Australian payroll faces pressing AI skills gap as sector lags in adoption

Australian employers face significant challenges in their payroll operations, as a new industry report reveals a major skills gap in artificial intelligence (AI) knowledge within the sector. According to the Australian Payroll Association's 2025 Payroll AI Adoption Report, 70% of payroll professionals admit to lacking understanding of how AI functions in payroll systems, making it the highest priority capability gap identified.

Skills shortage

The report draws on responses from 856 employers and outlines systemic issues within payroll management in Australia. Nearly half of organisations surveyed-49%-have yet to begin adopting AI in their payroll departments. This is despite growing awareness, with 74% of professionals acknowledging that AI could improve compliance and reduce error rates in processing payroll.

The data points to inadequate training across the sector. Payroll teams are struggling with increasingly complex workplace awards, enterprise agreements, and regulatory frameworks. Persistent issues surrounding wage underpayments-and resulting wage theft scandals-highlight the sector's vulnerability. The problem is compounded by insufficient skills development provided to payroll staff.

Adoption barriers

Payroll professionals cited the inability to understand AI's integration in payroll systems as their main skill deficit. Only 5% described themselves as "very confident" in their understanding of AI applications for payroll. Data privacy and security remain primary concerns, with 71% naming these as risks, while 46% feel they do not have the internal expertise to evaluate potential AI solutions properly.

Adoption rates differ by organisation size, with 46% of large enterprises (over 1,000 staff) either piloting or implementing automation and AI agents. Small and medium-sized businesses lag significantly, held back by lower confidence and knowledge barriers.

Specialist agents

Industry experts argue that generic AI tools are inadequate for payroll's unique compliance needs. The move is towards subject matter agents-AI systems tailored to the specifics of Australian payroll legislation and awards.

"AI will not replace payroll professionals, it will elevate the work we do. But we must close the skills gap and demand more support and clarity for payroll teams. This is not a moment to wait and see, it's a moment to shape the future of payroll," said Tracy Angwin, Director, Australian Payroll Association.

Subject matter agents are designed to provide real-time guidance on navigating complex legislation, flagging risks before payroll is processed, and aligning with both Federal and State requirements. Such agents work alongside staff, aiming to reduce human error and pre-empt compliance failures.

Beryl's example

Beryl, an AI-powered payroll agent, has recently received recognition in the form of an AI Innovation Award at the Australian AI Awards. Beryl is engineered as an assistant specifically trained in Australian payroll rules. It delivers tailored, immediate guidance to payroll professionals dealing with ambiguous legislative questions or complex payroll calculations.

"Beryl represents what the future of payroll looks like. It's not about replacing payroll professionals, it's about giving them a specialist AI colleague who never sleeps, never takes leave, and helps them deliver perfect payroll every time," said Angwin.

Users of Beryl have reported improved accuracy and increased team confidence. Payroll officers using the agent spend less time referencing official websites or phoning government agencies, and more on high-value tasks like exception management and strategic analysis. Compliance risks can be addressed before submissions to avoid discovery during audits.

Investment trends

The report shows that 10% of organisations are actively implementing or planning AI projects in payroll, and 28% are engaged in related discussions. Key anticipated benefits are enhanced compliance and confidence (45%), reduced manual workload (41%), and increased accuracy (36%).

Recommendations

The Australian Payroll Association is calling for investment in training focused on AI literacy, data analysis, and compliance. It recommends starting with targeted pilot projects-such as using subject matter agents for payroll support-and prioritising specialist AI solutions over generic alternatives. The report also stresses the need for clear communication from software vendors around the capabilities and limitations of AI integrations.

Payroll remains a critical function in Australia, managing a sector estimated at AUD $1.2 trillion, according to recent ABS statistics. As AI continues to become more integrated into payroll processes, the impact on compliance, staff confidence, and operational resilience will be closely monitored by employers and industry leaders alike.