Payroll cyber incidents rise as compliance burdens grow

Cyber incidents affecting payroll processes have risen to 70% of organisations from 57% a year earlier, according to ADP's survey of 1,816 senior payroll stakeholders across 20 countries.

Less than half of organisations have a company-wide contingency plan if payroll systems are compromised. The survey found that 41% have such a plan, while 47% have dedicated data security resources within the payroll function.

Nearly a quarter of respondents, or 23%, said their organisations had suffered three or four cyber incidents affecting payroll over the past year. A smaller share reported five or more incidents, pointing to repeated disruption in a function that handles salary payments and sensitive employee data.

The research suggests security has become a central issue for payroll leaders. A third of respondents identified enhancing data security as a key area for global improvement over the next two to three years.

Compliance burden

Security concerns sit alongside wider operational pressures in payroll. Three-quarters of leaders described managing employment regulation across multiple jurisdictions as a significant challenge, while 70% said they struggle to identify where they are non-compliant.

That uncertainty appears to carry a direct cost. The survey found that 69% of organisations overpay employees rather than risk regulatory violations, yet 68% still incur penalties for non-compliance at least once a year.

Legislative changes are also driving payroll errors. Almost half of respondents, or 47%, said applying new laws was one of their top two causes of mistakes.

Jeff Phipps, General Manager, ADP UK & Northern Europe, linked those issues to a broader need to rethink operating models.

"When two-thirds of organisations are deliberately overpaying staff because they can't confidently navigate local regulations, it's clear the current approach isn't working. The answer isn't more caution; it's redesigning payroll risk management. In a complex and fragmented global payroll environment, leaders should aim to unify compliance and security under a single operational model rather than treating them as separate lanes. Even as businesses turn to AI, it doesn't scale cleanly across borders because of differences in labour laws, tax rules and data structures. This highlights the need for systems that monitor regulatory changes in real time, embed security controls within payroll workflows, and evolve team structures so they have the regulatory and technical expertise needed to navigate this complexity," said Jeff Phipps, General Manager, ADP UK & Northern Europe.

Skills strain

The survey also found mounting pressure on payroll teams from labour shortages. Some 68% of organisations said their payroll service had been affected by a shortage of skilled staff, up from 61% a year earlier, while 64% said they struggle to hire externally.

In response, many employers are revising how payroll work is organised. Some 72% said they are rethinking payroll management amid skills shortages, and 44% are exploring artificial intelligence as one response.

Automation is part of that shift, though not the only one. Among those reviewing their approach, 40% said they were automating manual processes and 39% were standardising processes across geographies.

Artificial intelligence is already being used in day-to-day payroll work. Around a third of respondents said they use it for data entry, error detection and compliance management, while a further 37% to 40% are scoping or implementing it in those areas.

Structural shift

The research points to a significant change in where payroll sits within large organisations. The proportion operating payroll as a standalone function rose to 43% from 13% in a year, while the share within finance fell to 21% from 52%.

That shift suggests some employers are giving payroll a more distinct role rather than treating it solely as a back-office finance process. It also reflects the range of issues now tied to payroll, from cybersecurity and regulation to workforce data and technology deployment.

Some 76% of payroll leaders said they are growing their teams, with employers seeking expertise in compliance, data security, analytics, payroll processing and IT. At the same time, 44% want their teams to spend more time on data analysis and business process improvement, and 43% want greater focus on strategic planning and integrating emerging technologies.

The survey covered organisations with more than 1,000 employees globally. More than 80% of respondents were at Senior Vice President, board or other senior decision-making level.

The findings suggest payroll is becoming more exposed to the same risk, staffing and governance demands affecting other core business functions, while still being judged on its core task of paying staff accurately and on time.