SME bosses are increasingly relying on artificial intelligence to make decisions about employee benefits, research has shown.
According to a survey of 1,000 senior decision makers by insurance broker Lockton, two-thirds of SME leaders (69%) helped design benefits packages using AI tools such as ChatGpt.
However, those who used AI frequently were more likely to feel uneasy about their choices. Three-quarters (77%) admitted to feeling guilty all the time.
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Stewart Waddy, head of small business consulting and production in Lockton, said the issue is not just technology itself, but the uncertainty surrounding it.
“Small businesses want to do it right with their employees, but this also creates pressure to get things right. Without clear guidance, leaders continue to carry the burden on their own. They risk being reactive and inconsistent or cloudy with guilt,” he said.
This sense of doubt has made it more critical of the employee's interests. Two in five AI users thought there was a need for a significant improvement in their benefits package, compared to just 9% of leaders who have never used AI.
Why AI appeals to small and medium-sized businesses
For many small businesses, the appeal of AI lies in its speed and affordability, according to HR expert and author Sara Yahia. “AI feels like a cheat code,” she said. “For small businesses, it's like hiring a thousand consultants with shoelaces.”
However, this study suggests that this addiction reflects anxiety rather than confidence. Four in 10 (39%) SME leaders said they felt they could make independent benefits decisions. Others pointed to barriers such as conflicting advice (31%), time pressure (31%), and fear of mistakes (29%).
Nevertheless, few people look to professional advisors. Despite a third (39%) saying that doing so would boost their confidence, only 12% of respondents asked for help from brokers.
AI blind spot
According to Lorna Ferrie, director of law and compliance at Payroll Provider Mauve Group, AI often overlooks regulatory differences between countries when providing benefits advice.
She highlighted the contrast between France, where health care, pensions and childcare leave are mandatory, and the US, where most of its benefits are voluntary. “AI tools without expert input can easily overlook these nuances,” she said.
Lack of employee consultations can also mean that the company's interests do not meet the needs of its staff. Three-quarters of SME leaders (75%) admitted that they relied more on their experiences than staff feedback or performance data when shaping their perks packages.
Liz Sebag-Montefiore, director and co-founder of HR Consultancy 10eighty, said this represents an opportunity that was missed. “Staff feedback appears to be a clear starting point when designing benefits packages. The use of AI assumes that management is already collecting data, but this doesn't seem to be the case here,” she added.
This disconnect created a gap in confidence. Most SME leaders (94%) felt comfortable responding to individual employee requests, but only 46% were confident in their long-term benefits strategy.
How SMEs can shape smarter profit strategies
Despite these challenges, the research suggests that SME leaders can improve their benefits strategies by using advisors to seek staff feedback.
Employee involvement must be central, Ferry said: This helps businesses design benefits strategies that support retention and provide compliance.
“Providing attractive and comprehensive employee benefits doesn't have to be about costs,” Wadi added. “It's about strategy, integrity, visibility.”
For Yahia, the key is balance. “Leaders have to make AI a compass rather than a map,” she said.
Read CIPD fact sheets to explore ways to implement benefits for different employees as part of a broader compensation strategy
