Artificial Intelligence in Human Resources—Risk Reduction Best Practices

Human Resources (HR) is undergoing a major transformation with the integration of artificial intelligence (AI). Traditionally focused on administrative tasks like recruitment, payroll, and employee relations, HR is now leveraging AI to streamline processes, improve decision-making, and enhance the overall employee experience. AI-powered tools can quickly analyze large volumes of data to identify top candidates, predict employee turnover, and personalize training programs. As organizations continue to adopt these technologies, HR professionals are shifting toward more strategic roles, using AI insights to build stronger, more agile workforces while also navigating important ethical considerations around data privacy and bias. However, the use of AI in HR has included more risk to employers. We have compiled a list of tips every employer should use when utilizing AI.

Governance and Policy

  • Create an AI Use Policy for HR
    • Define what tools are approved and how they can be used
  • Assign Ownership
    • Designate a person or team responsible for AI oversight in HR
  • Document Where AI Is Being Used
    • Recruiting, screening, performance reviews, terminations, etc.
  • Require Human Review for All Employment Decisions
    • No fully automated hiring or termination decisions, for example

Legal and Compliance

  • Audit AI Tools for Bias
    • Especially in hiring, promotion and compensation decisions
  • Understand Applicable Laws
    • EEOC guidance, state-level regulations, city restrictions
  • Check for ADA Compliance
    • AI tools should consider accommodations for candidates and employees
  • Validate Job-Relatedness
    • Make sure AI criteria actually tie into job requirements
  • Disclose AI Use to Candidates if required
    • Transparency reduces legal exposure

Data and Privacy

  • Limit Data Inputs
    • Don’t feed sensistive or unecessary employee data into AI Tools
  • Protect Confidential Information
    • Avoid entering personally identifiable information (PII) into public AI tools (e.g., ChatGPT, Gemini, etc.)
  • Review Vendor Data Policies
    • Know how your AI vendors store and use your data
  • Ensure Data Accuracy
    • Bad data can lead to bad decisions, creating legal risk

Tools and Selection Management

  • Vet AI Vendors Thoroughly
    • Ask about bias testing, audits, legal compliance and risk allotment
  • Avoid “Black Box” AI Tools
    • If you can’t explain how it works, using it creates risk
  • Regularly Re-Evaluate Tools
    • Regulations and algorithms both change over time

Training and Usage

  • Train HR Teams on Proper AI Use
    • What it can and cannot do; how it should or should not be used
  • Ban High-Risk Use Cases
    • Example: Using AI to make termination decisions without review
  • Create Clear Usage Guidelines
    • Prompting standards, documentation requirements, records retention rules, etc.

Risk Prevention

  • Document Decisions Involving AI
    • Especially in hiring, promotion and compensation decisions