The AI Hiring Dilemma: Regulation, Ethics, and the True Cost of Automation

Scrolling through LinkedIn today, I came across a post from Andrew Lewis, Head of Talent at Worldly, that struck a chord with me. Andrew consistently shares insightful perspectives on our industry, but this time, his thoughts on AI and recruiting really stood out. There’s already been endless chatter about what AI can do and rampant speculation on what it will do to the role of corporate recruiting. However, the real conversation should be about the more profound implications of AI in hiring—its regulation, ethical concerns, and long-term impact. 

So, let’s discuss it.

The Future of AI in Recruiting: Beyond the Hype

AI in recruiting is no longer a futuristic concept—it’s here, and it’s transforming how talent acquisition operates. But rather than rehashing what AI can do, it’s time to shift the conversation to what AI should do and how it will shape the industry’s future.

Here are four critical discussions that recruiting leaders must have to navigate this evolving landscape, questions we should be asking ourselves, and my best attempt at some preliminary answers based on my experience in recruiting innovation in high-tech companies for the last 15 years, speaking to dozens of experts in our industry, following the latest trends in AI technology,  and my recent studies in AI & Machine Learning engineering at the University of Texas McCombs School of Business.

1. The Role of Legislation and Regulation

Governments and regulatory bodies are moving swiftly to establish guidelines around AI in hiring. From the EU’s AI Act to the EEOC’s focus on algorithmic bias in the U.S., legislation will directly impact what’s possible in AI-driven recruitment. Key questions include:

• How will compliance requirements shape AI adoption in hiring processes? Regulations will likely demand transparency in AI decision-making, requiring employers to disclose how algorithms assess candidates. This means that organizations must ensure their AI tools comply with anti-discrimination laws (if the new President's future or recent executive orders aren't shut down by the courts, that is) and are auditable.

• Will increased regulation slow innovation, or will it lead to better, more ethical AI systems? While some fear that stricter laws may stifle AI advancements, regulation can also encourage responsible innovation, leading to AI that is fairer and more effective.

• How can organizations proactively prepare for upcoming AI compliance standards? Companies should invest in AI governance frameworks, conduct regular audits of AI systems, and partner with legal and technical experts to ensure compliance.

Staying ahead of these changes will be crucial for companies that want to leverage AI effectively while avoiding legal pitfalls or risks to their hiring success.

2. The Problem of AI on Both Sides of the Hiring Process

As AI tools become more advanced, candidates and employers alike are using AI-powered agents. This raises fundamental concerns:

• If recruiters use AI for screening and candidates use AI to optimize their applications, who is actually being evaluated? This creates a potential “AI arms race” where automated systems interact with each other rather than with humans. It raises concerns about whether hiring decisions will be based on genuine skills or on which AI system is better at gaming the process, which risks wasting both the candidate's and recruiter's time and affects hiring speed and quality, given that companies won't truly assess their qualifications until a recruiter or hiring manager screen.

• Does an AI-to-AI hiring process result in better matches or increase hiring risks? While automation can reduce bias and streamline hiring, it may also lead to hiring decisions that lack human intuition, cultural fit assessment, and emotional intelligence.

• How do we ensure that AI enhances, rather than replaces, authentic human connection in hiring? AI should be used as a tool to support recruiters rather than replace them. This means ensuring that humans review AI recommendations and that authentic and timely candidate engagement remains a priority.

Recruiting professionals must consider when AI adds value and when it dilutes the human elements that are essential to making great hires.

3. The True Cost of AI at Scale

AI promises efficiency, but at what cost? Beyond the upfront investment in AI tools, there are hidden costs to consider:

• Are organizations truly saving money, or are they trading cost efficiency for quality? AI-driven hiring can reduce time-to-hire and lower administrative costs, but if it results in poor hiring decisions, turnover costs may outweigh the savings.

• How does reliance on AI affect workforce planning and recruiter skill sets? AI might shift recruiter roles from sourcing to strategic decision-making, requiring new skill sets in data analysis, AI auditing, and ethical hiring practices.

• What is the impact on DEI initiatives if AI is not designed with fairness in mind? Poorly designed AI can reinforce existing biases that have long been inherent in hiring, and that could be absolutely amplified if AI tools are not designed and implemented ethically. Organizations must invest in AI systems that prioritize fairness and conduct ongoing bias assessments. I wrote a blog recently that can help HR and TA leaders better understand how to evaluate this technology and what cross-validation, the process AI engineers use to ensure the quality and reliability of their models, is and the questions to ask when buying AI tech.

While AI can drive cost savings, companies must weigh these against long-term talent outcomes.

4. The Long-Term Impact on Candidate Experience

AI-driven hiring processes may streamline applications, but will they create a better experience for candidates? In my experience as a Talent Acquisition consultant, the most common theme (and frustration) I've noticed is how difficult it has been for businesses to think long-term, especially regarding their hiring strategies. In fact, candidate experience is the worst it's been in decades.

• How do candidates feel about being assessed by AI rather than humans? Some candidates appreciate the speed and efficiency of AI-driven hiring, while others find it impersonal and frustrating. Ensuring a balance between automation and human interaction is key.

• Will automation lead to more transparency, or will it create a more impersonal process? AI can potentially provide clear feedback on why candidates were or weren’t selected, but without human touchpoints, it may also lead to candidates feeling like just another data point. However, at this point, ghosting of candidates is so common that I think, at first, candidates will be happy to hear back from a company at all after they apply to roles, human or not.

• What are the best practices for using AI without making candidates feel like they’re just data points? Companies should ensure personalized communication, offer AI-driven interview prep tools, and provide human check-ins throughout the process.

Preparing for the Future of AI in Recruiting

Rather than asking what AI will do to the recruiting profession, talent leaders should be asking how they can shape AI’s impact on it. In fact, we've been talking about this topic well before ChatGPT, and Generative AI even came into the fold. The fact is, AI and machine learning have been used in recruiting and HR tech for well over a decade, well before generative and conversational LLMs took it to a whole new level. I even predicted this moment in my keynote at SourceCon in 2017.

The future of AI in recruiting isn’t just about automation—it’s about ensuring that technology serves both employers and candidates in a meaningful, ethical, and effective way.

As these discussions evolve, recruiters and TA leaders must take an active role in defining AI’s role rather than letting AI define the future of recruiting for them.

At Proactive Talent, we help organizations navigate these challenges by designing forward-thinking recruiting strategies, building strong employer brands, and extending internal capabilities with flexible, embedded, AI enabled and trained, talent acquisition and employer brand professionals. If your organization is looking for a partner to help you succeed in this rapidly evolving business landscape, let's start a conversation today.