Payroll resilience in an era of rising compliance

Published: 2026-01-29T16:00:08+00:00

Source URL: https://www.thehrdirector.com/payroll-resilience-era-rising-compliance/

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Summary

Nearly 500 UK firms were fined this year for underpaying staff, but the story is wider than isolated compliance lapses. Payroll has evolved from a back-office task into a strategic function touching compliance, employee trust and operational risk. Rapid, sustained regulatory change — from minimum wage hikes and age-band adjustments to parental leave reforms and IR35 — has increased complexity and exposed capability gaps in systems, skills and governance.

The piece highlights research showing average payroll accuracy at about 85%, with common causes including data errors, manual time-entry faults and limited automation. It warns that fines are only the visible cost: payroll mistakes erode trust, damage reputation and divert resources. The article argues that organisations should treat payroll as strategic, investing in integrated technology, stronger governance and external partnerships to build resilience ahead of the Fair Work Agency and upcoming Employment Rights Act reforms.

Key Points

Almost 500 UK companies were fined for underpaying staff; regulatory scrutiny is intensifying.
Payroll now spans compliance, employee trust and operational risk, not just back-office processing.
Frequent legal changes (minimum wage, NI, IR35, parental leave, flexible working) increase complexity.
ADP research suggests payroll accuracy averages 85% — roughly one in six employees may face a pay error.
Skills shortages and recruitment challenges hamper payroll delivery; 61% report skills gaps affecting service.
Hidden costs include lost trust, higher churn risk, reputational damage and diverted IT/operational effort.
Solutions: stronger governance, integrated HR–finance–payroll platforms, automation and specialist partners.
Organisations should audit, stress-test systems, map skills gaps and introduce regular compliance reviews now.

Why should I read this?

If you look after payroll, HR or finance — stop ignoring this. The article is a sharp wake-up call: mistakes now mean more than fines — they wreck trust and reputation. It cuts through the noise and tells you exactly why payroll needs tech upgrades, better governance and outside expertise. Short version: fix payroll before payroll fixes you.