Payroll challenges for retail in 2025: what's costing you time, trust and margin

In the retail world, margins are tight, turnover is high, and change never stops. With such a dynamic environment, it’s easy to overlook the hidden inefficiencies buried in payroll. But speak to any HR leader, finance director or store manager, and a familiar pattern emerges: payroll is taking too long, errors keep cropping up, and there’s always a last-minute scramble before payday.

Payroll problems aren’t just admin niggles. They’re quietly dragging down profitability, compliance, and employee trust. And while every retailer is unique, certain payroll challenges consistently show up in specific types of retail businesses. Here’s a breakdown.

Grocery and convenience retailers’ challenges

Multiple roles and locations  

In grocery and convenience retail, employees often work across multiple roles or locations within the same week. Someone might cover tills in one store and stack shelves in another. On paper, it looks simple. But when it comes to payroll, these role changes trigger different pay rates, cost centre allocations, and shift differentials.

Lack of automation

Without a system that can track and automate these complexities, payroll teams end up manually adjusting records. Not only does this waste time, but it also increases the risk of error and makes it difficult for finance teams to understand true labour costs by store or department.

Holiday pay complexity

Holiday pay is another complexity. With so many variable-hour workers, the legal requirement to calculate holiday pay based on the previous 52 weeks can become a logistical nightmare. When retailers get it wrong, it’s not just a compliance issue, it damages employee trust and creates exposure to tribunal claims.

Value and fashion retailers’ challenges

Staff turnover

For retailers in the value or fashion segments, staff turnover is part and parcel of the model. Seasonal peaks demand rapid hiring, often of temporary or agency workers. This creates a revolving door of employment contracts, shift patterns, and payroll inputs.

Lack of payroll processes

What we see time and again is an over-reliance on spreadsheets, emails, or even WhatsApp messages to record hours and absence. Store managers aren’t always trained in payroll processes, so data arrives late or in the wrong format. Payroll teams are left firefighting. Errors creep in. Pay queries spike. And your people lose faith in getting paid correctly.

Auditability becomes a problem, too. With patchy records and manual workarounds, finance leaders often struggle to produce clean reports or explain variances. It’s a hidden burden that chips away at operational confidence.

Furniture, electrical and commission-driven retail

Calculating bonus payments

In commission-led sectors like furniture, electricals or telco retail, payroll gets even more complex. Bonuses are often calculated manually based on spreadsheets from sales managers or branch leaders. This creates room for interpretation, delay, and dispute.

When bonus payments are late or wrong, it doesn’t just frustrate employees, —it affects motivation and performance. In these sectors, trust in pay accuracy directly influences your sales floor.

Cost reporting

Another issue is payroll cost reporting. Many finance teams want to track labour cost per store or region, but outdated or disconnected systems make that difficult. As a result, payroll is recorded as a lump sum rather than a meaningful operational metric. That limits insight and slows down decision-making.

Mid-sized national retailers:

Growing pains

When retailers grow, their problems don’t disappear, they just get more complex. Mid-sized businesses often have thousands of employees, spread across hundreds of sites, but still rely on legacy payroll systems or manual processes.

This is where risks around pensions and RTI (Real Time Information) become acute. Auto-enrolment opt-ins and opt-outs, late starters, leavers and adjustments all need to be tracked accurately. When these aren’t automated, payroll teams end up chasing data across systems or making manual fixes that increase the risk of fines or HMRC scrutiny.

Manual sign-off points

Manual payroll sign-off is another pressure point. In many businesses, HR, finance and operations all need to approve payroll data. But without role-based workflows or integrated platforms, that approval chain is powered by emails, spreadsheets and shared drives. It’s slow, it’s fragile, and it creates stress at the very moment accuracy matters most.

Why it matters to the business: from payroll pain to performance risk

It’s easy to view payroll challenges as back-office noise. But they touch almost every metric that matters to a retail leader.  

Delays, manual fixes, and poor data hygiene drive up costs, reduce margins, and strain resources. Compliance risks like pay errors and bonus disputes can lead to fines and reputational harm. Late or incorrect pay damages trust, increases turnover, and weakens the employer brand. Demotivated staff and disputes hurt performance, cross-selling, and growth, ultimately impacting revenue.

Manual processes eat up time that could be spent on strategic initiatives. Inaccurate pay damages morale and increases staff churn. Compliance errors risk fines and reputational harm. And a lack of visibility into payroll costs makes it harder to control spend or optimise performance at store level.

When payroll is modernised, with integrated systems, real-time data, and automated workflows, those problems start to disappear. Finance leaders gain clarity. HR regains capacity. Line managers gain confidence. And most importantly, employees get paid correctly, on time, every time.

In a sector where margins are tight and change is constant, payroll isn’t just a process. It’s a strategic lever. And retailers who treat it that way stand to gain not just operational efficiency, but real competitive advantage.

To learn more about streamlining your operations, download our latest guide for retailers. You’ll discover:

• How technology can boost morale, reduce turnover, and drive performance
• How to leverage AI and automation to cut waste, optimise scheduling, and reduce operational strain
• The benefits of real-time payroll for retailers