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financial loss, data breaches and mandatory regulatory reporting. Finally, talent shortages and knowledge concentration present a growing but often overlooked risk. Payroll expertise is ageing and difficult to replace, with critical knowledge frequently undocumented and limited succession or absence cover in place. FS: From a compliance perspective, one of the most significant changes ahead for many pay teams is the move to mandatory payrolling of benefits. For organisations that don’t already payroll benefits, this represents a major shift in processes, system configuration and internal ownership, and will require careful planning to implement smoothly. A second key risk is the accelerating use of artificial intelligence (AI) in payroll technology and wider workplace tools. While these tools can bring real efficiencies, they need to be adopted with care. Poor implementation or over-reliance on AI for research and decision-making can lead to errors that are time consuming and costly to correct. There’s also a risk that some AI tools are trained on outdated or incomplete information, meaning outputs may sound plausible without being factually accurate. Unless pay professionals engage critically with these tools and make deliberate choices about when and how to use them, well-intentioned use of AI could inadvertently lead to misunderstanding or non-compliance. PU: I think the obvious huge area for risk comes from the multitude of changes contained within the Employment Rights Act. Although the date for the mandatory payrolling of benefits has been pushed back to April 2027, this will still be an area of risk for pay professionals in the coming year. This will require them to ensure they’re fully up to speed with the changes and that their software is ready to handle the appropriate reporting requirements ahead of the 2027 deadline. The annual NMW changes in April also bring their own compliance headaches. This regularly catches companies out when conducting their minimum wage checks as they must ensure that any salary sacrifice schemes in place are still compliant for people whose pay is at or around the minimum wage level. Cybersecurity and data vulnerabilities are a big risk, as payroll holds such sensitive data. Key risks include phishing,
social engineering attacks, human error leading to data breaches and weak access controls in payroll systems. Q: How can organisations scenario plan for payroll technology risks, for example, system failures, cyber breaches or sudden legislative changes? PS: Payroll is a business-critical function which directly impacts employee trust, regulatory compliance and organisational reputation. As payroll technology becomes more integrated and data-driven, scenario planning is essential to manage risks such as system failures, cyber breaches and sudden legislative changes. Effective scenario planning begins with identifying high-impact risk events. For payroll system failures, organisations should map critical dependencies across platforms, vendors and data feeds to uncover single points of failure. Scenarios should test payroll continuity plans, including backup systems, parallel payroll runs, manual payment processes and off- cycle pay capabilities. Processes should be fully documented to ensure teams understand roles and escalation paths before a real failure occurs. Cybersecurity scenarios require close alignment between payroll, information technology, legal and communications teams. Organisations should plan for breaches involving sensitive employee data, testing response actions such as system isolation, regulatory reporting and employee notification. Preventative controls such as role-based access, encryption and audit logging should be reviewed against these scenarios to ensure they’re fit for purpose. Sudden legislative changes can disrupt payroll accuracy and timelines. Scenario planning should focus on agility, monitoring regulatory developments, system impacts and assessing vendor readiness. Maintaining strong vendor relationships will allow for faster adoption. Strong governance underpins all scenarios. Clear ownership, decision- making authority and post-incident reviews help embed lessons learned. Through structured scenario planning, organisations can strengthen payroll resilience, reduce disruption and maintain compliance in an increasingly complex risk environment. FS: Scenario planning for risk is an area where AI tools can be genuinely helpful.
There’s a wealth of established guidance on business continuity and disaster recovery, and AI can help organisations tailor scenarios and plans to their own operating context. That said, it isn’t realistic to plan for every possible event. Effective risk mitigation relies on having a clear, flexible and well-maintained plan that can be adapted under pressure. This includes up to date emergency contact lists, access to key operational information, documented priorities for payroll processing and clarity around decision-making authority during an incident. Ultimately, a plan that’s familiar, usable and regularly reviewed will be far more valuable in a crisis than a perfect document that nobody’s referenced in years. PU: Scenario planning is essential for pay teams for staying resilient when technology fails or regulations shift unexpectedly – we all remember what felt like weekly changes to furlough regulations during the pandemic. Start by mapping out what you see as your ‘critical’ payroll processes, from data input to payment execution. This way, you’ll know what must be maintained in each and every circumstance. Include cross-functional team members immediately (e.g. IT, HR, finance, compliance / risk) to allow a full operational review. Have clear escalation routes and decision-making authority, which allow the plan to be actionable. Look at ‘what if?’ scenarios. A couple of examples could be: ‘What happens if our payroll software crashes on payday?’ or ‘How do we react if HMRC introduces new rules mid-cycle?’ Work through and document the potential impacts, response steps and recovery timelines for each. Have backup / standby solutions in place. Maintain offline payroll templates, ensure cloud providers offer redundancy and have an emergency payment method ready. Communication is key, so define how you’ll notify employees, finance teams and others during disruption to avoid confusion and prevent any potential reputational damage. Finally, test and review. Run regular payroll continuity drills and update plans after major legislative changes or system upgrades. Align your approach with best-practice frameworks such as ISO 22301 (Business Continuity) and ISO 27001 (Information Security) for added assurance.
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