by Like every corporate sector, the Human Resources (HR) function is undergoing a transformation driven by Artificial Intelligence (AI). Small and Medium Businesses (SMBs) are using AI-powered tools for recruiting, onboarding, and payroll to boost efficiency and cut costs.
However, new research surveying over 1,000 employees and employers across American companies has revealed a significant trend: declining trust in AI across several critical dimensions.
While employer (managing directors, executives, HR leaders, and founders) anxiety about AI remained roughly the same as last year, employee anxiety rose significantly across the board. Concerns about bias, discrimination, and privacy saw a sharp increase.
Despite the overall rise in AI adoption, the technology faces resistance in key HR functions such as offboarding, training, and employee development.
Employers are growing wary of automating emotionally charged moments that define brand perception and the long-term relationship with high-performing staff. This pullback reflects a growing realization among leaders that the key differentiator in workplace productivity and culture is the Employee Experience, which hinges on trust, transparency, and human connection.
Here are the key takeaways for every HR leader exploring new uses of AI:
AI’s Successes and Sticking Points
Not all Human Resources tasks require a soft touch. The biggest surge in AI adoption has occurred in the area of Benefits Management.
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66% of employers felt that using AI to answer routine questions—such as “What is my deductible?” or “How do I file a claim?”—was either “moderately acceptable” or “highly acceptable,” a slight increase from 63% last year.
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53% of employees now use AI “often” or “always” for benefits questions, a substantial jump from 41% reported last year.
Benefits Management is an ideal area for AI integration because the queries are highly structured and repetitive. Simultaneously, as HR teams manage increasingly massive workloads and competing priorities, offloading routine benefits inquiries to AI offers a much-needed operational reprieve.
There is also a strong desire for always-on HR support, with 53% of employees and 66% of employers believing HR should be a 24/7 resource. The desire for round-the-clock support is even higher among younger employees.
Prioritizing the Human Touch
The picture of AI in HR is becoming more nuanced. While employers are keen to streamline operations, many are increasingly cautious about using AI in areas related to employee well-being or corporate culture.
Employer willingness to offload certain HR functions to AI has actually decreased from last year:
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The percentage of employers willing to offload Offboarding to AI fell from 34% to 32%.
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Willingness to offload Training dropped by three percentage points, settling at 23%.
“Employers may be avoiding the use of AI in offboarding and training because these areas require empathy, personalization, and cultural sensitivity.“
AI may be perceived as too transactional for moments that define the Employee Experience and company legacy.
Growing Mistrust in AI Systems
Skepticism about the security standards of AI tools is also on the rise, particularly among employees. Employee concern has grown more significantly than employer concern across every category.
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Employee concern regarding Accuracy and Privacy reached $3.67$ on a 5-point scale, moving closer to the “Moderately Concerned” level.
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Employee concern over Bias and Discrimination saw the largest overall jump, rising from $3.23$ in 2024 to $3.5$ in 2025.
At a time when employee engagement is already fragile, using AI in ways that feel impersonal or unfair could exacerbate workplace conflict, making HR leaders’ jobs more difficult.
Transparency is crucial, especially for smaller businesses that may not have dedicated HR teams to vet and monitor AI tools like larger enterprises. Given the increasing regulatory scrutiny of AI, employers need to stay current with evolving laws regarding data privacy and discrimination. It is vital to ensure that any AI tool used in recruiting or talent management meets these standards.
The conclusion is that AI systems will require continuous refinement: “HR teams will need to continue putting people at the center of the process.”
Also Read: How AI in Business is Transforming the Global Economy
A Strategic Approach to Safe AI Adoption in HR
As SMBs accelerate their adoption of Artificial Intelligence, a key challenge will be drawing clear boundaries between what technology can automate and what requires a human touch.
To navigate this effectively, companies are advised to employ the following strategies:
1. Be Transparent
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Be open about when and how AI is being used, especially in emotionally or otherwise critical HR functions.
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Establishing an AI Governance and Compliance Program helps teams set company-aligned AI standards and workflows.
2. Build in Safeguards
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Include escalation paths for human review when problems arise.
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Focus on Data Protection Strategies to ensure that employee and customer data are handled appropriately.
3. Prioritize Training
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Train HR staff to understand and interpret the outcomes generated by AI.
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By strategically using AI, HR teams can free up time to focus on more strategic work.
In a landscape where employee adoption of AI is up, but trust is down, businesses that use AI without addressing concerns about transparency and fairness risk worsening their employee engagement issues.
Companies should view AI not as a Band-Aid but as A Bridge:
“The goal isn’t to replace the human in human resources. It’s to give HR the bandwidth to remain human where it matters most.”
