Payroll trends 2024: where is the payroll industry headed?

Megatrends like artificial intelligence and cloud computing are changing the way businesses operate. From customer service to HR, there is almost no business function that is not impacted by technological innovations and other trends that shape the way we work and live.

Payroll is no exception to that. New payroll technology trends are on the horizon and global payroll leaders need to keep an eye on the latest developments to stay ahead of the curve. However, it’s not just technological advances that influence where payroll is headed in 2024.

What are the most important payroll trends for the coming year? What innovations to expect in the payroll industry in 2024? And what’s on the horizon for global payroll?

Ongoing labor market challenges, such as talent shortages and increasing employee turnover, are expected to lead to changes in the way employees and employers think about compensation in 2024. In the current economic climate, employees see themselves in an advantageous position to ask for a pay raise. According to the 2024 Robert Half Salary Guide, 63% of workers report plans to ask their employer for a raise. 

Also, with the labor market currently being candidate-driven, organizations are prepared to pay more for top talent. In fact, 51% of businesses plan to increase their starting salaries in 2024, while another 40% offer signing bonuses to attract new recruits.

Next year’s overall salary increase rate, however, is expected to drop. As HR Dive reports, employers in the U.S. are planning salary increases of 3.9%, which is lower than the average 4.1% salary increase in 2023.

Another payroll industry trend related to compensation is a broader adoption of pay transparency. As Robert Half reports, 63% of companies share salary information in their job postings because they think that it helps them attract talent.

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The demand for payroll outsourcing is expected to keep growing in the next few years. Technavio predicts that the payroll outsourcing services market will grow by USD 6.15 billion by 2025. Meanwhile, Fact.MR expects a 6.1% compound annual growth rate in the demand for payroll outsourcing services from now till 2033.

There are several trends that are expected to shape the outsourcing industry in the upcoming year and that are likely to influence payroll outsourcing too. These trends include the rise of cloud-based solutions and the adoption of next-gen technologies, such as robotic process automation (RPA), artificial intelligence (AI), and machine learning (more on this in the next section).

Further trends that will have an impact on payroll outsourcing in 2024 are the rise of the gig economy and an increased awareness of potential cybersecurity risks, such as data leaks in payroll outsourcing.

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The shift towards cloud computing is happening across many different industries, and payroll is no exception to that. Cloud-based payroll management offers businesses several advantages, including cost savings and a higher level of flexibility. Meanwhile, payroll integration will continue to play an important role when it comes to enhancing payroll efficiency.

Another technology trend that is affecting payroll is the rise of next-gen technologies. Artificial intelligence, machine learning, and robotic process automation may only just have entered the payroll space, but the vision is there. With the right payroll set-up, we could see processes like data validation and payroll anomaly detection being taken over by AI.

Technology, outsourcing and compensation are three key aspects where we can identify clear trends in payroll for 2024. But there are also other topics that are trending in payroll. Here are some additional payroll trends to watch out for in the next few years:

• Adapting to the gig economy: As more businesses work with freelancers and independent contractors, payroll systems need to be adapted to cater to different employment types.

• Payroll transformation still going strong: The impact of COVID-19 on global payroll has sparked a formerly unknown urgency among businesses to future-proof their payroll. Payroll transformation will remain a key priority for businesses in 2024. A study conducted by ADP showed that the main drivers behind payroll transformation projects are concerns regarding payroll data security, payroll integration, technological set-up, and employee experience.

• Focusing on employee experience: In an increasingly candidate-driven labor market, creating a positive employee experience is crucial for businesses that want to attract top talent. Since payroll is essential for both employee experience and employee retention, businesses are expected to increase their efforts to create a good payroll experience for their employees.

• Adopting flexible payment options: There is an increased demand for flexibility that is affecting businesses in many different areas, including payroll. In a workplace that is increasingly marked by flexibility and agility, businesses have to diversify their salary payment methods and include new payment options, such as Earned Wage Access (EWA).

Looking at the general trends that are expected to shape the payroll industry in the next few years, one could wonder where global payroll is headed in 2024 and beyond. Global payroll leaders should keep an eye on the following trends:

• Combining local knowledge with global insights: Local expertise will always be a crucial factor in multi-country payroll operations. But keeping payroll local is not enough anymore in 2024. Instead, it’s all about combining local payroll processing and compliance with a global view of data, processes, and operations.

• Making payroll security and contingency planning a priority: Keeping sensitive employee data secure has always been a top priority in payroll, but with the rising number of cybersecurity attacks and data breaches, enhancing payroll security across global workflows and systems is more important than ever. The same holds true for payroll contingency plans and payroll disaster recovery.

• Shifting priorities in the payroll department: With all the different payroll trends on the horizon for 2024, priorities are expected to shift in the payroll department too. Strategy development, data-driven decision-making, security considerations and technological advances are likely to take center stage in formerly operations-driven payroll teams.