Research from payroll and HR software provider PayFit found that manual payroll is causing what some describe as “payroll paralysis,” with 37 percent of employers reporting high team stress due to the time-intensive nature of these tasks.
The primary sources of payroll-related stress include data entry, complex calculations, payslip distribution, salary transfers, and compliance with HMRC submissions. The strain on payroll teams is further exacerbated by new regulations, adding to an already demanding year-end period.
Compliance Changes Add Pressure
From April 2025, National Insurance Contributions (NICs) will increase from 13.8 percent to 15 percent, and the secondary threshold for employer NICs will decrease from £9,100 to £5,000. These adjustments mean additional calculations and updates for HR and finance teams.
At the same time, the Employment Allowance will double to £10,500, providing relief for smaller businesses. However, expanded employee protections under the new Employment Rights Bill will bring further complexities. These measures include first-day statutory sick pay, stricter holiday pay rules under a new Fair Work Agency, and enhanced protections for pregnant employees and those on maternity leave.
Firmin Zocchetto, CEO and Co-Founder of PayFit, said, “The toll that manual payroll takes on teams is undeniable. We’re hearing from businesses experiencing what we can only describe as ‘payroll paralysis’. Teams are overwhelmed with ever-growing payroll tasks and the pressure of adapting to legislative shifts. Recognising the signs of this paralysis is essential. If we don’t act, there’s a real risk to the wellbeing of HR and finance teams, as well as company performance.”
Year-End Demands Compound the Issue
As the year-end approaches, payroll teams face heightened demands, including distributing bonuses, adjusting holiday pay, and preparing for self-assessment tax returns. These tasks require precision and compliance, placing further strain on resources.
The survey found that 68 percent of respondents expressed a desire to automate certain payroll functions, recognising the potential benefits for productivity and accuracy. Critical areas identified for automation include submitting payment information (15 percent) and calculating statutory pay (13%). Only 9 percent of employers automate up to a quarter of their payroll tasks, while 15 percent report automating most (more than 75 percent) or all payroll functions.
Dr Melissa Carr, Lecturer in International Human Resource Management at Henley Business School, said, “It is important to recognise that work can involve periods of high intensity. However, what is critical is that these periods are off-set with time to regroup and recharge. High intensity over extended periods can lead to burnout and impact employee wellbeing and engagement.”