AI is being widely adopted by HR professionals across many different organizations and industries, big and small. In fact, recent studies from the General Assembly show that 82% of HR professionals are now using AI as part of their day-to-day operations, from writing job descriptions to analyzing employee feedback. More concerning, however, is that only 30% report receiving dedicated AI training for their role.
With greater exposure yet limited training, employers may open themselves up to risks associated with using AI. Security concerns become even greater when employees use AI tools to process sensitive workforce and employee data. Additionally, many HR professionals, employees, and business leaders may use AI tools without approval from their IT department.
To prepare for an AI-Driven business landscape, employers must take steps to protect employee and business data from potential security, compliance, and competitive risks. In this article, you will learn the main risks that come with using AI for HR related tasks, what shadow AI means, and how it affects data privacy, and best practices to help your business steer clear of potential breaches with AI.
What Is Shadow AI and How Does It Affect HR?
Shadow AI is the use of AI tools without the official approval from an employer or IT department, if the business operates with one. Shadow AI refers to employees using AI-powered applications or generative AI tools for business purposes without formal approval, oversight, or governance from the organization.
To give an HR-specific example, an HR professional may upload employee performance information, such as from a 360-degree employee feedback survey, into ChatGPT to draft reviews, which can unintentionally expose sensitive employee data to a third party.
The main reason HR professionals use shadow AI is to increase their productivity and efficiency; however, many HR professionals may not understand the data security risks that come with AI usage.
Why Shadow AI Can Pose a Threat to Employee Data
Even though using shadow AI can be a considerable risk for your organization’s own proprietary data, employee data is particularly vulnerable because it often contains personally identifiable and highly sensitive information. Because you’re dealing with identifiable metrics that can put your employees at risk, if it is exposed, mishandled, or accessed by unauthorized individuals, it can cause your staff to lose trust in the organization, which increases the potential for flight risks.
For this reason, HR professionals should be aware of the following employee information that poses significant risks if breached:
- Personally identifiable information, such as fingerprints
- Payroll and compensation data
- Social Security numbers and tax information
- Benefits enrollment or insurance records
- Performance evaluations
- Medical and leave-related information
Because AI can store, process, and use data to help improve its own model, both employees and HR professionals may not understand where information goes once it's entered in the AI system. Unless your organization has purchased and actively uses enterprise-level AI solutions, using publicly available AI solutions can lead to significant data breach risks.
Best Practices for Protecting Employee Data When Using AI
To prevent potential privacy breaches with sensitive workforce and business data, your organization needs to adapt to the following best practices regarding AI usage, shadow AI, and managing your HR team:
Identifying Shadow AI Usage in Your Organization
It’s very possible that your organization may be using shadow AI solutions without you even knowing. While it’s hard to audit every individual employee’s use of AI in the workplace, there are a few telltale signs that your HR team may be leveraging shadow AI.
Employers should be aware of the following:
- If employees are using their personal AI accounts to contribute to their tasks
- If AI-generated content appears in business operations
- Teams or departments that have independently adopted AI tools separate from the rest of the workforce
- If your company lacks a formal AI usage policy
- Increased use of browser extensions and productivity apps on company computers
Establishing AI Governance in HR
To restrict your HR team from using shadow AI or other unauthorized AI usage, you’ll need to build an AI governance strategy, allowing you to vet your workforce administration operations through only approved platforms and processes.
To get your organization started, you’ll want to include the following in your governance strategy:
- Data security standards and data handling
- AI tool vendor evaluation procedures
- HR training programs
- Compliance monitoring and self-audits
- Incident response planning
Beyond just training your HR team, you’ll also want to provide a cross-departmental collaboration to ensure your governance strategy is aligned with your objectives. Involving IT, legal, compliance, and all leadership roles with the creation, implementation, and enforcement of your governance strategy is crucial for your organization to maintain security.
Other Best Practices for Protecting Employee Data Regarding AI
- Establish an AI Usage Policy: A critical step for all employees is to define approved vs. prohibited uses of AI tools and highlight that employee data may not be entered
- Create an Approved AI Tool List: Vet which vendors your organization can use for business operations while maintaining security and compliance
- It’s recommended to use enterprise-level platforms for HR-related tasks because they typically offer stronger security, access controls, and compliance protections
- Train Employees on AI Risks: Educate your HR team on “shadow AI” and be sure to provide real-world examples of data leaks, compliance violations, and improper AI use
- Limit Access to Sensitive Data: Require sensitive data to be maintained and accessible only by trusted individuals, ensuring only authorized personnel can access, modify, or share sensitive information
- Evaluate Workforce Data Using Dedicated Solutions: Leverage HR analytics tools designed to handle employee data safely while giving you real-time insights immediately
- Implement AI Governance Processes: Conduct regular risk assessments and review AI tools thoroughly before adoption
- Monitor and Detect Shadow AI Activity: Identify unauthorized AI tools and perform regular audits to stop usage before risks arise
Frequently Asked Questions
Managing Employee Data Protection and AI Usage in the Workplace
As AI adoption continues to evolve, organizations need both technology and governance strategies to maintain compliance and protect employee information. Additionally, many laws and regulations are being developed to restrict the use of AI tools for employee record management and recruiting processes. Some states have already enacted regulations that limit or govern how employers can use AI in hiring, employment decisions, and employee monitoring activities.
To stay on top of evolving regulations while ensuring a safe work environment, it’s critical to have an HR compliance solution that helps you understand new laws as they are released and provides best practices that quell compliance concerns. Additionally, having a secure HR Analytics solution helps provide an extra layer of protection to your employees and critical identification, compensation, and performance data while being able to gain valuable insights in real-time without having to run data in AI solutions. With an all-secure, full suite payroll and HR platform and a team of HR experts, you can help prevent data leaks through shadow AI activities, create clear AI tool policies, and communicate AI tool objectives widely to the entire workforce. If your business needs help maintaining proper data security measures with the HR team, contact us today or schedule a compliance check-up for a more in-depth discussion.
