Yellow Canary’s 2026 State of Payroll Compliance Report reveals highlights widespread AI use in payroll compliance, but finds that assurance still relies on governance, audits, and human judgment.
SYDNEY, AUSTRALIA – FEB 2, 2026 - New research shows Australian organisations are increasingly adopting automation and artificial intelligence to manage payroll compliance at scale. The findings show that confidence in payroll outcomes depends on how organisations govern and apply technology in practice.
As payroll environments grow more complex, driven by evolving awards, changing working patterns, and increased regulatory scrutiny, organisations are turning to RegTech to deliver consistency, visibility, and control. However, the data shows that while technology adoption is widespread, confidence in pay accuracy remains uneven.
Insights from Yellow Canary's 2026 State of Payroll Compliance Report reveal that nearly two thirds (64%) of organisations say they are confident in their payroll compliance. At the same time, more than a third (36%) remain unsure they are paying employees correctly. These results indicate that while capability continues to expand, certainty has not yet followed at the same pace.
Organisations accelerate technology payroll processes
More than three in four organisations (77%) already use artificial intelligence in some form to support payroll compliance.
Organisations most commonly use AI to assist with scale and complexity alongside existing payroll and compliance processes, including monitoring payroll data to detect compliance issues (42%), tracking legislative and regulatory changes (36%), and reviewing employment contracts against legal guidelines (35%).
According to Marcus Zeltzer, Founder and Managing Director at Yellow Canary, organisations build confidence in payroll compliance when they pair technology with regular, structured audits.
“Automated audit platforms support ongoing assurance,” Zeltzer said. “They test whether pay outcomes reflect actual working arrangements.”
Looking ahead, 57% of employers plan to implement automated payroll audit technology. However, 43% have no immediate plans, highlighting differences in adoption pathways, resourcing, and organisational readiness.
Despite increased use of advanced tools, most organisations continue to apply layered compliance approaches. Nearly half rely on built in payroll system reports (48%) and internal audit functions (47%), while 46% now use external audit technology to improve coverage and visibility across pay outcomes.
This mix of approaches highlights the continued use of established controls alongside newer technologies in managing payroll compliance.
Technology enables insight. Governance builds confidence.
According to Zeltzer, technology has improved organisations’ ability to manage payroll complexity, but assurance depends on how teams apply insights in practice.
“AI has become an enabler in payroll compliance. It can analyse large volumes of data faster and make sense of complexity at scale,” he said. “But technology alone does not create assurance. It needs a human in the loop.”
As awards, classifications, and working patterns continue to evolve, automation and AI give organisations unprecedented visibility into pay outcomes. However, visibility alone does not resolve risk unless organisations act on insights consistently and with accountability.
“Bad data in, bad data out. Technology is a powerful enabler, but it requires strong governance and oversight,” Zeltzer said.
Organisations shift from periodic reviews to continuous assurance
The research shows organisations increasingly view automated payroll audits as a governance essential. When implemented effectively, automated audits shift payroll compliance from a periodic, retrospective activity to an ongoing source of insight into accuracy, coverage, and root causes.
This shift allows organisations to identify issues earlier, address systemic problems, and reduce the likelihood of errors escalating into larger compliance failures or remediation programs.
“Payroll audits must be scheduled regularly. Waiting until an issue arises is too late,” Zeltzer said. “More frequent audits allow organisations to identify issues earlier, reduce risk, and ensure employees are paid correctly.”
Automated audits do not replace payroll and compliance professionals. Instead, they allow teams to focus on judgment, investigation, and decision making, while technology manages scale, repetition, and data analysis.
The findings reinforce a broader principle: organisations build confidence by augmenting human expertise with well governed, scalable technology, rather than treating automation as a substitute for accountability.
As RegTech adoption continues to accelerate, organisations that invest in both technology and governance frameworks are better positioned to move from reactive compliance to proactive assurance.
About the 2026 State of Payroll Compliance Report
The 2026 State of Payroll Compliance Report draws on insights from 540 payroll, finance, and compliance leaders across Australia. The research examines confidence levels, audit practices, and how organisations use automation and artificial intelligence to manage payroll compliance.
Download the 2026 State of Payroll Compliance Report here.
About Yellow Canary
Yellow Canary is a workforce compliance technology company that helps Australian businesses detect, diagnose, and rectify payroll, superannuation, awards, and leave errors with automated AI-powered payroll audits.
