The Transformative Impact of AI on HR in Retail: The Opportunities and Challenges That Lie Ahead

19th November, 2024

Artificial Intelligence (AI) is revolutionising industries, and the retail sector is no exception. As AI technologies continue to advance, they are poised to significantly transform Human Resource (HR) practices in retail, bringing both exciting opportunities and notable challenges that need to be carefully managed.

The holiday season also brings unique challenges to retail HR, with rapid increases in temporary staffing, intensified customer service demands and necessity for efficient workforce management. AI can help navigate these demands, but retailers must also remain vigilant of legal requirements and ethical considerations that intensify during the holiday season.

Let’s start with the opportunities:

Streamlining Recruitment and Hiring

One of the most significant impacts of AI within the retail sector is on recruitment and hiring processes. AI-powered algorithms can automate the initial stages of hiring by scanning CV’s, matching candidates to job requirements, and even conduct initial screening interviews via chatbots. This automation not only speeds up the hiring process, but also reduces human bias, potentially leading to more diverse and qualified hires–all of which are crucial advantages in the fast-paced retail environment where staffing needs can fluctuate rapidly.

Enhancing Administrative Efficiency

Admin tasks such as payroll processing, scheduling and performance evaluations can be streamlined using AI. For example, AI can automate the creation of work schedules, taking into account employee availability, seasonal trends and peak business hours. This reduces the administrative burden on HR/ team managers and ensures optimal workforce management and potentially improve customer service.

AI can also provide real-time performance analytics, helping managers to make data-driven decisions about promotions, rewards and career development opportunities. Employers should however be cautious about using AI to automatically issue performance, disciplinary or attendance related warnings based on the data it collates, as this could inadvertently trigger unfair dismissal and/ or discrimination claims.

Enhancing Employee Training and Development

AI can enhance employee training in retail by offering personalised learning experiences. Virtual reality (VR) and augmented reality (AR) technologies, powered by AI, can create immersive training scenarios for everything from customer service to inventory protection. These tools can be adapted to each employee’s learning pace and style, potentially improving skill retention and job performance.

Challenges and Ethical Considerations

Whilst there are many benefits for the retail sector in utilising AI within HR practices, there are also several challenges that need to be considered:

Data Privacy and Security

AI systems rely on vast amounts of data to function effectively. Ensuring the privacy and security of this data is paramount. Retail companies must implement robust measures to prevent breaches or misuse of employee information and indeed have an awareness of where such information originates from (for example, some AI tools collect large amounts of personal data from social media platforms without potential candidate and employee knowledge). This includes complying with the requirements of the General Data Protection Regulation (more commonly referred to as GDPR) and the Data Protection Act 2018. As Commercial Litigation Partner, Laura Hill also discusses in the blog, My, My, My, All This AI.

Job Security

The use of AI in workforce management may raise concerns about job security and employee privacy. Staff may feel that their every move is being monitored and analysed, which may lead to increased stress and potential pushback against the use of such technology. Transparency around the use of such AI is crucial to alleviate such concerns and to obtain employee buy in.

Bias and Fairness

Although AI can reduce human bias, it is not immune to it. AI systems learn from historical data, which may contain inherent biases. If not properly managed, these biases can perpetuate discrimination in hiring, promotions and other HR practices. Ensuring fairness requires continuous monitoring and updating of AI algorithms to eliminate biased outcomes. AI should not be used as a replacement for human input into HR decisions, but as a data tool to inform and assist managers with their decision making process. It should be noted that if a business chooses to rely heavily, or indeed solely, on AI systems to make decisions and such decisions are incorrect or harmful (for example, using biased hiring algorithms), it will be exposed to discrimination claims, which if successful, will attract uncapped compensation.

Employee Trust and Acceptance.

AI holds immense potential to transform HR practices in the retail sector, offering opportunities for more efficient recruitment practices, employee engagement and general administrative efficiency. However, retailers must navigate challenges related to bias, privacy, employee trust and skills adaption. As AI continues to evolve, the HR landscape within the retail space will need to strike a delicate balance between leveraging technological advances and maintaining the human element that is crucial to successful HR management and a positive customer experience.

We have a multi-disciplinary team which is embedded in the retail sector and able to advise on all the aspects mentioned in this article. If you wish to have a no-obligation conversation about the steps you could be taking, please get in touch with Charlotte Nuttall or another of our expert retail sector lawyers.