Payroll modernization has moved from a nice-to-have to a critical business essential. Those who don’t embrace modernization through technology risk their payroll being hampered by hidden obstacles in their legacy systems.

While most businesses have recognized the need for change in this area, and are confident that they can adapt with new technologies, following up on that aspiration is proving difficult in practice for many. Our recent research conducted with 200 payroll, HR and finance leaders around the world backs that up, and has uncovered many of the blockers that are inhibiting progress.

In this blog, we’ll explore what those blockers to payroll tech adoption are, and how you can reassess your future payroll readiness to navigate past them.

What’s standing in the way of adopting new technologies in payroll?

Our research identified five main blockers to progress, with some affecting different organizations more than others. Nevertheless, it’s important to have a full view of what could be getting in your way:

1: Legacy systems that can’t support modern payroll: Some 27% of respondents to our research cited legacy systems as a barrier to their readiness. A patchwork of systems, accumulated through years of expansion, aren’t well-suited to modern requirements. They often slow transformation initiatives because they can’t support the necessary automation, intelligence, or integration.

2: Integration complexity and data silos: 23% of respondents cited a lack of integration skills, especially when organizations still rely on siloed systems where data is sent using email, spreadsheets and file uploads. For payroll modernization to work, organizations need integrated payroll/HR/finance ecosystems built on real-time, accurate data and connected workflows.

3: Skills gaps around modern payroll technology: connected to the previous point, 22% cited that their staff lack skills to manage new technology more generally. Often, this is because organizations underestimate how much technical skill is needed to deploy and manage modern payroll platforms.

4: Budget constraints: over a third of respondents – 37% – said cost concerns are their biggest challenge. Deploying new technologies can require significant investment, especially to ensure compliance and robust security, and to facilitate business growth.

5: Organizational inertia and change management challenges: getting commitment from key decision-makers and stakeholders can be difficult. Some 11% of respondents cited stakeholder buy-in as a blocker, often caused by slow decision-making, fragmented ownership and general resistance to change.

Payroll tech adoption: three core areas of readiness 

Achieving future payroll readiness to break down these blockers needs a coordinated, holistic approach across three key areas: technology, compliance, and cybersecurity. They have to be addressed in unison because they are deeply interconnected with each other. Weakness in any one of them will undermine the other two at the same time. 

But through our research, and our experience in helping develop data-driven strategies for payroll modernization, we’ve established where high-performing teams succeed and where others stall:

Technology readiness

Almost 90% of organizations say they feel ready to adopt the ‘three As’ of payroll technology: automation, AI, and APIs. This starts with replacing fragmented systems and manual processes with solutions that are integrated, scalable, and supported by high-quality data.

Roadmapping, frameworks and planning are key here, including:

• A phased integration roadmap coordinated with your broader ERP, HR, and architecture strategy
• Process mapping to balance opportunities for standardization with regional differences
• Metric frameworks and change management to help demonstrate fast ROI and generate internal momentum for adoption and continued investment
• Clear governance frameworks that set boundaries for AI autonomy vs human approval

In this endeavor, you should look for a payroll provider with a comprehensive tech stack. This should include API offerings that are robust, diverse and secure (including adopting REST API standards), and that keep sensitive payroll data safe with proprietary, secured AI models.

They will help you start with low-risk pilots like anomaly detection, reporting and document processing to prove value; training programs to help payroll teams understand, validate, and challenge AI outputs; and support with gaining executive sponsorship that can cut through competing departmental priorities.

Compliance readiness

True compliance readiness demands a system that absorbs regulatory change without any business disruption. This, perhaps, is why only 41% of organizations say they’re “very confident” that their payroll processes can sufficiently adapt to regulatory change.

Businesses need systems that deliver compliance data on demand, centralized compliance oversight, and automated audit trails for every payroll action. The payroll provider can support here with proactive operational resilience testing, and by providing in-country expertise and regulatory interpretation, making them a strategic compliance management partner.

Furthermore, they should also be able to help with compliance training for all stakeholders, and technical change management to update systems and processes.

Cybersecurity readiness

With payroll holding some of your organization’s most sensitive data, cybersecurity readiness is a must. Yet only 37% of our respondents said they felt “very confident” in their ability to protect payroll data from cyber threats. Payroll should therefore be treated as a critical system in your wider cybersecurity strategy, with security resources actively protecting payroll systems. 

Any good payroll partner will meet robust security certifications like ISO 27001 and SOC 2 Type II, with embedded protections built into their core platform. They will be able to provide continuous monitoring, stress-test processes, and rapid incident response, along with support and planning for emerging threats like quantum decryption. This should be backed up with regular security training so that teams can spot anomalies and potential fraud.