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The waiting is the hardest part: How to calculate the ROI of payroll automation 

March 6, 2026
Drew Maginn

Most professionals can’t get through a workday without some mention of artificial intelligence (AI) and its potential to transform their business practices. And when organizations decide to test out AI products, they often start in the finance department with payroll cost reduction tools. And while immediate payroll automation benefits like task efficiencies and cost savings are often promised, are organizations really getting the return on investment they expect? Let’s find out.

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Are early adopters of AI already seeing a return on their investment?

When it comes to AI adoption and impact, the line between truth and fiction is often blurred. In a 2025 survey by KPMG Canada, 93 per cent of Canadian organizations are using AI in some shape or form, but only two per cent reported that they are currently seeing a positive return on their investment. These returns are even lower among small and medium-sized organizations, leaving many unsure of how to proceed and questioning whether they can wait months or even years to see the benefits of AI automation when operating in a challenging economic environment. 

Exploring your options: What payroll tasks can be automated using AI?

If you’re interested in incorporating AI into your payroll practices, there any many opportunities available. These include the below.

  • Performing data analysis and calculations: Automated tools can review your data to ensure that your calculations are accurate in areas such as time sheets (e.g., pay inconsistencies, missing hours worked), earnings and deductions (e.g., statutory deductions, benefits, overtime) and adjustments (e.g., retroactive pay).

  • Ensuring proper compliance: Automated tools can ensure that payroll calculations and remittances comply with federal and provincial legislation, including validating that any changes to rules are appropriately interpreted and applied to your systems.   

 

  • Managing and preventing errors: Automated tools can detect any discrepancies in payroll processing, such as highlighting unusual changes in pay, identifying missing deductions or flagging duplicate entries. 

 

  • Supporting reporting and reconciliation: Automated tools can compare payroll across different periods and prepare year-end reports to assist with tasks like preparing T4 statements and returns for the Canada Revenue Agency.  

 

  • Providing employee assistance: Automated tools, like chatbots, can answer common payroll questions or connect employees with an appropriate staff member depending on the nature of their question.

Understanding the impact: Measuring payroll automation benefits for finance teams

If you choose to deploy automated tools, the return on investment can be measured in a variety of ways.

  • Employee time savings: Comparing time spent by employees per payroll cycle before and after implementing payroll automation. This allows you to measure the impact of automating certain tasks or processes, as well as help to identify further areas for integration. 

 

  • Employee opportunity gains: If employees are spending less time on certain tasks without impacting the accuracy and schedule of payroll, they can be reassigned to other areas that need more attention and support (e.g., financial forecasting, training and development), which can increase productivity, retention and overall contributions of these employees.

 

  • Structural changes and cost savings: In some instances, where time savings are significant and employees may not have the required skills to be redeployed to other areas of the business, certain positions may be eliminated or combined, leading to overall cost savings for your organization.

  • Error and correction savings: To measure benefits in this area, compare instances of errors and corrections pre- and post-implementation of automated tools (e.g., fewer payroll re-runs, corrections, compliance penalties).

Results may vary: Linking payroll automation investment to operational savings 

While many organizations are hoping for an immediate return on investment when they turn to AI for support, the reality is that the results may vary significantly across different organizations. When you start thinking about the impact of these tools, keep a few things in mind to temper your expectations.

  • Most automation tools can’t live up to their promised benefits (at least not right away): Many of the claims about the high return on investment of AI tools come directly from vendors and service providers. Keep this in mind when presented with “case studies,” as they are likely going to position these products in an extremely positive light.

    • Results will vary based on your level of integration: The returns on automated tools may depend on how deeply you’ve integrated them into your processes. For example, organizations that successfully automate areas of payroll alongside other connected functions like human resources are likely to see more time and cost savings than those who are using AI sparingly.

  • Size matters: Automation is likely to lead to higher returns in larger organizations with greater payroll complexity and larger payroll teams. For small and medium-sized organizations where only a few employees support payroll and related functions, the gains may be smaller and harder to quantify right away. 

Even though it may feel like conversations around AI and automation have been happening for a long time, the reality is that many of these tools are still relatively new and their impact isn’t fully known. For organizations investing significant time and resources into these tools, it’s important to have a plan to measure their impact while keeping your expectations grounded in reality. And while it may feel uncomfortable investing in automation without a guaranteed return, at least you can be reassured that you’re not the only organization figuring things out as you go.  

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