HR and AI: Opportunities and Challenges

As with many industries, HR departments present areas for improvement. Manual tasks and management of data across multiple systems are ongoing challenges and tend to drain productivity. Now that artificial intelligence (AI) is being used by payroll practitioners and is surfacing in other aspects of HR, many of those processes are becoming faster and easier for HR teams, from automation of repetitive tasks to creation of more personalized employee experiences, including recruitment, onboarding and learning.

AI in HR management not only streamlines processes but helps HR teams screen candidates more efficiently, predict turnover and provide more personalized paths for professional development. As the role of AI in HR expands, HR must partner closely with IT departments, which are critical to the adoption and management of HCM and payroll platforms.

Along with the boost in productivity and agility AI can provide comes responsibility. Organizations like ADP are addressing concerns around algorithmic bias, data privacy and transparency — most often by ensuring human oversight from development to refinement and even after deployment.

Let’s take a look at the types of AI being used in HR to get a better understanding of the general benefits to this industry.

Types of AI in HR

AI isn’t one particular technology. The term encompasses a variety of ways machines are able to mimic how humans think, learn and solve problems. Ultimately, AI refers to systems that can analyze data, recognize patterns, make decisions and improve over time by building on what it has learned. Systems may follow rules, learn from examples or combine multiple techniques. When it comes to artificial intelligence in HR, there are different types of AI HR solutions. Let’s explore some of the most commonly used.

Machine learning (ML)

Machine learning (ML) involves the use of algorithms to analyze large datasets — such as employee performance, turnover history and hiring success — and make predictions or decisions based on that data. With machine learning, HR teams can better predict risk of attrition, use historical predictions to match candidates to job descriptions and identify workforce needs in advance to help with strategic planning. Since ML continues to “learn” by ingesting data, its capabilities get better over time.

Generative AI

Many people who use large language models (LLMs) like ChatGPT are familiar with how generative AI helps create new content, like text, images, audio or code. This is all based on patterns it has learned from existing data. When it generates content, it’s essentially providing original outputs because it’s scanning its entire knowledge bank of data to respond to individual prompts or instructions.

Reinforcement learning

This type of AI in HR is showing promise in areas that require ongoing optimization and adaptation. Some HR teams are using it to gamify HR experiences, for example, helping employees learn a new skill or delivering more personalized content based on how employees are engaging with content and delivery. Reinforcement learning can also help fine tune recruitment funnels, optimizing hiring strategies by assessing which candidate sourcing methods, interview sequences, or timing of offers leads to better candidate acceptance and long-term fit with the organization.

AI assistants/chatbots

Most of us have interacted with a chatbot on a company website. Chatbots can help reduce information overload by serving up specific, relevant information based on a user query. As an AI HR solution, chatbots can be tailored to roles, departments or engagement levels, which can help minimize the need for mass emails or individual follow-ups. AI assistants can also support HR teams with:

• Candidate communications (e.g., confirmation of interview times)
• Answers to frequently asked questions
• Next-step guidance

By handling these types of interactions, chatbots help free up HR teams from repetitive types of communication.

Natural language processing (NLP)

NLP has to do with understanding and interpretation of human language. In HR this type of AI can help with things like:

• Keyword analysis for better ranking of resumes
• Assessment of employee reviews to determine companywide sentiment
• Fast and easy summarization of documents (e.g., performance reviews, policy updates)

Again, NLP — like other types of AI in HR — is not a single thing but rather a driver for a variety of tools like AI assistants and chatbots, generative AI and AI agents.

AI agents

While AI assistants and chatbots are tools generally designed to answer questions or complete simple tasks, AI agents tend to be more advanced, goal-oriented systems that can handle multi-step reasoning and decision-making.

Think of it like this: A chatbot may be used to answer employee questions about benefits. An AI agent may be used to manage the entire onboarding process, including collection of paperwork, payroll setup, training scheduling, post-onboarding check-ins and manager notifications.

Explore AI in HR: Five use cases you should know

Benefits of AI in HR

AI is a game-changer in just about every industry, including HR. It’s helping HR teams work faster and smarter by automating repetitive tasks while creating a more personalized experience for employees. Let’s take a closer look at some of the benefits of HR and AI working together.

Task automation

Instead of relying on spreadsheets and emails, HR teams can use AI to manage tedious tasks, which may include launching and tracking performance review cycles based on timelines or employee milestones, or sending personalized reminders to managers and employees to ensure timely performance submissions. Through task automation, AI can reduce administrative burden and create a smooth, streamlined performance review process.

Employee access to information

To minimize the need for human intervention, HR AI assistants and chatbots can provide 24/7 answers to common questions employees might have about policies, PTO, payroll and/or benefits. AI tools can also allow employees to easily search through HR documents while personalized dashboards can push relevant HR content to employees, based on their department, activity or stage of employment. AI can further help monitor milestones (e.g., promotions, certifications, anniversaries) and provide timely nudges or recommendations.

Employee hiring and onboarding

Employee onboarding is one of the most compelling AI use cases in HR. As previously mentioned, AI can make the entire hiring process smoother and more efficient by automating everything from completion of forms to new employee training reminders. With AI, candidates can better access open roles based on their skills and experience. On the HR side, using generative AI to draft personalized outreach emails cuts down on repetitive work and processes.

Analytics and forecasting

AI-powered platforms in HR can also benefit analytics and forecasting. By leveraging AI technologies, HR teams can analyze employee engagement, turnover trends and performance patterns. AI also helps with forecasting of workforce needs and skill gaps based on how the business is growing or estimated attrition. Thanks to AI dashboards and visualization tools, HR leaders can create automated strategic reports and make smarter, faster and more confident decisions.

Lower HR costs

In HR, time is surely money. Using AI to automate candidate screening can help lower recruiting costs by reducing time-to-hire. AI chatbots for automated support can help minimize the burden on help desk staff while intelligent document handling and workflow automations eliminate hours of manual administrative work.

Challenges of AI in HR

In a very short time, we’ve seen widespread adoption of AI tools while also seeing legitimate reasons for concern. In the realm of HR, issues of trust and transparency as well as regulatory concerns and data privacy considerations are among the key challenges.

Data and privacy

Employees need to trust that AI used for HR is there to improve workplace productivity and enhance the employee experience with a system that is acting ethically and responsibly. This is especially important when it comes to hiring as well as data privacy. In HR, AI used to monitor productivity or employee sentiment runs the risk of becoming "Big Brother"-ish with over-monitoring of employee activity. Misuse or hacking of sensitive employee data could also lead to privacy breaches that are not just bad for employees but bad for business.

Bias and discrimination

While AI has the potential to minimize unconscious human bias by ingesting information that allows LLMs to make more data-driven decisions, it's also quite possible for AI models to make hiring or promotion decisions based on biased or unverified data. This can result in unfair treatment of job candidates or employees and could make a company more vulnerable to legal challenges.

AI transparency

The role of AI in HR should be one of support rather than replacement of human HR teams. That said, AI will continue to play a pivotal role in a wide variety of HR tasks and processes, so it’s critical to let people know how AI is being used, what data is being collected and analyzed, and how AI is utilized to make HR decisions. Being up front and transparent about AI usage will help establish trust in the workplace while also keeping stride with global data protection laws.

Explore See how ADP uses AI to empower HR teams

Will AI replace HR?

While it’s unlikely AI will replace HR altogether, it’s already changing it, for sure. And while there are some things AI can readily assist with, there are other aspects of HR that require human participation and intervention.

Some HR tasks that AI can handle include those that are:

• Repetitive (e.g., resume screening, data entry, interview scheduling)
• Rules-based (e.g., compliance tracking, benefits enrollment)
• Data-heavy (e.g., employee sentiment analysis, turnover prediction)

In these areas, automation can save time and reduce human error. For example, a recruiter might take three hours to screen for qualified candidates while an AI-powered applicant tracking system can perform the same work in a matter of minutes.

Of course, there are areas of HR that AI struggles with. This includes work that requires:

• Emotional intelligence and empathy (e.g., handling workplace conflict, coaching managers, supporting employee well-being)
• Nuanced judgment (e.g., ethical decision-making, sensitive terminations, navigating interpersonal dynamics)
• Cultural leadership (e.g., building inclusive environments, strengthening engagement, leading change)

In these areas, our humanness still matters — as do the skillsets of an HR professional.

As HR and AI continue to evolve, artificial intelligence tools will make the everyday work of HR professionals smoother and easier while serving up a more personalized experience for employees. The benefits of artificial intelligence in human resources are numerous but so are the challenges. Trust depends on how AI is used. Clear communication, strong data privacy and legal compliance are what matter most.

At ADP, human oversight is integral to the reliable operation of AI. Our solutions offer recommendations to human decision-makers, who then determine the appropriate course of action; AI doesn’t make decisions for humans. We continuously monitor our models using human experts to validate and refine generative AI outputs. This approach ensures that our AI tools deliver accurate and reliable information, supported by a feedback loop that fine-tunes model quality.