2024 Recap: 5 Payroll Trends That Shaped This Past Year

The payroll landscape in 2024 has seen a remarkable transformation, driven by advancements in technology, especially the rise of AI-powered tools. Companies are increasingly adopting these innovations to streamline payroll processes, enhance accuracy, and support compliance. Throughout the year, key trends have emerged, reshaping how businesses handle payroll, from integrating with broader HR systems to embracing end-to-end solutions. 

These shifts are a response to companies’s need to optimize operations, improve employee experiences, and stay competitive. Below, we explore five payroll trends that defined 2024 and continue to shape the future of payroll management.

1: Average Pay Increases Drop to 3.6% in 2024

One of the key payroll trends in 2024 is the gradual slowing of pay raises, a shift that is expected to continue into 2025. According to compensation software firm Payscale's latest Salary Budget Survey, employers are budgeting for an average 3.5% pay increase in 2025. This marks a slight dip from the 4% and 3.6% increases seen in 2023 and 2024, respectively. 

“Given the stabilization of inflation and the easing of labor market conditions, we’re seeing a slight reduction in planned salary increases for 2025, though figures are still above the 3% pre-pandemic baseline that employees have come to expect,” Ruth Thomas, chief of research and insights at Payscale, told the Society for Human Resource Management (SHRM).

Although these increases remain above pre-pandemic levels, the trend signals more cautious wage growth as employers balance compensation strategies with broader economic conditions. Business owners will need to focus on managing wage expectations while maintaining competitiveness in an evolving labor market.

2: 'Technology-Driven' Payroll Solutions Gain Momentum

In 2024, a notable trend emerged: the growing popularity of technology-first payroll solutions. These systems, primarily driven by software and automation, minimize the need for human intervention, allowing businesses to streamline their payroll processes. 

Ben Eubanks, Chief Research Officer at HR consultancy Lighthouse Research and Advisory, observed, “I’ve seen more truly global solutions start to appear in the last year or two are technology-led, not service-led.” This shift highlights a growing preference among employers for payroll platforms that let technology handle the heavy lifting. 

Experts argue that these solutions are not only faster but can also help reduce compliance risks by automating complex payroll tasks. For small businesses, the impact can be transformative. 

Nearly 42% of small business employers still rely on DIY or homebrew payroll solutions, which are often time-consuming, prone to errors, and lack comprehensive features. Switching to a technology-driven payroll platform can significantly improve efficiency and accuracy, marking a crucial turning point for businesses seeking to modernize their operations. 

3: The Shift Toward Integrated HR and Payroll Solutions

As businesses look for ways to streamline operations, the demand for a single-source solution integrating payroll with broader business functions (especially HR) has surged. Employers now expect their payroll systems to seamlessly connect with other key HR processes, allowing for a more efficient and cohesive experience across the board. 

However, many businesses are hesitant to abandon familiar systems. Nearly a third (29%) have been using the same payroll technology for over a decade, making it clear that while innovation is appealing, reliability, and familiarity remain crucial. 

This trend is not just about improving payroll but about improving the entire HR ecosystem. As Gary Anderson, Director of Sales at talent management technology company Criterion, explains “Buyers want to be able to stay with the payroll software they have because they know how that system works, so they want an HR platform that can pass data to their payroll system. The other trend is wanting everything all in one system. Businesses want to buy a full human capital management solution that has everything in it, including payroll.” 

The future of payroll is undeniably tied to integration - creating systems that not only handle payroll efficiently but also support the broader HR and business needs of today’s organizations.

4: GenAI Continues to Make Inroads into Payroll

After the initial hype cycle in 2023 and early 2024, the expectations of AI completely transforming payroll have tempered, and the focus has shifted towards more practical and reliable use cases. 

For example, AI is becoming commonplace in payroll technologies to automate data entry and reduce errors. By cross-referencing and validating data from various sources, AI helps ensure that payroll calculations are accurate. This is important, as accuracy remains one of the most commonly cited issues with payroll; nearly a third (32%) of small business owners confess to having made at least one payroll mistake (and those are just the ones admitting it).

“Validating paychecks is a primary use case for AI,” says Greg Pridgeon, SHRM-CP, a senior analyst for Forrester. “There can be a strong ROI for using AI in compliance, especially in those regions of the world where an organization might not have a lot of compliance expertise.” However, AI should be used carefully, as over-reliance on automation without proper oversight can lead to compliance issues or errors if not properly monitored.

Is it possible AI could eventually replace the payroll function entirely? Possibly. “It’s not hard to envision a near-term future where employee work time is calculated and payroll is run with little to no human intervention other than handling exceptions,” Pridgeon argues.

Not everyone agrees, however. Matt Hillier, EVP for products at CloudPay, points out that AI is just a tool. “It is still ultimately technology and, for the time being at least, there must also be human involvement,” he writes. In particular, because GenAI doesn’t actually have the ability to think for itself, it cannot produce compensation-related strategy or analysis—key elements of any payroll program in a competitive talent marketplace.

5: The Growth of Self-Service Payroll Solutions

Enabling employees to handle many aspects of their payroll experience themselves is hardly a new payroll trend, but the growth of AI and ‘technology-led’ solutions, as described above, is pushing the boundaries of what employee self-service (ESS) means by broadening what the platform can do by itself.

ESS platforms have long allowed employees to access and update their payroll details, view pay stubs, manage tax information, and handle benefits enrollment, all without needing to go through HR staff. Now, however, AI-powered tools like chatbots and virtual assistants can provide much more advanced and personalized assistance. This reduces the administrative burden on HR departments while allowing employees​ to handle a greater range of needs then and there.

Ready to optimize your HR operations and boost business productivity? Consider partnering with CoAdvantage, a nationwide Professional Employer Organization (PEO). With our comprehensive and cost-effective HR solutions, including but not limited to: HR administration, HR technology, workers' compensation management, and tailored health insurance packages. From payroll to compliance and risk management, we've got you covered. 

Let us handle the complexities of HR management so you can focus in growing your business. Fill out the form below to discover how CoAdvantage can support your company's success!