Strategies for Successful Payroll Transformation

Organizations are increasingly integrating key aspects of digital transformation into their corporate strategies to drive business growth, an industry expert said July 9.

By implementing core transformation strategies, such as enhancing employee experience, optimizing built-in quality control mechanisms, and improving operational efficiency, payroll can achieve greater efficiency, according to Teresa Smith, director of the human insights HCM strategic advisory group at UKG.

Smith spoke at PayrollOrg’s 2025 Virtual Congress.

Understanding Payroll Transformation
Payroll is undergoing radical transformation, Smith said. With various internal and external stakeholders, including HR, Finance, employees, and government bodies, there is an urgent need for payroll professionals to adopt robust strategies to enhance payroll efficiency and productivity, Smith continued.

“The journey of transformation is personal,” Smith said. Payroll transformation begins with developing a clear vision for your payroll department and mapping out strategies to achieve those goals, she said.

One of the biggest challenges in the process of payroll transformation is the alignment of risk and responsibility, particularly concerning data accuracy and compliance, Smith said.

“Payroll has significant responsibility for the financial wellbeing of an organization and its employees,” Smith said. With minimal tolerance for errors, it is vital to rethink payroll processes to ensure efficiency and accuracy, as data inaccuracies can adversely affect both organizations and employees, she added.

A true payroll transformation should not only streamline payroll processes but also enhance employees’ experiences, Smith said. By approaching payroll with a fresh perspective, organizations can unlock new opportunities, refine processes, and improve employee experiences, she added.

The Payroll Maturity Curve
Payroll professionals need to be more strategic, Smith said. The strategic payroll professional utilizes data to help senior management make better business decisions and improve employee experience, she continued.

There are five levels in the payroll maturity curve, Smith said. At the first level, payroll relies on manual entries and paper-based systems that are poorly integrated, leading to delays and errors.

At the second level, most processes are automated but not well integrated, resulting in frequent errors and delays. While at the third level, automation and integration are present, yet issues with delays and errors persist, she said.

At the fourth and fifth levels, known as the strategic and visionary payroll phases, systems are fully integrated, delivering strategic insights and actively pursuing technology that significantly enhances the employee experience, with zero errors and delays, she said.

Payroll professionals should understand where they are on the curve and adopt a strategy that addresses their specific needs, Smith said.

Achieving Payroll Transformation
By striving for strategic or visionary levels, payroll professionals can implement a payroll transformation playbook centered on excellent employee experience, built-in quality, and operational efficiency, Smith said.

Understanding what employees value the most is critical to a successful payroll transformation, she said.

“Employees are expecting more,” Smith continued. By leveraging data, organizations can streamline operations, making employees’ jobs easier and more productive, she said.

To foster engagement and increase productivity, payroll professionals must seize every opportunity to enhance employees’ experience, Smith said.

By building trust, creating compelling employee experience, and automating payroll processes, organizations can lower operational costs and scale efficiently, she said.

“Inaccurate data makes it difficult to assess workforce productivity,” Smith cautioned. Payroll professionals should implement built-in quality control measures to streamline administrative processes, enhance data accuracy, and improve overall efficiency, she said. “Fixing data at the end of the process is expensive,” Smith added.

Operational efficiency is key to payroll transformation, Smith said. By creating efficient payroll data management systems, organizations will drive efficiency, reduce labor costs, enhance compliance, improve employees’ experience, and achieve greater operational efficiency, she added.

“The cost of compliance is a game-changer,” Smith said. Payroll professionals can begin their transformation journey by analyzing their current systems and processes to identify areas for improvement, she said.

By adopting these strategies, payroll professionals can drive transformation within their organizations, Smith concluded.