Australia is facing the largest payroll skills shortage in the Asia-Pacific region, with only 43 per cent of businesses employing payroll professionals.

Research by ADP has found that Australian businesses are facing “critical skills shortages” in payroll, which businesses believe can be mitigated by automation and AI.

“Automation is transforming payroll, streamlining processes and reducing manual errors, but its true value lies in how it supports human expertise,” Judy Barnett, operations director at ADP Australia, said.

“AI-powered systems can flag potential compliance risks, but without human oversight, they might misinterpret complex award conditions or leave entitlements.

“With Australia facing payroll skills shortages and a complex regulatory landscape, businesses must strike the right balance between AI-driven efficiency and human oversight to ensure compliance, fairness, and adaptability.”

One-fifth (20 per cent) of Australian businesses cited a lack of payroll expertise as a major challenge impacting their payroll service delivery.

Over half (53 per cent) of businesses said would like to automate data entry to save time, while 36 per cent cited a lack of automation as a primary cause of their payroll inaccuracies.

Globally, the main barriers to recruiting payroll staff included difficulty attracting and retaining talent (24 per cent) and difficulty finding suitable skills to fill vacancies (22 per cent).

Over half (61 per cent) of companies reported that the payroll services they deliver had been affected by staff shortages. Of these businesses, 71 per cent addressed shortages by training their non-payroll staff to work in payroll, while 81 per cent upskilled payroll staff and 76 per cent considered outsourcing payroll capabilities.

ADP’s survey also found that organisations are ramping up their efforts to improve pay equality and transparency. More than one-third of respondents planned to focus on these areas in the next few years.

Two-thirds (65 per cent) of surveyed companies were reviewing how they could manage payroll with fewer people. Of this group, 58 per cent considered using AI technology, 50 per cent wanted to automate manual processes and 44 per cent considered centralising operations in order to boost productivity.

As companies invest more in automation, survey respondents indicated they would like their payroll teams to spend more time on integrating new technologies, improving business processes, analysing data, strategic planning and ensuring data security.

Conversely, they would like their teams to spend less time on fixing payroll data errors, data entry, reconciliations, reporting and handling employee queries.

This indicated that payroll professionals were set to spend more time on higher-value, intellect-intensive tasks as technology automates manual payroll activities.

The survey’s findings underscored the importance of harnessing new technologies to navigate complex regulatory landscapes with fewer staff.