AI investment rises, spurring upskilling concerns in Australia

Businesses in Australia are increasing investment in artificial intelligence (AI), yet there is a growing concern regarding workforce upskilling.

Research from ELMO Software indicates that 57% of HR professionals report a rise in AI-related budgets for 2025, a significant increase from 38% in 2024. This shift highlights the rapid pace at which AI adoption is occurring.

The 2025 ELMO HR Industry Benchmark Report, which surveyed 900 HR professionals in Australia, covers various workforce trends including technology adoption, employee mobility, productivity, and HR challenges.

In this changing landscape, there is increasing pressure on businesses to upskill, cross-skill, and reskill their workforce. Workforce development has emerged as the top challenge for 27% of HR professionals over the next 12 months, moving up from fourth place last year. This follows economic uncertainty and labour shortages previously marked as the primary concerns.

Chief Executive Officer of ELMO Software, Joseph Lyons, commented, "The rapid integration of AI is fundamentally reshaping job functions. To successfully work alongside AI, HR professionals must focus on retooling and retraining, fostering transparency and collaboration between technical and human-focused roles, and ensuring AI-driven decisions align with organisational values."

Confidence in AI remains high among HR professionals, with 83% believing it will significantly affect HR this year, and 32% describing it as 'transformative'. Interestingly, this confidence is slightly lower in smaller organisations, at 77%. A majority of 68% believe their HR department is "future-ready" for AI adoption.

"While enthusiasm for AI is evident, the challenge lies in translating this confidence into effective implementation. As organisations continue to explore AI's full potential, ensuring the right strategies, skills, and infrastructure are in place will be critical to long-term success," Lyons added.

Increased budgets are not only directed towards AI technology (57%) but also towards learning and development (54%), as well as HR technology (52%). HR professionals point out AI proficiency, predictive trend analysis, and financial literacy as crucial skills for the future.

Despite the swing towards upskilling, employee turnover continues to be a critical issue. Over a third (35%) of HR professionals predict an annual turnover rate of 6-10% in 2025, with 28% estimating it could reach 11-20%. Additionally, retention during the probation period challenges organisations, with 34% estimating 6-10% of new hires leave before completing this stage.

Junior roles typically take two weeks to fill, and with an average hiring cost of AUD $13,870.32, a mid-sized company with 150 employees facing a 10% turnover rate incurs an annual hiring cost of roughly AUD $208,000. This necessitates a balance between efficient hiring processes and robust retention strategies.

"HR professionals are under increasing pressure to not only hire the right talent but also ensure they stay and grow with the organisation," said Lyons. He added, "AI already helps to streamline hiring and training processes, but without a strong focus on engagement and retention, businesses will struggle to reap the full benefits."

The primary drivers of retention, according to HR professionals, are employee engagement (38%), work-life balance (30%), and effective leadership (29%).

"Those who successfully integrate AI while developing a skilled, engaged, and adaptable workforce will be best positioned for success in an evolving workplace," said Lyons.

Many organisations still face challenges with fragmented systems in managing employee data, which hinders achieving data-driven HR. Smaller businesses, with 21-49 employees, are particularly affected, with 58% using stand-alone payroll systems, as opposed to 28-40% in mid-sized to large organisations. Only 30% of Australian businesses have implemented an integrated HRIS platform.

Lyons stated, "At ELMO, our purpose is to empower HR leaders with all-in-one technology that streamlines processes and enables smarter decision-making. By embracing responsible innovation – whether through AI-powered automation, real-time data insights, or secure and compliant systems – organisations can future-proof their workforce and shape a more strategic approach to HR."