What is the future of AI in HR and payroll?

Artificial intelligence is changing the way we work. The impact of new technologies like digital assistants, robotic process automation, and generative AI is palpable across all industries, business functions, and professions, including HR and payroll.

Surveys show that 76% of HR leaders believe that not adopting AI solutions in the next 12 to 24 months will lead to reduced organizational success compared to other organizations that implement artificial intelligence.

What can AI do for HR and payroll teams? How to use artificial intelligence for HR and payroll? How will AI change the way HR and payroll departments operate?

Artificial intelligence holds enormous potential for payroll and HR, which is why many business leaders and managers are keen on experimenting with next-gen technologies to find out how to best leverage this potential.

The benefits of AI for HR and payroll include: 

• Increase in operational efficiency,

• Reduction in the number of errors,

• Time savings,

• Elimination of mundane and repetitive tasks,

• Minimization of resource-intensive processes,

• Enhanced employee experience,

• Cost savings,

• Increased accuracy,

• Improved decision making,

• Enhanced recruiting,

• Reduced bias in hiring and recruiting,

• Better employee engagement, and

• Streamlined talent acquisition (TA).

There are many different ways AI can be used in HR and payroll. Its use cases include hiring and recruiting, talent acquisition, payroll processing, general HR management, and more. Here are some examples of how payroll and HR teams can leverage artificial intelligence to streamline their workflows and realize efficiency gains.

Examples of AI in Human Resources

Artificial intelligence can support HR departments in a variety of tasks ranging from performance management to policy creation. Here are a few common use cases of AI in HR:

• Employee performance management: Artificial intelligence can be used by HR for employee performance reviews. AI-powered tools can track and record employee performance data year-round to provide all the necessary data and insights when the moment of the final performance assessment comes around.

• Employee onboarding and offboarding: The onboarding process marks the beginning of the employee lifecycle and is crucial for laying the foundations of a positive employee experience. An AI-driven onboarding system can provide new hires with step-by-step guidance and ensure all the important administrative tasks are completed. The same goes for employee offboarding.

• Creating new HR policies: Workplace policies provide guidance on how employees are expected to work and behave in a professional context. Workplace policies not only need to be very detailed, but they also need to be kept up to date to reflect legal changes or changes in the organization’s corporate strategy and operating principles. Generative AI can help HR professionals revise workforce policies and quickly draft new policies as needed.

• Generative AI for text creation: Creating new or updating existing HR policies is just one example of how HR can leverage generative AI to save time on text creation. Other examples include drafting job descriptions, contracts, employee handbooks, and interview questions.

• Capturing employee engagement: Engaged employees are more productive, which is why businesses should try to keep employee engagement levels up. To do this, they first need to know what the current status quo is. AI-powered tools can help here by automatically carrying out employee engagement surveys and analyzing the results to provide HR with the necessary insights for employee engagement initiatives.

• Personalized Learning and Development: Learning and Development (short: L&D) is important to equip employees with the skills and knowledge they need to carry out their tasks in the best possible way. Artificial intelligence can help HR professionals create a personalized learning experience for employees that maximizes the learning output and optimizes career development efforts.

Use cases of AI in hiring and recruiting

In addition to its use in general HR management tasks, artificial intelligence can be of particular help in hiring and recruiting. Use cases of AI in recruiting include:

• Automated candidate screening: Candidate screening can be automated with the help of AI. This significantly increases the efficiency of the hiring and recruiting process and reduces the time to hire.

• Automated mailing: Artificial intelligence can be leveraged to send out automated emails to candidates. For instance, candidates who previously applied for a job at the company could be informed about new open positions that match their profile.

• Recruiting chatbots: Chatbots can be used to interact with candidates and answer questions about the process, the organization, the position, and any other topic that could be of interest for a candidate. By answering standard questions, they save recruiters and HR managers valuable time.

• Matching candidates with job descriptions: AI can further be used in the hiring and recruiting process by automating the matching of candidates with existing job descriptions. Resumes can be screened by AI to compare candidate skills and experience with the requirements in the job description.

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Artificial intelligence in payroll processing and management

Artificial intelligence helps businesses achieve important time savings and efficiency gains by automating time-intensive, repetitive tasks. Business functions like payroll where there are many mundane tasks that need to be carried out with each payroll run can therefore really benefit from AI-powered tools.

Here are a few examples of how AI can boost productivity in the payroll function by automating processes and tasks:

• Payroll compliance and data management: Artificial intelligence can significantly enhance data and compliance management in payroll. Automated data flows between the payroll system and other workforce management tools are as important here as data standardization. Payroll compliance can be enhanced with integrated payroll data validation functions and automated payroll compliance updates.

• Payroll error detection: Validating payroll results is a crucial part of payroll processing. The validation process can be sped up if AI-driven tools are used that are able to spot and highlight payroll anomalies.

• Data collection for payroll reporting: Collecting payroll data for payroll reporting can be a tedious, time-consuming process. With AI-powered payroll software, this process can be automated. If paired with payroll analytics tools, this can bring real value to the payroll function.

• Payment automation: Another use case of AI in payroll processing is to generate payment information and send it to a connected payment option automatically.

• Data entry and validation: Artificial intelligence can support data-entry and validation processes in payroll. Automating data inputs from other workforce management systems and having AI carry out preliminary data validation checks saves payroll teams valuable time.

Another possible use case of AI in payroll is the use of chatbots to answer payroll-related employee queries surrounding wages, paychecks, and more. Together with payroll automation, this makes a strong case for adopting AI technologies in the payroll department.

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Adopting AI in HR and payroll is a transformation project that requires careful planning and execution. Here are a few tips to help you get started.

• Eliminate preconceptions: There are many myths that rank around artificial intelligence. Any organization that is serious about adopting and implementing AI in their HR and payroll processes must first make an effort to understand the true nature and potential artificial intelligence has to offer.

• Evaluate benefits and risks: Just because the technology is there, it doesn’t mean that you have to use it. AI has many potential benefits for organizations, but not every organization is able to harvest these benefits in the same way. Before implementing AI in HR or payroll, businesses should first carry out an in-depth assessment of the risks and benefits.

• Think about privacy and confidentiality: Privacy and confidentiality are two major concerns businesses have when thinking about implementing AI in HR and payroll. Information might be used to further train the artificial intelligence model, leaving HR and payroll leaders to evaluate potential confidentiality risks. For instance, using sensitive or confidential information when writing a prompt for generative AI tools could lead to severe confidentiality issues.

• Combine tech and human intelligence: One of the major threats of relying purely on AI in areas like hiring and recruiting is that it might lead to processes and procedures losing their human touch. There are examples from big tech companies, such as Amazon, that show that using automation and AI in the candidate selection process can lead to unintentional bias and other problems.

Artificial intelligence is increasingly used in Human Resources and payroll to automate mundane tasks and make better decisions in hiring, recruiting, and overall workforce management. Leading HR industry specialists, such as Josh Bersin, predict that AI will be changing the landscape of HR tech significantly.

Artificial intelligence is poised to revolutionize the way payroll and HR departments operate by automating repetitive tasks and giving HR and payroll professionals time to focus on strategic initiatives that create real value for the organization. HR and payroll leaders should therefore embrace AI and integrate it into their processes and workflows.

Another important aspect to consider when answering the question of how AI will change payroll and HR is its impact on jobs in the HR and payroll department. Adopting artificial intelligence will lead to many tasks being automated. While some payroll and HR tasks will simply become obsolete, AI implementation will also create new roles, tasks, and skill requirements.

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