The Impact of Artificial Intelligence (AI) on Payroll Management

According to the Global Payroll Complexity Index (IMCP) published by Alight in 2023, France is the country where payroll processing is the most complex globally. This complexity is due to constantly evolving regulations that combine and overlap various sources (social, fiscal, labor code).

Any error in payroll processing can have consequences for the company, particularly financial or reputational ones, making the reliability of the payroll process a major challenge. Additionally, there is a shortage of expertise in this sector, particularly concerning the "expert" aspect of the function, which adds to the current human resources challenges.

Given these various challenges and the rise of sophisticated technology and algorithms, using advanced technologies could be one of the paths to explore in addressing these issues. The integration of artificial intelligence in payroll management will inevitably transform and redefine working methods.

RSM offers insight into the potential improvements and challenges inherent in the integration of artificial intelligence into payroll functions.

Artificial Intelligence in Payroll Management: What Benefits?

Automating Repetitive, Low-Value Tasks

AI can be used to automate tasks such as data entry or control, allowing time savings, reducing potential human errors, and focusing on higher-value tasks. The increasing automation of payroll processes, enabled by AI and blockchain, also reduces administrative workload.

Thus, AI represents a significant productivity gain:

• Expense management
  Automating data entry, control, and validation makes the management process easier. AI can also detect anomalies and irregularities, analyze spending, and optimize costs.
   
• Leave and absence management 
  With automation, the processing of leave and absences is fast, efficient, and accurate. Scheduling with predictive planning is also optimized.
   
• Sick leave management
  With OCR (Optical Character Recognition), it becomes possible to convert scanned documents or images into text data, avoiding manual re-entry and integrating it directly into the payroll process.
   

Automating and Optimizing Control Processes

Thanks to machine learning, AI is a valuable tool in payroll control processes. It enhances the accuracy and reliability of payroll calculations:

• Automated payroll calculation verification
  The system can quickly spot errors in data entry, duplicate payments, overtime calculations, social contributions, or sick leave rights.
• Payroll data tracking and analysis
  Using algorithms, large amounts of data can be tracked and analyzed to perform consistency checks before payroll closing, DSN submission, and salary transfers.
   

Quick Adaptation to Regulatory Changes

Payroll compliance is an ambitious goal that requires constant legal monitoring. AI appears to be a solution since it can ensure this regulatory monitoring and suggest updates to payroll rules in line with new legislation. It becomes easier to follow legislative changes, thus reducing errors and minimizing the risks of audits.
 

Assisting Payroll Managers and Employees

Chatbots¹ , powered by conversational AI can also be invaluable to employees by automatically answering the most common questions about payroll, the company's social regulations, or personnel management processes (advances, leave requests, etc.). They help optimize payroll managers’ work and enhance employee experience.

Clearly, the use of AI within the payroll function has benefits for the business as well as the function's employees. Intelligent automation, which combines technologies such as BPM² , workflows, RPA,³ ,AI, and generative AI, will streamline and advance process automation, growth, and decision-making.

However, even though AI offers improvement opportunities and seems to address some needs, it also brings significant challenges for employers, especially in terms of ethics and change management.

What Challenges Does This Integration Bring?

Respect for Ethical Values and Fundamental Rights

AI raises major new questions about the protection of fundamental rights and ethics.

With the implementation of the European AI Regulation (RIA)⁴ on August 1, 2024, the first regulation aimed at governing the development, marketing, and use of AI systems that may pose risks to health, safety, or fundamental rights, companies will need to adapt. However, its application will be phased in.

This RIA is not meant to replace the requirements of the General Data Protection Regulation (GDPR), which will continue to apply to the processing of personal data. Its goal is to complement it by setting the necessary conditions for developing and deploying trustworthy AI systems.

Improper use of AI exposes the company to real risks of personal data leaks. Setting clear guidelines for its application in the company, such as integrating specific rules in internal regulations or IT charters, and collaborating with experts on the subject, is crucial to ensure proper use.
 

Training and Adapting Employees to AI

Any transformation project has an impact on the organization, processes, and working methods within the company. Therefore, introducing AI requires accompanying teams through this new digital transition.

To do so, appropriate tools should be implemented as part of the change management process, especially regarding training, which should cover both the technical aspects of AI and how to interpret the generated data for use.

With the development of automation and AI integration, payroll professions will evolve profoundly. Over time, payroll professionals will need to develop new skills in data and AI to leverage new technologies and improve their effectiveness.

Our Advice and Recommendations 

It is essential to understand these new technologies to figure out how to strategically integrate them to optimize payroll management. Reviewing payroll/HR processes may also be necessary to fully benefit from these innovations and improve efficiency.

However, AI cannot replace human expertise; it complements it by improving process efficiency while freeing up time for strategic tasks. Human intervention is still needed to supervise AI.

(1) Intelligent conversational assistant for employees.
(2)Business Process Management (BPM), which takes a strategic approach to processes and operations for optimization and adaptation.
(3)Robotic Process Automation (RPA), which automates repetitive tasks by transferring data between different information systems.
(4)Official Journal of the European Union (JOUE) publication on July 12, 2024, and entry into force on August 1, 2024.