walks of life, the core driver of much of this change is technology, notably, what have become known as the ‘Three As’: AI, automation and advanced API integrations, which are collectively changing the game for payroll practitioners, teams and wider organisations around the world.
2025 Payroll Efficiency Index data
This evolution was highlighted in CloudPay’s recent 2025 Payroll Efficiency Index, which is based on an analysis of over one million payslips processed across more than 130 nations. The report focuses on a series of metrics that provide insights into the true value offered by pay functions and analyses data related to issues per 1000 payslips (I/1000), first-time approvals (FTAs), data input issues (DII), calendar length (CL) and several other metrics, offering a more detailed analysis than other comparable studies.
This year’s data reinforces the findings of the previous study, and while a drop in global FTAs (from 73.82% to 72.61%) may seem to suggest a downturn in efficiency, it’s actually indicative of an adaptation to global pay processes, which are now demonstrating greater flexibility and nuance.
This trend is supported by other data, including increases in supplemental runs (the proportion of payroll runs taking place outside of the normal cycle), which have climbed to 19%, and in global calendar lengths (the number of days it takes to complete a payroll cycle from start to finish), which have increased by almost 12% this year, from 5.86 days to 6.57 days.
Flexible approach
Combined, the data paints a vivid picture of a longer-term shift in how payroll processes are being managed globally to accommodate more flexibility and nuance. The increasing adoption of automation, AI and APIs as part of broader digitalisation programmes is becoming an essential driver, enabling businesses to meet new payroll demands, and has led to major overhauls in the way that employee and financial data is processed.
At a global level, the Index paints a picture of an industry and profession undergoing major, tech-backed change. But this is not the case across the board, and there are outliers. Analysing the UK in more detail, for example, highlights some ongoing challenges. Despite a minor uplift on last year’s figures, domestic first-time approval rates remain at the lower end of the global scale. However, on the more positive side, the Index also revealed that the UK is striking a strategic balance between technological advancement and human expertise. This is in light of the country’s specific flexibility demands, which impact FTAs, and that are further exacerbated by the increase in UK calendar length, which subsequently rose from 5.51 to 6.25 days.
The data also suggests that the pace of change is so fast that those organisations that aren’t adopting a tech-backed approach to global payroll will quickly fall behind their competitors. Ultimately, a new normal is developing where payroll can be more flexible, adaptable and fit with the demands and requirements of modern businesses, and the onus is on employers to keep pace.
Payroll overhaul
The increasing adoption of emerging technologies represents possibly the biggest shift in the history of payroll. The function has never faced such dramatic requirements to adapt and pivot, and is now seeing a major rush of tech-backed change, which all employers and teams are having to adapt to in order to remain competitive.
Technology, varying employment models, shifting calendar lengths, workforce fluctuations and more are all changing the game, and creating the need for more flexible pay structures that can adapt to different challenges. Organisations that employ seasonal workers, for example, who regularly feel biannual pinch points, can find it far easier to manage increased workloads and meet the need for flexibility by adopting a more modern, tech-backed approach.
It is no coincidence that countries that have embarked on major digital transformation programmes have seen the greatest leap in efficiency metrics. Counter to that, the fact that so many have revealed difficulties with disconnected solutions suggests that there are still improvements to be made. This could lead to further payroll efficiencies if the trends in the latest report continue, with 94% of payroll, HR and finance leaders surveyed indicating that disconnected systems and solutions remain a challenge. The Index data suggests that payroll is embarking on a further, major period of change, and while it is moving away from manual operations, it’s becoming far more nuanced, adaptable, and ready to tackle further challenges in the future.
