Small business owners are constantly being advised to turn to AI for HR support. Yet, in the rush to digitise, few are being told where to draw the line between tasks that can be handled by technology and those that still require a human touch.
The consequences of misjudging the boundary can be significant. A business that automates the wrong function may face deep legal or regulatory exposure. But an owner who remains too attached to manual processes will likely find themselves drowning in paperwork that a machine could resolve in seconds. For most small and medium-sized business owners, navigating this transition has become a game of high-stakes guesswork.
Ilona Charles, however, sees a clearer path. As the founder of fractional HR consultancy shlio and author of HR for Impact, Charles spends her days helping business owners navigate this tightrope. She believes it’s crucial that small business owners and HR leads find the right balance as the sector transforms around them.
“I think it’s a really exciting time but there is a lot to learn,” Charles says. “Our function needs to try and get a little bit ahead of the game, which is easier said than done.”
AI Should Own The Repetitive HR Tasks
The most immediate benefit of AI in a small business is helping to keep on top of recruitment volume. Modern candidates are using AI to generate and spray CVs across job boards, regardless of suitability.
“You put up an ad and people are just getting inundated with applications,” Charles says. “A lot of them are just being obviously generated by AI or some of the large language models, and whether they’re true to the actual background of the person is hard to tell.”
Some businesses may receive hundreds of applications for a single role. “So, it’s creating a lot of extra work for small business in terms of just sifting through all of that, trying to work out who are actually the right people to be interviewing and shortlisting,” Charles explains.
Her conclusion: technology has to clean up its own mess. “I think it does need to be solved by AI as well, because you can’t just keep throwing people at it,” she argues. This means using AI-enabled tools like applicant tracking systems, which go beyond basic keyword matching to analyse the actual context of a resume, automatically ranking candidates based on their specific experience and intent while filtering out irrelevant submissions.
Charles also notes the evolution of candidate interviews, with AI agents now able to handle the early stages. “I think that will be a huge change for the candidates and the employers, but it’s happening now, so we need to start getting used to it,” she says.
She points out that most business owners wanting more streamlined processes would not need to build AI workflows from scratch. They may find that work is being done for them. “Those platforms, whether it’s an ATS or payroll systems or HR systems, the developers of those products are developing their own AI all the time,” she says. “Go to the provider of the platform and say, ‘How can I be using that better?’ Most of them, including Employment Hero, have great customer success teams. They can help you use the functionality better. And sometimes that’s just worth that phone call to save them a bit of time down the track.”
Humans Must Retain Control Of Some Functions
Charles offers a practical threshold for knowing when the balance has tipped too far toward automation: once compliance enters the picture.
Policies, procedures and employment regulations change frequently, and the consequences of getting them wrong fall squarely on the employer, a human in-the-loop is critical. “We know that AI isn’t always 100 per cent correct, so there does need to be some sort of leadership over that,” she says. “I do think when you’re starting to get into the employment law space, it is good to have a person and some expertise rather than just relying on AI.”
Charles acknowledges that human oversight can become onerous in SMEs, especially when businesses with fewer than 20 employees often operate without a dedicated HR function and the responsibility falls on the owner.
For businesses below that threshold, she says engaging fractional HR support can be an effective compromise. “If you start to get health and safety issues in the workplace, or bullying and harassment, or there’s WorkCover claims, those things can start to become very, very time consuming and costly from a business owner’s perspective, both time and money,” she explains. “My rule of thumb is usually when the ‘people issues’ are starting to take up the majority of your time as a business owner, that’s when I’d get some HR help in, definitely.”
She adds that an experienced HR practitioner can also review what AI is producing, catch what it misses, and step in when a situation requires the kind of accountability a language model cannot provide.
Managing Director of Talent Solutions at Employment Hero David Holland agrees judgment has been elevated as an HR skill. “The conversation around AI is too often framed as ‘people versus technology,’ but that’s the wrong lens,” he says. “By automating the transactional tasks – the payroll compliance, the data entry, the screening – AI is actually clearing the path for HR leaders to step into their true value: leadership coaching, developing emerging talent and building culture.”
Charles acknowledges that for some SME owners, AI adoption may not be a quick fix. “The use of AI is probably going to add a bit of workload to small business owners as they work out where it can add value and where it doesn’t, and then what sort of oversight they still need to provide,” she says. “But I think over time, absolutely, AI should help small business owners free them up a little bit from some of the basic HR work that they have to do today.”
