Three in ten European companies use AI in payroll

The number of European employers who see payroll optimisation as one of their biggest challenges is rising from 11% in 2024 to 14% in 2025. Companies are also investing more in payroll compared to last year, particularly in complying and adapting to changing labor legislation (47%), payroll data security (46%) and sustainability in payroll processing (38%). Interestingly, half of European companies saved significant costs by outsourcing payroll services. This is according to recent international research by the leading European HR solutions provider SD Worx among 5,625 HR managers and 16,000 employees from sixteen European countries.

One in seven (14%) of European employers see payroll optimisation as one of the biggest challenges for 2025. Countries such as Romania (27%) and Poland (24%) are particularly struggling with this. Compliance with labor legislation and regulations is also higher on the agenda, with 17% citing it as a challenge, a relatively high increase compared to the 14% last year. Again, Poland tops the list (29%), followed by Croatia (23%) and Serbia (23%).

European companies are therefore investing more in payroll optimisation this year than last. Almost half (47%) are investing in correctly complying with labor laws and adapting to changing legislation, up from 38% in 2024. Two thirds (66%) of European employers also say they are actively following EU regulations related to HR. Payroll data security ranks second on investment at 46%, up from 37% last year. Sustainability in payroll processing, such as reduced paper use and environmentally friendly processes, ranks third at 38%. 

In addition, more and more companies are also investing in self-service systems for employees, for example to view their payslips or to plan and request their holidays. Over a third (36%) say they are investing in this, compared to 27% in 2024. The survey of employees shows that 46% manage many administrative HR tasks themselves through a self-service system.

Remarkably, the integration of (generative) AI into the payroll process is at the very bottom of the list of investments: only 12% of companies invest in it, which is admittedly an increase from 2024 (8%) At the same time, a fifth (19%) invest in employee help desks or chatbots to answer questions about payroll, whether or not supported by AI technology. Indeed, three in 10 European companies report that their payroll system today already provides AI agents and chatbots that allow employees to ask questions about their salary and benefits. Apparently, employees are not always aware of this, as only one-fifth say they can use this in the organisation.

European employers are also increasingly opting for payroll outsourcing. HR and payroll professionals expect the (partial) outsourcing of payroll services to become more popular over the next three years.

Currently, 36% of companies partially outsource their payroll; employers surveyed expect this percentage to increase to 41% by 2028. The use of in-house software combined with help from outside experts and full payroll outsourcing are also expected to increase, from 9% to 10% and from 6% to 8%, respectively.

In contrast, SaaS models and in-house systems with in-house staff are losing popularity. A quarter of European companies currently use in-house software and staff for payroll, but this number is expected to drop to 20% by 2028. About a quarter (26%) of companies independently use software from an external vendor (= the SaaS model). This is expected to drop to 21% by 2028.

Half of European companies that use in-house payroll software with external specialists, and another half of those that partially or fully outsource their payroll, report significant cost savings in their payroll process. That figure is significantly lower among companies that opt for SaaS or manage their payroll entirely in-house, with their own software and payroll experts (29% and 37%, respectively).

SD Worx, the leading European HR service provider, assists smaller and larger organisations with their HR and payroll challenges. To keep a finger on the pulse of employers and employees, SD Worx regularly conducts in-depth surveys. The analysis of the most recent “HR & Payroll Pulse” provides organisations with valuable insights to focus and future-proof their HR and payroll strategy.

The survey was conducted in February 2025 in 16 European countries: Belgium, Croatia, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Poland, Romania, Serbia, Slovenia, Spain, Sweden and the United Kingdom by the SD Worx Research Institute. A total of 5,625 employers and 16,000 employees were surveyed. The results provide a representative picture of the labor market in each country.