Used in the right way, AI augments payroll professionals, freeing them up to focus on talent and development instead of data drudgery. By Shannon Karaka, Country Lead for Deel in Australia and New Zealand.
Payroll teams are under pressure from regulatory changes, skills shortages, the global expansion of workforces (and their pay runs), and employees expecting higher levels of flexibility in how they are paid and when.
In this environment, it’s time to move past chatbots answering payroll questions and explore how AI tools can tackle bigger challenges, like managing compliance in different countries or catching pay errors early.
Why AI is perfect for payroll
AI thrives on big datasets, and payroll is full of them. Payroll settings must scale and adapt as companies grow, and in some cases expand across borders. Analysis by Technology Investment Network in 2024 found that almost half (47%) of all workers employed by New Zealand’s 200 largest tech companies with an export focus are now based overseas.
AI has the ability to automate data analysis, help payroll professionals stay up-to-date on country-specific rules, and dynamically adapt payroll and HR processes, making compliance easier to manage and errors a thing of the past. For example, we’ve launched an AI-powered misclassification assessment localised in 15 countries, assisting employers to assess the classification of workers across the world.
As payroll, and HR more broadly, is dealing with highly sensitive information, the margin for error when using AI has to be zero. A core principle at Deel when developing AI is to ‘keep humans in the loop’, which recognises that responsibility needs to be baked in from the get-go if employees are to respect and trust AI in the workplace, and eventually realise the possibilities of what the technology can and will bring.
There is clearly an appetite to use AI. According to the Deel Australia Payroll research in 2025, nearly half (47%) of surveyed payroll professionals reported that they are currently using AI in their payroll functions, and a further two-fifths (40%) are considering using it.
Here are the areas where AI can truly transform payroll systems and improve the experience for payroll teams and employees alike:
Solving Gross-to-Net (G2N) variance
One common challenge in automated payroll is explaining why an employee’s pay amount changes from one cycle to the next.
Gross-to-net pay can vary due to reasons like expense reimbursements, bonuses, commissions, benefit adjustments, or foreign exchange rate fluctuations.
More significant changes can happen due to country-specific policies. Traditionally, payroll managers had to manually explain these differences, a process that is both time-consuming and prone to error. But AI tools can now automate this.
Advanced models analyse payroll data in real time, identify the root causes of paycheque changes, and break them down into clear line items for both employers and employees. This eliminates confusion, improves transparency, and ensures everyone receives accurate payroll reports.
Making expense management simpler
Expense management is a persistent pain point for global companies. AI technology can step in to automate these processes, reducing errors and compliance risks.
For instance, AI can check receipts and invoices against local laws, flag duplicates, and even compare submissions to third-party databases to spot fraud.
For employees, AI tools can provide instant feedback during expense submissions. If a claim exceeds a per diem limit in a specific country or doesn’t meet local tax rules, the AI system can flag the issue in real time and explain how to fix it.
Automating processes and connecting systems
Payroll processing often involves repetitive manual tasks, like customising reports or transferring information between systems. AI capabilities can automate these workflows, helping payroll teams save time and reduce human error.
For example, testing AI-driven optical character recognition (OCR) to interpret tax documents provided by revenue authorities.
By automating data entry, the AI system maps required fields directly into payroll systems, creating accurate reports without manual intervention.
Over time, this eliminates the need for developers to configure templates, streamlining payroll runs and making localised reporting faster and more efficient.
AI also has the potential to transform user interactions with payroll software. Imagine a payroll manager asking task-specific questions directly within the system, like “What’s the tax withholding rule in France for 2024?” or “How many contractors are on payroll in Europe this year?”
Employees could do the same, asking for clarification about payroll deductions or benefits packages in real time without needing to navigate to a separate chatbot.
Why this matters
Payroll is one of the largest monthly expenses for any business. Improving payroll systems, ensuring global compliance, and giving teams faster access to critical payroll data is business-critical.
At the same time, employee expectations about their pay day experience are changing, Employees want flexibility, immediate access to their money, financial transparency, and the ability to customise their compensation to suit their lifestyle. In a study carried out among New Zealand employees earlier this year, we found that over two-thirds would prefer a faster pay cycle and 40% would consider being paid in something other than NZ dollars.
By embedding AI capabilities into the core of payroll software, businesses can create a ‘payroll as a service’, creating a smoother, more flexible and transparent experience both for payroll professionals and their colleagues. Used in the right way, AI augments payroll professionals, freeing them up to focus on talent and development instead of data drudgery.
For AI to truly deliver on its promise, it needs to move beyond surface-level applications and tackle the real challenges facing payroll teams today.
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