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Are SME workers ready for AI in HR departments?

Published on 17/07/2023 by David Jani

Artificial intelligence (AI) tools in the workplace are a hot-button issue, especially in the human resources (HR) field. Are AI solutions the answer to optimising HR in small to midsize enterprises (SMEs), and are workers ready to shift towards autonomous systems in making staffing decisions?

Workers discuss with management about the use of AI in HR

SMEs have big choices to make about how and when they utilise AI in HR tech. There are already worries among the UK workforce that AI could come for people’s jobs. Companies such as BT and IBM have already made plans for significant cuts to their workforce in favour of AI

Naturally, a big question arises about where and when AI might be used in the human resources process and whether the UK workforce is ready for that shift. ‘Human resources’, without the ‘human’ element in charge, may be a step too far for many who are employed by SMEs.

We approached this question with our sample of 1,029 UK SME employees. As we saw in our previous report, over a quarter of our respondents had reported job cuts in their companies, and it is still unclear whether AI is having an influence over these key staffing decisions. 

London SMEs are the biggest adopters of AI in HR

HR is one of the more sensitive parts of a business, and an HR team often relies on leadership, psychology, discretion, team building, and other important soft skills. Despite having the capacity to aid decision-making by analysing large quantities of data, subtler soft skills are harder for machines to replicate and could create friction internally.

Has the move towards AI systems being used in HR already started in UK SMEs? According to our findings, it is not yet widely used.

Prevalence of AI use in UK SME HR departments

Only a minority of companies have any AI tools in use in HR at the current time. London, however, proved ahead of the curve, with more than double the number of SMEs using these systems compared to the rest of England and Scotland.

It appears it is still early days for using AI in an HR team. However, a small proportion of UK SMEs are already embracing its adoption. Whilst the number is small now, it is likely to grow in the coming years and companies may want to consider planning scenarios for its possible use in the future. 

Did you know?

There are many ways that a company could deploy AI in its HR processes. Some significant examples of AI in HR software tools include:

Additionally, generative AI tools such as Chat GPT or Google Bard may also be used to automate repetitive tasks and can create templates for HR communications such as emails, letters, and reports. 

54% of SME employees in companies that use AI in HR have concerns

AI offers many possibilities for business owners to optimise and streamline their HR operations. However, one of the disadvantages of AI in HR is the discomfort it can cause among staff.

Artificial intelligence is gaining a reputation as a tool that could make many professions redundant. Therefore, its introduction is a tricky issue for companies regarding where and how it is implemented. It is possible that even in the best circumstances its use could cause significant worries within the workforce.

This proved the case with many staff we questioned where AI was used in their HR department. 

Graph of the proportion of employees concerned about the use of AI in their HR department

As seen in the graph above, most (54%) of this sample expressed concerns about using artificial intelligence in HR. However, worries about AI in HR were much more pronounced across all respondents when the issue of redundancies selected by an artificial intelligence system was considered.

Graph showing comfort levels for UK employees on the subject of AI making redundancy decisions

The prospect of AI-chosen layoffs makes most of our sample uncomfortable. It was interesting to note that the highest levels of overall comfort (36%) were seen in London, matching other trends we’d already seen where Londoners seem more willing to embrace AI systems.

A question of ethics in using AI in HR

Not only were SME employees across our sample uncomfortable with AI’s implementation for selecting layoffs. Nearly three-quarters (73%) of all respondents agreed that the premise of companies using AI to lay off employees could lead to heightened stress.

Additionally, we found that many in our full sample had strong views on whether the use of AI in HR was ethical.

Opinions from UK SME employees on whether the use of AI in HR is ethical or not

More than half (52%) of all respondents believed that using AI technology to make critical HR decisions is morally wrong. Whilst many (34%) remained undecided on this factor, opinion tended to skew towards the negative more than the positive. However, it was interesting to see that London had the most respondents in favour of using AI in HR by more than a 10 percentage point margin compared to the national average. 

Did you know?

According to a recent UK government white paper setting out the AI regulatory framework for the country, companies using AI in their processes must:

  • Ensure users and subjects are not undermined or discriminated against under the terms of the Equality Act 2010 
  • Explain how AI is used in their processes with sufficient transparency
  • Guarantee that AI systems in goods and services operate safely and securely in compliance with existing product safety and data protection laws 
  • Establish clear lines of accountability internally for the management of AI tools

It is worth reflecting that among our respondents AI tools were not yet widely used to choose redundancies. Only 8% said that it was used in this way in their companies, whilst 76% of our sample said that their employers didn’t use AI to select redundancies.

Nevertheless, concerns arise with using AI in human resources, as expected. Whilst these worries are mostly contextual, there is a general feeling of anxiety that persists about this subject matter. 

Most companies are transparent about how AI is used in HR

The data in our research shows the effect that using AI systems in HR can have on morale. Major worries can arise from its use and possibly impact employee stress and well-being negatively.

What then, are companies doing to help address these fears? Are employees being made aware of how an AI system is used in their HR departments and are they getting a chance to air their concerns?

Most (57%) of staff whose companies used AI in their HR department said their firm informed employees of the manner of its use. This was especially commonplace in London, where 69% of respondents from the region said they were properly informed about the use of artificial intelligence.

However, a large proportion of respondents in companies with AI in HR either were not informed of the nature of its use (33%) or were not sure (10%). This implies small companies may still need to improve how they communicate the use of AI in their human resources activities.

Worried staff are raising AI concerns with managers

Many of those who worked in companies with AI in HR who expressed fears about AI software in HR (53%) proactively discussed their concerns with an HR representative or manager, whilst 42% hadn’t yet but planned to in the future, as seen in the results below.

Proportion of SME employees with concerns about HR who have discussed their worries with HR or boss

Transparency in companies using AI in HR can be essential to maintaining trust, especially given its chances of provoking staff anxieties. Staff in companies already using such tools want clear information about how AI will be implemented in the HR process to allay fears.

These preferences from employees, along with the Information Commissioner’s Office’s (ICO) advice on explaining to stakeholders how AI makes decisions, suggest an action plan should be considered to deal with employee doubts. From an internal company perspective, this could mean making it clear to staff where, when, and how AI tools are introduced in HR, outlining a clear policy with levels of accountability, and giving staff room to air doubts and queries should they arise.

Tips for SMEs

Being ahead of the concerns that introducing new systems like AI may bring can mitigate some of the negative effects on workplace morale. Software for workplace communication and policy management can help plan the best way to inform workers about the introduction of AI into a business and allow them to address their doubts directly.

The view on using AI in HR isn’t simply black or white 

Up to now, we’ve studied how AI can provoke anxieties among the workforce. However, that doesn’t give the complete picture of how staff in SMEs view AI’s use in HR. The reality is more nuanced.

Of course, not everyone in our survey expressed concern with AI technology choosing layoff candidates. A quarter (25%) of our respondents were comfortable with automated systems being used in this way

When asked to select up to three reasons why they trusted these systems to perform the task of making staff redundant, they highlighted the following explanations:

  • AI is unbiased (46%)
  • AI can avoid decisions based on a manager's personal issues with their employee (40%)
  • AI can rely on real data about performance to make a decision (37%)
  • AI can generate more accurate decisions (32%)
  • Other (1%)

What can be observed from these results is that AI’s lack of bias can be a great benefit, rather than simply coldly calculating. Factors such as the objective use of HR data and the ability to avoid preferential biases to select candidates for redundancy provide some significant advantages to a process which is never pleasant, no matter who is making the call. 

What was also commonplace among all our survey-takers was a view that AI technology will inevitably be used in future job-cutting decisions. When asked whether they agreed with the statement, 'In the near future, technology such as AI will be the main driver in making critical business decisions such as lay-offs?', 50% agreed, 37% disagreed, and 12% weren’t sure.

However, this doesn’t necessarily mean that employees in SMEs think this is all bad news. When asked about the trustworthiness of AI technology in HR, there were a number of tools that staff believed could be beneficial.

levels of trust UK SME employees have in AI being used in specific HR technology

As the graph above shows, tools such as training software and employee monitoring tools were seen by at least half of our respondents as trustworthy to some degree when used in AI-powered platforms in an HR context. Of course, this only shows the current picture, and with AI still being a big unknown for many in business, trust could increase over time. 

Overall, we can see that AI’s use in HR isn’t necessarily just negative. Many in our sample are comfortable using it, even in more controversial circumstances. More importantly, most people see this as a nuanced issue where the use of AI can complement the functions of HR, especially training and employee monitoring. 

Overcoming the fears and demonstrating the benefits of AI in human resources

There is no doubt that the use of AI in human resources can cause employees to worry. Therefore, it is wise for SMEs to consider a careful, strategic, and transparent approach to using AI in this way to alleviate possible concerns.

We observed the following key takeaways in our data from SME employees on the topic of using AI algorithms and processes in HR hiring and firing:

  • A fifth of UK SMEs currently use AI in HR
  • Most (54%) SME staff in our sample have concerns about using AI in human resources, and 75% are uncomfortable with artificial intelligence being given the power to make redundancy decisions
  • Some HR functions (such as training and employee monitoring) are seen as the most trustworthy uses of AI in this context
  • The majority of companies using AI in their HR departments are transparent with employees, but a significant number (43%) are not being properly informed
  • Half our sample believe that AI will have a role in making layoff decisions in the future

We’re likely at an early stage of this technological curve and whilst adoption is low now, it is possible it could grow significantly over the coming years. Businesses and HR practitioners can act on this now by starting to assess where these tools may fit into the process or by collecting the data necessary to train AI.

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The data for GetApp’s Employee Exit Experience Survey was collected between May 25th and June 7th and comprises answers from 1,029 respondents. We selected our survey sample based on the following criteria:

  • UK residents
  • Aged 18-65
  • Full-time employees in companies with between 2-250 members of staff 
  • Working for their company for over 1 year at a level above trainee and below owner status

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About the author

David is a Content Analyst for the UK, providing key insights into tech, software and business trends for SMEs. Cardiff University graduate. He loves traveling, cooking and F1.

David is a Content Analyst for the UK, providing key insights into tech, software and business trends for SMEs. Cardiff University graduate. He loves traveling, cooking and F1.