The changing face of payroll

The latest REC/KPMG survey revealing UK vacancies at their lowest since 2020 isn’t just another market indicator – it’s a wake-up call for the payroll and reward industry, demanding an evolution from transaction processors to business partners.

The slowdown in permanent hiring and the sharp decline in temporary billings paint a clear picture of market uncertainty. Yet this cooling presents an unprecedented opportunity for payroll and reward professionals to demonstrate their strategic value. With starting salaries showing their slowest growth since early 2021, we’re entering a period where sophisticated reward strategies will matter more than process efficiency.

April’s upcoming increase in employer National Insurance contributions adds another layer of complexity to an already challenging landscape. While some might view this as merely another compliance hurdle, it could be seen as an opportunity to reimagine reward structures. The £25 billion additional government revenue expected by 2029 through these changes will fundamentally alter the cost basis of employment, pushing organisations to think more creatively about their total reward offerings.

The Bank of England’s recent rate cut to 4.5% signals their concern about economic growth, but it also creates space for innovation in traditional approaches to salary and benefits. The rising availability of candidates, coupled with increasing redundancies, suggests a need to move beyond simple salary benchmarking to more sophisticated total reward approaches.

For too long, payroll has been seen as a back-office function, focused solely on ensuring people get paid accurately and on time. But in today’s complex environment, with its mix of economic uncertainty, regulatory changes, and shifting workforce expectations, payroll must step forward as a strategic advisory function. It will help organisations navigate these challenges while maintaining both cost control and employee engagement.

The current market conditions demand a fundamental rethink of how we approach reward strategy and the cooling market could be an opportunity to demonstrate how sophisticated payroll and reward strategies can drive business success. The organisations that will thrive in this environment will be those that recognise the role of payroll and reward in navigating these challenging times.

The path forward requires embracing the expanded role of payroll and reward, turning current challenging market conditions into opportunities for sustainable growth and success.