To succeed in 2025 means doing more than just keeping the status quo.
New payroll trends are revealing a potential for you to get more than just paying your employees. Payroll platforms are opening the way for businesses to support different workspaces and employee types, different and growing pay total arrangements, and meet the desires of employees to get more quickly to accessible assets and pay-related information.
Staying updated on these changes is not just an issue of convenience. For business leaders to stay competitive in this new era they need to embrace new technology to help support the retention of employees and keep everyone compliant, and with the right mindset, HR technology and innovative payroll solutions can help achieve this goal.
11 Payroll Trends Every Business and HR Leader Should Know About in 2025
As we end the year, here is how payroll trends for the year 2025 can make paying employees go from back-office function to competitive advantage.
Real-Time Performance Data Payroll Trends
According to the 2025 Priorities for Business Leaders study, more than 70% of businesses pinpoint growth as their biggest challenge — and your payroll data could be the key to tapping that growth potential.
Payroll platforms can do so much more than safely get cash into an employee’s bank account these days, including sophisticated systems that integrate with analytical tools to provide you real-time insights into labor cost, overtime trends, enterprise-wide compensation patterns, and more! Combined with innovative business principles, these up-to-the-minute insights give you the power to base decisions on data relate to staffing, growth, and resource allocation.
Workplace Flexibility and Better Benefits
As we head into 2025, companies of every size understand that employee retention is about more than just a paycheck. Close to half of organizations are paying up to keep staff, but employers are also doubling-down on flexible work arrangements and new and improved benefits. Perhaps most significantly, the majority of business leaders indentify employee well-being — physical, financial and mental — as their #1 priority this year.
The trick for companies is striking the right balance. You’re not looking to replace human expertise, but AI can absorb the laborious, tedious, and complicated work that takes so long to complete, allowing your payroll team to spend less time on the mundane and more time on big picture decisions and doing what your employees want: delivering, building trust, and connecting with them.
Changes to Wage and Hour Regulations
Wage and hour compliance alone is over 5 hours per month for small businesses. 1 The most important regulatory concern for employers is recordkeeping and documentation, as well as data privacy protection (both close seconds).
Federal and state regulations shift continuously, adding to the challenge of remaining compliant. In fact, the recent news regarding overtime regulations exemplifies the volatile quality of compliance requirements.
Another example would be the Department of Labor’s 2024 Overtime Rule, which would have dramatically raised the salary thresholds for the Fair Labor Standards Act white-collar and highly compensated employee exemptions and would have affected about three million employees, was vacated by a federal court decision in November 2024. The salary thresholds for these exemptions have returned now to their 2019 levels, how quickly standards can turn.
Meeting Pay and Business Demands in an Uncertain Economy
Economic uncertainty is top of mind for business leaders in 2025, with 86% of respondents reporting this as their number one business challenge for the upcoming year. With inflation, rising operational costs and questions about profitability, it’s hard to meet payroll and other providences for the business. The specter of layoffs, along with continued uncertainty about inflation, may act as a disincentive for business owners who might otherwise be tempted to offer sign-on or retention bonuses and large pay increases to employees.
The sheer burden of dealing with administrative HR issues compounds the stress, with one in three leaders spending over 10 hours a week on it. These hours will best be spent on their strategic planning and growth initiatives — particularly during uncertain economic periods.
Faster Payroll Processing
The acceleration of payroll technology and automation have made it possible for companies to process payroll more easily and with more accuracy. Those who learn how to capitalize on this growing trend in the payroll industry can, for instance, implement same-day pay for employees. Faster processing capabilities also give timely reporting to management. With quicker access to real-time data, HR and leadership can collaborate sooner to identify trends or payroll mistakes and respond accordingly.
A particular area of exciting progress in this space is the move to front-end reviews of payroll, well in advance of any taxes and other withholdings. Doing front-end reviews allows you to verify that payroll is hitting its marks before leaving the shop, rather than processing batches of checks and discovering errors on the back end that require time to fix.
Revolutionary Payroll Functionality and Integrations to HR
With 2025 around the corner, many companies are either considering or implementing outsourcing to integrate payroll and HR functions, such as:
- Payroll processing
- Benefits administration
- Recruiting
- 401(k) tax recordkeeping
Outsourcing payroll offers much more than just basic processing make advantages. Companies claim fewer errors, more productivity, lower costs, better analytics, and better compliance. The true value is in establishing a strategic partnership early in the process that makes payroll management easier and more affordable later on.
Integrated payroll and HR technologies and payroll delivery systems can further serve the lifeblood of your business strategy. Back-to-basics principles around pay — sourcing and delivering pay transparency, offering benefits that play into work-life balance, or simply letting employees get paid quicker — could take you really far in building loyalty and retaining employees.
Earned Wage Access (EWA)
Payday isn’t just concerning how much — it’s concerning when. Earned wage access (EWA), a payroll service that allows employees to access a portion of their wages as they become available, before payday, has gone from an innovative perk to a mainstream benefit.
This on-demand payroll service usually charges a small fee, paid by the employee.
Either way, the perk helps employees get a better handle on their cash flow, which may help improve their cash management processes, reduce stress and lead to better performance and engagement at work. On-demand pay is one way you can demonstrate your commitment to helping your employees protect their financial wellness.
Paying Multiple Types of Workers – Classifying and Paying a Diverse Workforce
Your workforce might now be unbound by geography or traditional employment models. From offering remote and hybrid work options, to hiring your employees and independent contractors, you’re able to grow and shrink your team depending on business functions. But alongside the opportunity, it opens up payroll complexities that demand attention to detail.
For instance, employees have taxes withheld from their paychecks, and businesses must pay the employer’s portion of Social Security, Medicare and unemployment taxes. But you do not withhold or pay taxes for independent contractors.
Even so, you need to keep tabs on contractor earnings and inform the IRS of the data on a 1099-NEC tax form — if any of the contractors earned more than $600 in a calendar year. At the same time, you also have to issue Forms 1099 to independent contractors on or before January 31 each year—they will cover the previous calendar year.
And whether you have a workforce of employees, independent contractors or some combination of the two, classifying and compensating your workers properly can help safeguard your business from penalties. A quality payroll services partner with strong payroll tech can manage payment for many types of workers and payment needs for your business, all while working to minimize your risk of noncompliance.
Pay Transparency
Equal pay laws are in place in almost every state, but laws that mandate companies to disclose pay are a more recent development. By 2025, 14 states and 7 local jurisdictions will have mandates requiring companies to comply with pay transparency rules. Other states have similar pending legislation. The rules differ by state but share a common goal: To create more equitable workplaces through open discussion about pay.
Progressive companies are realizing that transparency is more than simply a legal requirement — it’s essential to maintaining a competitive edge in today’s hiring landscape. Having open conversations about pay transparency enables employees to see how the company’s compensation plans relate to them. We can share pay ranges or general pay guidelines by position, seniority, length of service, etc.
Data Security
Cybersecurity is among the top business priorities for 77% of mid-sized companies this year. 1 Implement best practices to secure your data, whether it’s physical documents or electronic records. The Federal Trade Commission has a guide for keeping your information safe, including:
- Physical Security: Paper documents with personally identifiable information should be stored in locked rooms or in a locked file cabinet. Restrict employee access to only those with a business need. Limit the number of keys issued and to whom.
- Electronic Security: Use encryption to protect sensitive data being transmitted via public networks like the internet to company-approved third parties. So consider encrypting all email transmissions inside your business.
- Firewalls: Use an installed firewall to break the connection between your network and the internet and keep it safe from hacker attacks.
- Authentication: [482] promote strong passwords and multi-factor authentication
- Laptop Security — Prevents downloading of unauthorized software.
Since payroll systems hold some of your most sensitive information, protecting employee data is a must. Even a single breach can result in vast monetary losses and damage to reputation.
Cloud-Based Payroll Technology
Cloud-based payroll option transitioned from an innovative alternative to a business necessity. If you haven’t switched to a cloud-based program yet, it’s time. They might provide real-time access from any location, automatic updates to tax tables and compliance requirements, and scalability that expands with your company.
Cloud-based payroll is more than just a means to process paycheques when combined with the right provider — it paves the way for future growth, while offering flexibility and security to meet your business needs.
Getting Ready for the Future of Payroll
Since payroll continues to evolve, new technologies, such as AI, flexible payment options, enhanced security measures and cloud-based solutions, will shape the future of payroll. To keep up, you’ll have to do more than upgrade legacy systems.
Be aware of these payroll trends as you close out your year-end payroll obligations and establish the groundwork for the coming year. If you’re ready to give the latest payroll solutions a try for your and your employees, The Payroll Company will help turn payroll into a business strategy that create long-term resiliency and success.
