How AI is undermining your benefits strategy

Many SME organisations are integrating artificial intelligence (AI) tools within their employee benefits strategies. However, you must remain aware of the pitfalls associated with relying on AI to conduct HR-related tasks.

This article explores the limitations of using AI to shape your benefits strategy, and how you can implement best practices that satisfy your workforce’s changing demands.

Growing AI usage among SMEs

Our SME Benefits Report (opens a new window) revealed almost 70% of SME business leaders surveyed had used AI tools, such as Chat-GPT, at least once to make decisions about employee benefits – with 50% of respondents saying they had used it on multiple occasions.

Unsurprisingly, not all leaders use AI equally. Younger respondents to our survey were considerably more likely than older respondents to have used AI to guide their decision making. The 25–34-year-old cohort had the most frequent use of AI (83%), followed by 18–24-year-olds (76%).

Crucially, 94% of frequent AI users surveyed believe that either some or significant improvement is needed for their benefits package. This suggests that AI is not filling the strategic gap and may be delivering substandard recommendations that do not solve root causes.

How does AI-reliance impact your benefits strategy?

AI offers users convenient, quick solutions and idea generation on demand. SME leaders are turning to AI for conducting competitor research, drafting internal communications, or to weigh up the most cost-effective benefits.

However, while AI can assist with benefits strategies, the strength of its answers is often determined by the quality of initial user prompts and the data on which the AI relies.

As a result, AI-based recommendations are typically:

  • Generic, and lacking in context

  • Unsuitable for all employees

  • Short-term fixes

  • Unable to specifically address employees’ real needs

For some business leaders, reliance on AI tools is a symptom of missing or inadequate support, rather than a HR innovation. Leaning too heavily on the technology can risk treating symptoms and overlooking root causes. Ultimately, this can compound existing issues within employee benefit strategies.

Recommendations for designing a robust benefits strategy

Decisions about complex, human-centred issues are increasingly being shaped by AI tools that can be shallow and prone to bias. But AI isn’t a substitute for trusted guidance and advice.

To build a robust benefits strategy, employers should:

  • Ensure benefits resonate with employees – This ensures employees feel their needs are understood and prioritised. To achieve this, leaders should consider offering flexible benefits to their staff, empowering employees to customise their compensation package. Customised benefit packages can help businesses attract talent, reduce turnover costs, improve the employer brand, and boost staff engagement at work.

  • Cater to diverse workforces – Employees have differing lifestyles and needs which are likely to change as their working lives develop. When crafting employee benefits, you must progress from the traditional ‘one size fits all’ approach to offer a wide range of benefits that reflects the diverse requirements of all staff cohorts and demographics.

  • Communicate appropriately – Communication must be a strategic foundation for a comprehensive rewards programme. By embedding communication into the heart of a reward strategy, you can help employees understand and connect with their benefits when they need them most.

  • Make benefits accessible – How employees experience and interact with their benefits significantly affects overall engagement levels. A positive user experience (opens a new window) can help streamline processes, make discovering and accessing benefits simple, combine services to a single source, and establish clear and simple communication throughout.

  • Promote continuous development – SMEs should look to open dialogue with employees to help create feedback loops on reward packages and collect insights to ensure benefits programmes remain responsive to shifting employee expectations. Implementing changes based on feedback and data-led insights enables you to ensure benefit strategies remain relevant.

To access the complete findings from our SME Benefits Report, click here (opens a new window).

For more information, reach out to a member of our team or visit our Workplace Benefits for SMEs (opens a new window) page.