Taking a Closer Look: How AI is Impacting Small Business Hiring

A few years ago, growth meant hiring quickly, and more headcount meant more output. In the age of AI, small businesses are adopting a new path to building a sustainable business.

Currently, teams are smaller, which means operational decisions carry more weight. And AI has entered the picture—not as a disruptor replacing people, but as a tool helping them move faster.

What’s Actually Behind the Hiring Slowdown

In the last few years, hiring has slowed, along with new job creation. But the reason may surprise you. 

For most of the last 17 years, interest rates were near zero, making credit cheap and investment capital widely available. Job openings had begun to slow months before AI became mainstream, and hiring continued to slow steadily as borrowing costs increased.

Engineering as the Blueprint 

In 2022, nearly two-thirds of tech companies on Justworks had engineering and technology roles making up at least 10% of their headcount. Engineering hiring, once the clearest indicator of expansion, now tells a different story.

Since then, hiring for engineering roles has fallen and remains lower, but no more than any other function. Engineering roles now make up a smaller portion of new technology companies, but this shift comes more from slow hiring than layoffs. Layoff rates are no higher for engineering jobs than for other full-time positions.

Further, new companies start smaller and take longer to expand their teams. When they do, it’s with a clearer sense of what each role needs to deliver. These trends reflect a shift in headcount strategy toward efficiency over rapid expansion. Meanwhile, AI tools have offered a path through the hiring slowdown, enabling tech startups to empower existing staff with the goal of minimizing busywork. This new model is more sustainable for long-term success, especially in a global economy that’s constantly in flux.

AI Isn’t a Replacement for People 

All that said, there's understandable anxiety about what AI means for people's jobs. When we surveyed Justworks customers directly, the dominant feeling was measured optimism. Overall, Justworks customers expect AI to make their existing teams more capable, not smaller. For example, 57% of the customers we surveyed shared that they expect AI to boost productivity within their current headcount.

The picture emerging is that businesses are using AI to extend what their teams can do—not shrink them.

Businesses Using AI Continue to Invest in Their People

Over half of Justworks customers already use paid AI tools. But investment in professional development hasn’t slowed. Most are pairing software adoption with training to upskill employees. Our data shows that 75% of customers provide AI training, and 2 in 3 businesses that invest in AI tools pair that with training. To take that a step further, 11% are hiring dedicated AI roles across fields like engineering and research.

Training employees on AI tools is where the real productivity gains come from. Tools without skills tend to sit underused. Likewise, skills without the right tools aren’t properly utilized. Together, they give small teams capabilities that were previously out of reach. 

Where Do Small Businesses Plan to Use AI

It’s clear that small businesses are using AI to enhance their existing teams, but how are they using it? Our proprietary data shows that 72% of those we surveyed expect AI to handle content generation, 58% data analytics and reporting, 50% scheduling and workflow automation, while technical support and product development are tied at 43%, and customer support follows closely at 42%. 

Zooming out to AI exploration on a function level, operations at 49%, marketing at 47%, and product engineering or design at 46%, followed by business development at 39%, and customer support at 30%, were the most represented. These findings build on the insights from the jobs and capabilities data represented above.  

Why Operations Matter More Than Ever

In a tighter labor market, when every hire carries more weight, those differences matter. And, keeping the team you have becomes just as important as finding new talent.

When teams are leaner, the cost of friction becomes more visible. Delayed payroll runs, compliance issues, confusing benefits enrollment and signup aren’t just administrative problems. They slow things down and interrupt momentum.

Our data reinforces how much the employee experience is tied to operational clarity. Employees enrolled in benefits are 12% less likely to voluntarily leave a job. But, when enrollment is confusing and your platform is making things more complicated, benefits adoption can feel like an uphill battle.

The Future is Rosier Than the Headlines Suggest

Today, growth is still a factor, but it’s no longer defined by how quickly a team expands. Instead, it’s how effectively a team can operate and scale workflows. AI contributes to that shift and enables it, while current economic conditions reinforce it. 

What's encouraging to see from Justworks customers is that many didn't just wait for conditions to improve. They found ways to do more with their existing teams, and AI has been a meaningful part of that.