Research on AI’s impact on the HR function, surveying 1,100 HR decision makers, identified the key benefits and concerns regarding the role of AI in HR and revealed that while almost two-thirds (61%) believe AI will positively impact HR practices over the next five years, the majority of those not already using it are unlikely to implement it soon. 

Key Findings:

• Current Use and Future Adoption: Roughly 2 in 5 (38%) HR decision makers currently employ AI in their practices and workflow, while 23% of those not currently using it plan to adopt AI within the next year. However, a significant 70% of non-users are unlikely to implement AI within the next 12 months, highlighting a clear gap in understanding and acceptance.
• Positive Impact Anticipated: 61% of respondents believe AI will positively impact HR practices over the next five years. This optimism is especially high among younger HR decision makers, with 86% of those aged 25-34 expecting beneficial outcomes.
• Impact across the HR function: AI is seen as a transformative force across several HR functions. Respondents believe the top 10 areas that will benefit most from AI are:

1. HR Analytics (46%)
2. Checking employment laws (37%)
3. Employee learning and development (35%)
4. Payroll management (34%)
5. Accessing hiring data/insights (33%)
6. Performance management (32%)
7. Benefits administration (32%)
8. Recruitment and talent acquisition (29%)
9. Employee onboarding (28%)
10. Salary benchmarking (28%)

Demographic Insights:

• Youth-driven optimism: HR decision makers under 35 are the most optimistic about AI, with 83% believing it will have a “somewhat” or “significantly positive impact” on HR in the next five years. Only 38% of those aged 55 and older share this outlook. In fact, over a quarter (26%) of over 55’s believe it will have a “somewhat” or “significantly negative impact”.
• Larger companies are more receptive to AI: 85% of HR decision makers from larger businesses (250+ employees) are optimistic about AI (noting that AI will have a “somewhat” or “significantly positive impact” on HR in the next five years), compared to 47% from smaller companies (1-250 employees).
• Companies with higher revenues are getting ahead: 61% of businesses generating more than $10 million were already using AI, with almost half (47%) of non-users planning to adopt it within 12 months. Only 13% of companies with a turnover less than $1 million were currently using AI, while 81% of those non-AI-using smaller businesses were not likely to implement it within the next year. The disparity in AI adoption could leave smaller companies at a disadvantage, potentially struggling with efficiency and innovation compared to their larger counterparts. 

Challenges and Concerns:

• Data Concerns: AI reliability and accuracy (16%), along with data security and privacy (16%), were the top elements HR decision makers were most concerned about when considering the integration of AI into HR.
• Human Element: The potential loss of personal touch in HR processes ranked third as the element HR decision makers were most concerned about when considering the integration of AI into HR (13%), signaling the importance of maintaining human interaction in AI-enhanced HR functions.
  • Additionally, “Employee dismissal” ranked lowest (13%) on “HR areas that would most benefit from AI”, followed by employee recognition and rewards (21%), further highlighting the concern of AI being overly involved in employee interactions that need a personal touch.

Aaron Goldsmid, Head of Product, Payments & Integration at Deel, said: “We are at a pivotal moment in the evolution of HR technology. Our latest research shows that only 38% of HR decision makers have already embraced AI. This means over 60% of companies have yet to adopt it – highlighting a considerable gap in adoption and hesitation, especially among smaller businesses. This reluctance to adopt AI is not just about the use of technology, it means many businesses are missing a trick in terms of gaining a competitive advantage in efficiency and strategic insight. For many companies HR is highly manual, and AI can help alleviate some of this admin burden, allowing HR leaders to focus more on strategy, creativity and people-focused work.

*Research from Deel