In this exclusive interview—also featured in People Heroes Magazine—industry analyst Pete Tiliakos shares insights on payroll management, stressing the importance of flexibility for today’s workforce and discussing how artificial intelligence (AI) is transforming payroll for businesses of all sizes. Read his insights in the Q&A below. 

1. What are the biggest payroll compliance challenges businesses face today? 

Pete Tiliakos: The compliance landscape has become an incredibly complex, moving target of requirements and intensifying regulations, which employers must navigate carefully. Across the U.S. and its territories, there are tens of thousands of governmental units encompassing counties, municipalities, townships, school districts, special-purpose districts, and of course the U.S. federal government, each enacting and enforcing employer impacting regulations at scale.  

Tax laws, wage and hour laws, and labor regulations are frequently updated at federal, state and local levels. All of which has become layered and more complex in the post-pandemic era. Employers are increasingly engaging a mix of full-time and freelance talent to fuel their strategies and often looking beyond borders to access the skills they need, all of which has compounded the need to ensure unwavering compliance where missteps can result in costly fines, penalties, lawsuits and unwanted negative impacts to the brand and its strategy.  

Now more than ever, employers of all sizes, especially those with long-term growth expectations, must double down on modern infrastructure and operating models of people, process, and compliance expertise powered by technology to derisk the business and its strategic path.  

2. What payroll innovations help businesses attract and retain top talent? 

 Tiliakos: The employers that are ‘winning’ in today’s hyper competitive talent marketplace are doing so by leveraging the power of flexibility. Flexibility is the most valuable currency an employer can offer to attract skilled talent to join its workforce. The ability to create a truly personalized, and fulfilling work experience derived through autonomy, choice and empowerment is priceless.    

From a talent attraction and retention perspective, the modern pay experience has become essential to enabling the employee experience (EX) and holds the trust between employee and employer. It includes competitive pay and total rewards, transparency in the calculation and results, and equity and fairness in its execution. Choice of pay timing, and method are now table stakes and powered by on-demand pay, which has quickly become the modern-day direct deposit. Underpinning the modern pay experience are tools and enablers to support financial wellness through early access to earned wages, education, insights and nudges to support employees in reaching their personal financial aspirations.  

 3. How is AI transforming payroll processing for businesses of all sizes? 

Tiliakos: Modern technology, and especially AI, has been and will continue to be game changers for payroll leaders and operations in organizations of every size. The convergence of cloud technology, integrations and APIs, and the onset of AI and machine learning have collectively ushered in a ‘golden age’ for payroll—where automation is giving way to augmentation and empowering payroll professionals to combine their rich skill sets and expertise with deep data and insights to return value and strategy—enabling impact to their businesses.   

Payroll has long been overlooked as an innovation area, left to limp along absent modern solutions that matched and de-risked the level of complexity they manage. This often leads to a high touch, highly manual and error-prone processes, straining resources and putting the company at risk. 

AI and augmentation are relieving payroll of manual effort, activating their rich insights, and enabling them to shift their roles from one of a simple processor toward that of a strategic advisor.  

Here are key use cases where AI will have a profound impact on payroll: 

• Touchless payroll for straight through, machine enabled continuous payroll processing to remove manual effort and human error while creating a real-time payroll experience for practitioners and employees. 
• Compliance monitoring to continuously search, surface, and interpret legislative changes, at scale, and in real-time, guiding practitioners to ensure timely adherence to regulatory mandates. Longer term, generative AI (genAI) will support updating tables and calculations to ensure systems remain compliant in real-time.  
• Data quality, movement and insights through automated data mapping, enhancing data audits, detecting anomalies, and fundamentally speeding up the data movement process and output quality. With the help of AI, payroll can unlock its rich, often underutilized dataset to power predictive decision-making and outcomes for the organization by pairing its data with broader HR, business, and operational data sets to help them ‘see around the next corner.’  
• Audits and controls are automated and autonomous when powered by AI. ‘Audits at the source’ remove the ‘ticking and tying’ efforts of the past, and surface anomalies and errors before they occur and in real time, nudging payroll toward the best path to resolution and prevention. With this essential element of payroll automated, payroll can return their focus toward more value-added tasks and confidently derisk their operations while supporting strategic plans as a center of expertise.  
• Shaping a modern pay experience through an always-on, insight-driven experience that enhances financial wellness and empowers employees with nudges and guidance in real time. The convergence of fintech, open banking, and AI/machine learning enables payroll and its results to be more transparent, intelligent, and personalized. As genAI and machine learning advance, payroll will connect pay with broader financial health, wealth, and retirement planning, giving employees greater control, insight, and autonomy over their financial future. 

4. What industries are seeing the fastest adoption of innovative/modern payroll solutions, and why? 

 Tiliakos: Organizations of every size and sector increasingly recognize the risk of neglecting payroll and overlooking the strategic enabling value it can provide when nurtured and integrated into the broader HR and business strategy. While payroll is largely not sector-specific in terms of requirements or complexity, each business and its respective culture and sector do bring unique challenges that payroll must manage and derisk.  

 Where payroll commonly differs at the sector level is largely rooted in the ‘source to gross’, essentially the gathering of all inputs (time, absence, pay, deductions, etc.) to enable readying payroll to conduct the ‘gross to net’ calc and processing.  

 Industries with a high-volume hourly, union, and deskless worker populations seek to advance their source to gross + gross to net processes in concert for maximum return on investment (ROI) and impact. Sectors like manufacturing, retail, and healthcare are increasingly leaning toward modernizing the scheduling to payment experience for practitioners, workers, and front-line managers. The outcomes mean greater efficiency, effectiveness, and productivity, while providing insights to manage the workforce and drive improved HR and business outcomes.   

5. How can companies strengthen payroll data security against fraud and cyber threats? 

Tiliakos: I recently read a report from Bank of America that sized cybercrime similarly as a country, estimating it to be the third largest economy in the world. The World Economic Forum describes cybercrime threats as “the dark underbelly of the digital era.” The threats are very real to the business of every size, and intensifying with the enrichment of technology, particularly AI.  While AI is improving our lives, it’s also empowering and attracting bad actors.  

Nowhere in the organization is the risk more apparent than in payroll, where protecting data and money from potential fraud, cyberthreats and risk is continuous. Now more than ever, payroll requires modern infrastructure to support fortifying payroll from these potential threats.  

Some of the key methods payroll can use to protect its data, center on leveraging modern payroll infrastructure with capabilities like multifactor authentication (MFA), role-based access, encrypting data, automating audits and controls. It also requires matching the technology with the leading practice process design for cyber threat prevention. Underpinned by continuous cyber security training and communications to ensure practitioners, employees, and leaders are positioned to prevent fraud and cyber threats at the source. 

Lastly, and possibly most critical is the need for a continuously tested and proven business continuity and data recovery plan (BCP/DR). The COVID pandemic, the Silicon Valley Banking crash, and more recently the ‘CrowdStrike incident’ have put payroll front and center regarding business continuity and data recovery. More importantly, what happens when BCP/DR is lacking or insufficient.  

Payroll is the ‘show that must go on,’ regardless of what the organization may experience beyond its control. Payroll must de-risk the organization by fortifying its practice and operations from these growing threats enabled through the right mix of technology, expertise, training, and a plan for continuity while managing volatility and risks associated with a potential system attacks and outages.  

Get more insights! Follow Pete Tiliakos on X at @PeteTiliakos. 

Print