One of the most concerning figures in the report is that almost a third of small business leaders, equating to 1.8 million, said AI implementation is a “critical” or “serious challenge”. This is having a major impact on their growth and competitiveness.

“The installation of AI and making employees aware of it and how to use it is the biggest challenge for our business,” said one Head of People from a 50–99 person company in the Midlands.

The Employment Hero ‘Work that Works’ report – based on a survey of 2,200 UK business leaders and employees – also highlights that while over half of business leaders credit AI and technology for boosting productivity, employees who feel left behind by poor automation strategies report a staggering 50% drop in their own output – revealing a critical disconnect in how tech is deployed and experienced.

Technology innovation without meaning doesn’t work

Only half of SMEs say they’ve kept pace with tech and innovation, and the gap is most visible in smaller firms. Businesses with fewer than 50 employees are:

• 50% less likely to have implemented AI
• 1 in 10 are investing less in tech than before
• Only 43% are satisfied with their workforce’s technical knowledge
• And 30% say they are operating in or near “survival mode”

Despite the challenges, the upside is clear. In businesses where productivity has increased over the past year, the top reason cited is tech advancements. When employees feel supported and see tangible benefits, outcomes improve significantly:

• Workers who use AI regularly rate their productivity 17% higher
• They are 23% more likely to say they’re making an impact
• And companies where automation is visible and helpful report double the productivity levels compared to those where it isn’t

A call for change

The findings highlight the need for a human-centred approach, prioritising education, confidence, training and meaningful communication between employees and employers when it comes to tech innovation and AI in their workplace.

Commenting on the findings, Employment Hero UK Managing Director, Kevin Fitzgerald, said: “This Government’s TechFirst announcement is a welcome signal that the UK recognises the role technology and AI can play in supporting small businesses. However, our Work That Works report shows that tech adoption alone isn’t enough.

“While half of business leaders say AI is already driving productivity gains in their business, only 28% of employees are using AI tools weekly. The gap isn’t just about access, it’s about understanding, confidence, training and support. Many employees simply don’t see the link between AI and their own productivity, or aren’t aware of the investment their company is making.”

“If we want to see real, long-term gains in productivity, we need to start with people. A human-centred approach, one that includes clear communication, training and alignment between leaders and teams is essential. Our data shows that when employees feel supported in using automation and AI, productivity rates can more than double. The opportunity is huge, but we can only realise it if technology strategies put people first.”

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