Small Businesses Using AI Are Hiring More, Not Less. New Study Finds a 10% Boost for the Smallest Firms

Artificial intelligence may be changing how small businesses operate, but it is not necessarily shrinking their workforces at the moment. New data suggests the opposite may be happening, particularly among the smallest companies, where adopting AI is associated with faster hiring and business expansion.

Very small businesses that adopted AI increased their employee headcount faster than comparable companies that had not begun using the technology, according to a new report from payroll and benefits platform Gusto.

The findings stand in contrast with the concern that businesses will use the technology primarily to replace workers and reduce payroll costs. At least among the small companies included in Gusto's analysis, AI adoption appears to be accompanying job creation rather than widespread job elimination.

Gusto examined payroll data from 2,262 customers and found that businesses using AI increased their headcount by "about 7% relative to comparable firms that were aware of AI but hadn't adopted it. That increase built gradually, climbing from about 4.5% to about 6.8% by the end of the fourth quarter."

The effect was particularly striking among companies with fewer than 10 employees. Those businesses "grew their teams about 10% more than comparable businesses that didn't use AI." Companies with 10 or more workers, however, did not experience a significant change in headcount associated with AI adoption.

One potential explanation is that owners and employees at tiny companies frequently handle administrative work alongside the tasks that actually generate revenue. AI tools can take over or speed up some functions, potentially allowing businesses to spend more time finding customers, expanding services, or increasing production.

That growth can eventually require more people. Importantly, the new jobs were not necessarily the kinds of positions most directly associated with office work. Gusto found that the smallest AI-using businesses tended to hire workers for hands-on roles connected to delivering their products or services, such as therapists at health care businesses and cooks at restaurants, rather than adding administrative employees.

The findings build on a Gusto survey conducted last year that found nearly two-thirds of small businesses were experimenting with AI. With another year of information available, the company was able to compare payroll records from businesses that adopted AI with those that knew about the technology but had not yet incorporated it into their operations.

Still, the results come with significant limitations. The study examined Gusto customers who responded to its survey, meaning the sample was not randomly selected and may not represent small businesses across the broader U.S. economy.

The researchers also stressed that the study identifies a correlation, not proof that AI itself caused companies to hire additional employees. "Businesses choose whether and when to adopt AI, and early adopters may differ in ways we can't observe," the report cautioned.

For example, business owners willing to experiment with AI could also be more aggressive about expansion, investment, or hiring, making it difficult to separate the effects of the technology from other characteristics of those companies.

Research from the NASDAQ Institute has suggested that AI can make entrepreneurship more accessible by allowing founders to perform tasks that previously required additional employees or outside contractors.