AI in the workplace 2026 UK: what employers need to know about the Business and Trade Committee inquiry

What has happened?

Artificial intelligence (AI) has rapidly become embedded in UK workplaces, influencing recruitment, performance management, and day‑to‑day decision‑making.

Against this backdrop, the House of Commons Business and Trade Committee (BTC) has launched its inquiry, Artificial Intelligence, business and the future of the workforce. Its purpose is to understand the opportunities and costs of AI adoption and to assess whether current workplace protections are sufficient in a world where AI is becoming essential infrastructure.

The inquiry follows a period of accelerating AI adoption – including generative AI and the emergence of agentic AI tools – and growing concern about fairness, accuracy and accountability in automated decision‑making.

Who should pay attention – and what is at stake?

This matters for:

• employers and HR teams who increasingly rely on AI across the employment lifecycle;
• managers and decision‑makers who may be using AI‑generated insights or automated systems without realising the legal implications; and
• anyone involved in employee relations, as AI is now affecting how grievances and claims are raised and resolved.

The key risks that may otherwise be overlooked include:

• bias and discrimination, where AI replicates patterns in historical data;
• data protection issues, particularly in the context of automated decision-making;
• explainability gaps where decisions cannot easily be understood or challenged (explainability simply means being able to understand, in plain terms, how an AI system reached a decision);
• accountability issues, particularly where it is unclear whether the manager, designer, or system is responsible; and
• a rise in AI‑generated grievances and claims, which are often lengthy, inconsistent or inaccurate.

In short: employers may face greater legal, operational and reputational risk unless AI systems are managed carefully.

The wider impact and what is coming next

The BTC inquiry signals a shift in the UK’s approach to AI in the workplace. While earlier government policy favoured a “pro‑innovation” and non‑statutory model, several developments have changed the landscape:

• Generative and agentic AI have accelerated far faster than expected.
• The Information Commissioners Office (ICO) and (Equality and Human Rights Commission) EHRC are examining discriminatory and opaque AI systems more closely. See further detail below.
• Public concern has grown around AI-driven recruitment and performance management.
• The UK’s signature of the Council of Europe Framework Convention on AI suggests firmer governance principles.

Workplace disputes are also evolving. Social media platforms such as TikTok, Instagram and Reddit now spread simplified or incorrect employment 'advice', contributing to an increase in grievances based on misunderstandings rather than legal principle. At the same time, generative AI tools enable individuals to produce detailed ET1s or grievances without legal assistance, often mixing genuine issues with AI‑generated narrative.

Taken together, these trends point towards:

• more structured regulatory expectations, even if not a full statutory regime;
• more scrutiny of recruitment, performance management and redundancy selection tools; and
• greater need for transparency and human oversight in high‑impact decisions.

In another signal of regulatory concern around AI in the workplace, the ICO has just released a report on automated decision-making in recruitment. Its key finding is that employers must more thoroughly assess the level of meaningful human involvement in their processes. Whenever automated decision-making is taking place, employers must ensure sufficient safeguards, including in relation to data protection rights, transparency and bias or discrimination. The ICO is consulting on its draft guidance on automated decision-making until 29 May 2026, and organisations can respond to the consultation here. The ICO will also be publishing updated guidance on recruitment and selection this year.

The BTC inquiry may therefore be a further step towards clearer rules and stronger worker protections.

When will this happen?

The BTC received evidence until 3 April 2026, after which it will prepare its report. While timelines for any government action are not yet defined, employers should expect tighter expectations in the near term, particularly around transparency, fairness and oversight.

Practical steps employers can take now

Employers can take several practical steps to get ahead of regulatory change and reduce risk when using AI in the workplace:

• Map your AI use: identify all tools used across the organisation, including informal 'shadow AI' used by staff.
• Assess impact and fairness: conduct AI impact assessments for recruitment, performance management, disciplinary processes and redundancy decisions. Monitor outcomes for discriminatory effects and keep clear audit trails.
• Ensure meaningful human oversight: avoid solely automated decision‑making in high‑risk areas. Make sure human review is genuine, informed and documented.
• Strengthen data governance: review compliance with UK GDPR, including safeguards for automated decisions and transparency obligations. Keep an eye out for the ICO's guidance on automated decision-making and updated guidance on recruitment and selection.
• Update policies and training: provide clear guidance on responsible AI use, accuracy checking and confidentiality.
• Manage AI‑driven disputes proactively: hold early clarificatory meetings to separate genuine allegations from AI‑generated narrative. Record issues clearly to support procedural fairness and efficiency.

AI has moved from novelty to necessity, but with that comes increased scrutiny and responsibility. The BTC inquiry marks a pivotal moment for workplace AI. Employers who act now – by mapping AI use, improving oversight and strengthening fairness controls – will be better placed to navigate whatever comes next.

Many thanks to Luke Sheridan, current trainee in the team, for his help in writing this article.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, April 2026