10 uses for AI in payroll processing

1. Identify discrepancies

Many employees' hours and pay remain fairly constant from one pay period to the next. AI can alert employees, managers and the payroll team if significant deviations occur during the payroll period.

This capability enables payroll staff to resolve errors quickly and do so before payroll processing begins, avoiding bigger problems later on.

2. Highlight issues in real time

AI can also potentially identify issues as users are entering and submitting them, reducing the amount of errors that make their way to payroll staff. For example, AI can immediately flag an employee entering more than 80 hours worked over a two-week period.

AI can also halt the processing of payroll until the payroll team has received and approved all data, avoiding the possibility of users processing payroll with errors in the information.

3. Process draft payroll runs

A payroll system with AI can automatically run draft payroll runs as data is entered and approved. Doing so enables the software to catch potential issues early and alert the payroll team before the final payroll run is processed.

Doing draft payroll runs saves time later on when payroll staff is trying to get payroll processed and finalized before the deadline.

4. Improve compliance

One of the biggest challenges of running payroll is making sure each employee's pay complies with the regulations for each jurisdiction. International companies, in particular, must ensure their payroll meets each country's, state's or province's tax laws and work-hour regulations.

AI can automatically flag any compliance issues, helping payroll departments continue to meet regulations.

5. Answer employee questions

Employees, managers and payroll team members may all encounter issues or have questions while using payroll software and its associated systems. AI can answer user questions and recommend next steps if applicable.

These capabilities can save time for payroll team members, as they have less questions to answer from employees outside the payroll department.

6. Automate reminders

Two steps in payroll that payroll staff must often complete manually are reminding employees to complete their timesheets and reminding managers to approve timesheets and time-off requests.

AI in payroll software can automatically send out reminders and escalate noncompliance when necessary, saving payroll staff time.

7. Confirm employee core data

Processing payroll requires information from each employee, such as their address, hourly rate or salary, and government ID, such as a Social Security number.

AI can confirm that the payroll software has stored all this information for hires and rehires and make updates when changes take place to an employee's profile.

8. Automatically update benefits

Employees may experience changes in benefits, including when they join a company or experience a life event that causes a benefits switch. AI can automatically adjust employees' benefits costs in the payroll system.

This capability can also be helpful when a company updates its benefits options, which often occurs yearly.

9. Assist with calculations

Payroll staff must complete many calculations during a payroll run, with potential calculations including a terminated employee's final pay, employees' overtime pay, vacation days taken versus earned, and company-specific items, such as investments or loan repayments.

AI can perform these calculations, with the payroll team checking the software's findings.

10. Detect fraud

Unauthorized changes to timesheets, benefits or investments may occur, or suspicious patterns may crop up, such as certain recurring expenses from an employee.

AI can continually review data for unapproved changes or concerning patterns and alert users if the tech identifies any issues.

Eric St-Jean is an independent consultant with a particular focus on HR technology, project management and Microsoft Excel training and automation. He writes about numerous business and technology areas.