55% of companies say payroll reform can ease financial stress: ADP report

Amid the inflation, geopolitical tension, technological and labour market shifts, employees financial being has become a key focus for HR and payroll departments in 2025. According to a report by the "Future of Pay in India 2025" by ADP, companies have identified that financial stress a major factor, impacting employee productivity, engagement and retention. 46 percent of the organisations in the country have identified the expansion of financial well being programmes to support their workforce.

Notably, majority of the business leaders (55 percent) have acknowledged financial stress can be reduced by overhauling the payroll system.

As per the findings of the report, companies are adopting flexible pay models salary-linked financial support and personalised benefits aligned with employees’ life stages. Nearly one-third (30 percent) of organisations are introducing flexible pay models as the workforce demands more financial flexibility, such as performance-based compensation and access to loans.

However, 65 percent of payroll leaders say avoiding compliance risk is very challenging. Payroll teams are under mounting pressure to navigate evolving tax structures, multi-state or cross-border regulations, and the upcoming wage code reforms, prompting a shift towards automated governance frameworks and payroll technology solutions.

30% of the surveyed organisations cited scalability and customisation challenges, while 28 percent identifed high costs as barriers to widespread adoption. Consequently, only 12 percent of organisations report having a payroll function fully equipped to support future workforce demands.

To overcome these challenges, HR service use payroll data in compliance and legal decision (29 percent); workforce planning (26 percent), employee productivity (22 percent) and learning and development investments, performance management, talent attraction and market expansion strategy (15 percent).

Further, 82 percent of the respondents acknowledged the pressure, companies are recalibrating budgeting, wage structures, technology utilisation and compliance processes to remain competitive.

"Financial well-being is not merely about increasing pay; it is about empowering employees with the right knowledge and tools. Ensuring employees understand financial, tax and payroll processes when joining the company fosters long-term financial security. Regular coaching and education sessions can further build confidence and enable employees to make informed financial decisions," Managing Director of ADP India and Southeast Asia, Rahul Goyal, said.