5 Pay & Compensation Priorities for 2026

The start of a new year always brings a new sense of optimism and energy. For businesses, it is also often the start of a new financial year with new objectives, budgets and projects.

With regards to pay & compensation, the year ahead is anticipated to be financially challenging in terms of managing and improving overall budgets, with the emphasis on ‘doing more for less’.

But there is good news for those involved in managing and running payroll – 2026 will see the significant step forward from being a transactional function to a highly-collaborative strategic business partner.

Through the financial and human resources data that it collates, the payroll teams will not only be able to deliver accurate, timely and transparent pay, they will contribute to critical business planning and budgeting. Through integrated technology solutions, they will also be able to increase their proactivity and value through effectively managing the ever-greater complexities of payroll with fewer errors, as well as contributing to broader business goals.

What can be guaranteed though is that the year will have plenty of opportunities & challenges, and whilst there maybe a few bumps in the road along the way, significant progress will be made in terms of accuracy and efficiency. Here’s our perspectives on some of the priorities for pay & compensation in 2026:

1. Meet the requirements of the EU Pay Transparency Directive

For those companies that fall within the scope of the EU Pay Transparency Directive, they will be required to enable pay comparisons through pay structures which categorise work of the same/similar value. A wide range of data points will be required to be continuously updated and available, including pay ranges, collective agreements and pay progression.

Whilst the required preparation to meet the reporting deadline should be well underway, organisations may be struggling from a technology perspective to ensure all the data is being captured effectively in order to be able to manage, analyse and report on it in the long-term.

From a reporting perspective, this requires organisations to establish a robust data architecture that integrates HRIS, payroll, rewards, and workforce planning systems. Data must be consistently structured, auditable, and traceable to support regulatory reporting, internal analytics, and external scrutiny. In practice, this means implementing standardised job architectures, maintaining historical pay data, automating data validation, and enabling repeatable reporting processes that can scale as reporting requirements evolve

ACTION: Ensure you can accurately manage, communicate and report pay levels and comparisons in a timely manner to meet the June 2026 requirements.

2. Use payroll data to enable better decision making

Processing payroll has traditionally been regarded as highly transactional. However, technology now enables payroll data and analysis to be used for better, and more strategic decision making.

As with all technologies, data structure and data accuracy are critical to running an efficient & compliant payroll. This also helps with budgeting, forecasting, and understanding workforce costs, as well as providing valuable insights for strategic decision-making. And with AI already being embedded in many technologies, the ability to improve accuracy further and reduce timescales is easier to achieve.

Typically the report driven decisions are owned outside the payroll team and it is important that the payroll team proactively reaches out to these teams to understand their need for payroll data inputs and also how they will be merging payroll data with other data for better decision making. This way the payroll team can fine tune their data provision for the best outcome.

ACTION: Ensure you have a clear data management plan that is regularly reviewed and updated to reflect changing requirements.

3. Increase productivity with AI

Technology adoption for pay and compensation is ever-evolving, but for AI, it is quite varied. In theoretical terms, the value and benefits of AI are clear cut (as long as the source data is accurate) – it will bring greater efficiencies and accuracy, as well as enabling further proactivity.

It is important to bear in mind that AI isn’t a single technology, it can be a collection of solutions, orchestrated together to deliver specific outcomes.

Areas where benefits for payroll can be readily achieved now include:

• Intelligent Payroll Insights: AI algorithms now detect anomalies, predict potential errors, and provide actionable recommendations before payroll is finalised. This proactive approach significantly reduces manual checks and ensures greater accuracy.
• Automated Issue Resolution: When issues occur, the system’s new AI features suggest immediate solutions, helping HR teams quickly address discrepancies without delays.
• Enhanced Personalisation: Employees can now access AI-driven, personalised pay experiences. From understanding their pay statements better to self-service.
• Global Compliance and Localisation: Most payroll systems are strengthening their compliance functionality, using AI to automatically adapt payroll processes based on local tax laws and labour regulations across multiple countries.

ACTION: Conduct an evaluation to determine the benefits and impacts of AI across your payroll using a mix of qualitative and quantitative measures.

4. Transition to continuous payroll calculation and real-time data

Unlike traditional payroll processes, continuous payroll allows companies to have a higher level of transparency over their payroll, starting from the first to the last days of any given pay cycle.

Errors are flagged as they happen, payroll cycles are more flexible, and organisations can even offer on-demand pay – an increasingly valuable benefit for employees.

It leads to improved quality, reduced processing time, and less stress, which will ultimately allow your payroll professionals to focus on strategic work in other areas.

The other benefit will be the ability to meet the ever-growing requirements of the regulators, such as HMRC, to provide more regular and accurate data. And dependent upon the cloud-based technology that you have adopted (or are planning to adopt), you may gain further from automated compliance tools alongside your integrated HR and finance systems.

However, the transition to continuous payroll may not be easy, especially for those already managing complex pay arrangements.

ACTION: Develop a plan for how and when your organisation could transition to continuous payroll and the pre-requisites required for it to be successful.

5. Empower your pay professionals for the future

Change – be it pay rates, local employment and tax laws or internal processes – is the norm for pay professionals. However, with the pay function itself changing and evolving, it’s vitally important that the technical and soft skills of its resources also adapt and develop.

There may be team members that are more interested in the tech-enabled aspects of pay and compensation, others may be interested in communicating and collaborating with other functions, such as HR, Finance, Compliance and Management on employee experience and advisory aspects.

Continuous development of your pay professionals is critical alongside building adaptable teams that are well-suited to the fast pace of technology change. It will enable greater confidence across the function (and the business) that it will be able to effectively manage any challenge it is presented with, both now and in the future.

ACTION: Create and implement an effective training & development plan for your payroll function that is reviewed at least every six months.

In summary……

2026 looks to offer many opportunities to deliver new levels of insights, accuracy and efficiency for pay and compensation. The increasing number of system integrations to and from payroll will significantly reduce manual tasks and also enable new insights for other departments, and your organisation as a whole.

However, at the heart of those insights and better decision making will be the data – this will need to be extremely well-structured and managed. Clear ownership and validation are also absolutely critical.

The pairing of modern integrated technology and well-informed pay professionals will bring significant value to any organisation – and a very happy workforce who are paid at a satisfactory rate, accurately and on-time.