Replacing workers with AI? You may come to regret it: Gartner warns 30% of employees who’ve been laid off because of the technology will be rehired by 2029 – and at a far higher cost to the business

Organizations that have rushed to replace workers with AI may end up regretting that decision – and will be forced to re-hire staff at a higher cost.

That’s according to new research from Gartner, which found kneejerk decisions to replace staff with AI are due to a lack of effective workforce planning.

Indeed, only 19% of firms said they have practices in place to help leaders understand how work is changing, assessing AI’s impact, and aligning talent strategies with business goals.

As a result, Gartner said that by 2029 around 30% of employees who were terminated and replaced by AI will be rehired, but typically at a greater cost to the enterprise.

“Many organizations are making AI and workforce decisions in the wrong order,” said Caitlyn McDonough, vice president analyst in the Gartner HR practice.

“They decide how many people to let go before they understand what it will take to get work done. The goal should be to understand what work matters most to the strategy, how that work is changing, and the right mix of people and technology needed to deliver business outcomes.”

Ditch the ‘bottom up’ workforce approach

Rather than 'bottom up' planning, where leaders consider today’s jobs, skills, and headcount and assess how AI could change them, organizations should start by considering the enterprise strategy first, then aligning workforce decisions to the work required to achieve strategic goals.

They should start by identifying the workforce capabilities most critical to executing business strategy, and then forecast future work demand and capacity requirements.

Next, they should assess the future workforce supply, including both human and AI-enabled capacity, quantify workforce gaps and evaluate potential solutions based on cost, risk and speed, and establish governance processes to prioritize and fund workforce investments.

“To prepare for an AI-driven future, leaders should stop planning for the workforce they have and start planning for the workforce their strategy requires,” said McDonough.

“When organizations shift the focus from jobs to work and work demand, they avoid costly workforce missteps and allocate resources more effectively.”

The grass isn’t always greener

The report echoes research from Forrester this time last year, which found that 55% of companies that cut staff in favor of automation ended up regretting the move. That study came just months after a similar report revealed more than a third of UK business leaders regretted cutting staff in favor of AI.

Crucially, however, Forrester noted that rehiring doesn’t always involve bringing back laid off staff. Companies are increasingly offshoring jobs to avoid rehiring at higher rates.

Some organizations have admitted as much. This summer, for example, Ford reportedly started rehiring hundreds of experienced human engineers to work on quality issues that AI simply couldn’t address.

Meanwhile, after replacing more than 40 customer service staff with an AI chatbot, the Commonwealth Bank of Australia found that it simply wasn't up to the task and reversed the cuts.

AI-related layoffs have been a recurring talking point over the past two years, with companies attributing workforce cuts to advances in the technology and associated cost savings.

These bold claims are often a cover though, according to a study by Oxford Economics.

As ITPro reported earlier this year, a research paper suggested that firms are using AI as an excuse to cover for weak demand, poor financial performance, or excessive hiring.

"Some firms are trying to dress up layoffs as a good news story rather than bad news, such as past over-hiring," researchers said.

FOLLOW US ON SOCIAL MEDIA

Follow ITPro on Google News and add us as a preferred source to keep tabs on all our latest news, analysis, views, and reviews.

You can also follow ITPro on LinkedIn, X, Facebook, and BlueSky.