Small Businesses that Adopted AI Are Hiring Faster

Introduction

Over the last several years small businesses have been increasingly using AI to build and grow their businesses. A Gusto survey showed that 64% of businesses reported at least experimenting with AI in April 2025. Moreover, nearly two-thirds of businesses started last year used AI in order to make it easier to open their doors. Small businesses are finding ways to increase productivity and revenue with this technology, and those that leaned into the technology hired faster in the next twelve months following their start with AI.

This analysis follows respondents to Gusto’s 2025 Main Street Meets Machine Learning survey to show how those who adopted AI changed their workforces. Our findings show that small businesses that adopted AI were more likely to grow their teams in the year after AI adoption. This finding is strongest at the smallest businesses: those with fewer than 10 employees grew their teams by an average of 10%, and small community services businesses (e.g., health care and education) grew their teams by nearly 20%. When we took a look at the titles of those who were hired, we found that they were hiring do-ers, people who produce more of the work that business provides to its customers, suggesting that small businesses are investing time saved by implementing AI into increasing their productivity.

We identified AI uses based on survey responses in April 2025. In this survey, 1,593 businesses told us that they used AI to various degrees and had been Gusto customers for long enough to track employment changes. Additionally, 669 told us that they knew about AI but had not implemented it into their business and had long enough histories on Gusto to track employment changes. This comparison group allows us to control for knowledge about and availability of AI systems. We are not comparing businesses that use AI against those who do not understand it or have never been exposed, instead we’re measuring the choice of using AI conditional on knowing about it. See our methodology section for a full list of robustness checks that further verified these results. 

Key Findings

• Businesses that use AI hire 7% more than those that don’t in the first year of using the technology. In the four quarters after adopting AI, a small business’s headcount rose about 7% relative to comparable firms that were aware of AI but hadn’t adopted it. That increase built gradually, climbing from about 4.5% to about 6.8% by the end of the fourth quarter.

• Businesses with fewer than 10 employees grew their teams about 10% more than comparable businesses that didn’t use AI. This suggests that AI can make the biggest difference in resource-tight businesses. The smallest businesses, which have just as much overhead work, can focus on their core mission and grow their teams through that.

• This result is broad across industries, and not just tech or professional services. Small businesses that adopted AI hired more across industries like community services, goods-producing, and personal services with small health care and social assistance firms standing out the most.

Business that use AI hire 7% more than those that don’t in the first year of using the technology

On average, small businesses that adopted AI see about 7% higher headcounts within the first year of implementing the technology than those that know about AI and choose not to use it; and by the end of the first year headcount is 6.8% greater than those who choose not to use AI. This shows that AI wasn’t a one-time hiring boost (for example, an AI engineer at a small tech startup); instead, businesses that used AI found opportunities over quarters to add to their staff. This is consistent with AI continuing to expand productivity and business output, creating additional opportunities for small businesses to expand their teams.

Among the adopters that added jobs, the new roles were mostly hands-on and customer-facing. Health-care and social-assistance shops hired therapists and other care staff; elsewhere, businesses added teachers, technicians, and cooks, plus some front-desk and admin support. We can't see why any one business hired somebody, but the pattern fits a simple story: AI absorbs routine work, freeing owners to put more people on the work that serves customers. That squares with the survey, where most owners said AI made them more productive.

The strongest growth was at businesses with fewer than 10 employees

In 2025, nearly two-thirds of small businesses that used AI said that they believed that AI would make them more competitive with larger businesses. After watching their growth a year after adopting AI, we can see why. The smallest businesses, those with fewer than 10 employees, saw the largest growth: 10% or more over comparable businesses that did not use AI. For the average business with 9 employees, this means that within a year of adopting AI small businesses have already onboarded one additional employee.

The mechanism here makes sense. In businesses with only a handful of employees, the owner’s time, hours, and attention are the most important resource and they’re often spent on business overhead; things like administration, scheduling, marketing, or research. Many of these businesses are too small to have established processes and resources available to protect the owner’s time to invest in their business. Larger businesses with 10-24 employees, for which we don’t measure any headcount change as a result of AI, already have much of these processes in place. Productivity for these businesses likely show up in other places than headcount, even if employees are freed to focus more on their core jobs rather than things that AI could do for them. 

AI adopters hired more across industries, not just in technology or professional services

Among the smallest businesses, those that had the most to gain from AI and made use of that additional productivity by adding to their headcount, we see strong hiring across each of our four sectors. Rather than being a technology story about a very small startup hiring additional AI engineers, we see similar growth at goods-producing (e.g., construction and manufacturing) and personal services (e.g., restaurants and salons) as we do at professional services (e.g., accountants or tech firms).

Small businesses as diverse as restaurants and manufacturing that adopted AI experienced similar headcount growth compared to businesses in technology and professional services that may have the most obvious use of AI. This suggests that increases in productivity as a result of AI are available for small businesses regardless of industry.

The one stand-out sector in our analysis is Community services businesses. These are primarily driven by small health care and social assistance businesses. Community services businesses with fewer than 10 employees that adopted AI experienced 19% headcount growth compared to comparable businesses that did not do so. When we looked at the type of employees hired at these businesses we saw something clear: the people hired were those that provide critical community services. This included more dental hygienists at dental practices or additional therapists at mental health clinics. Increasing productivity, through making patient documentation easier, could free up staff time for more patient care. This increases access to these services in addition to increasing revenue for these small businesses.

Conclusion

Across the businesses we followed, the ones that adopted AI went on to add more people over the next year than the ones that didn't, and the gain was largest where resources are tightest: firms with fewer than ten employees. It showed up whether the business was a restaurant, a manufacturer, an accounting office, or a dental practice, and it didn't take a heavy technical lift. Businesses that used AI for everyday tasks saw the same hiring gains as those that had built it deep into their operations.

The benefits of AI adoption don't look reserved for tech companies or the firms that can afford to go all-in. A solopreneur using AI to draft proposals and a dental office using it to speed up paperwork are both, in this data, winning back time that goes into the work their customers came for, and often into hiring the next person to help do it.

Methodology

This analysis follows small businesses that responded to Gusto’s 2025 Main Street Meets Machine Learning survey and measures how their employment changed in the year after they adopted generative AI, using the payroll they run through Gusto. The findings are associational: they describe a consistent pattern, not proof that AI caused the hiring.

Sample

We studied 1,593 businesses that reported using generative AI, to varying degrees, and 669 that were aware of AI but had not adopted it for a total of 2,262 businesses. All were Gusto customers with enough payroll history to track employment before and after the survey. Adoption timing comes from each business’s self-reported year of first using AI.

The comparison group

Our comparison group is businesses that knew about AI but chose not to use it. This isolates the effect of the choice to adopt, conditional on being aware of the technology, rather than comparing AI users against businesses that had never encountered it.

Measuring the effect

We measured headcount as the number of employees on payroll each quarter and estimated the effect with a Callaway and Sant’Anna event study, a method built for settings where different businesses adopt at different times. Each business is compared with not-yet- and never-adopting businesses, relative to the quarter before it adopted, and effects are reported over the four quarters after adoption. Employment paths were flat and parallel before adoption, the key check that the two groups were comparable.

Robustness

The result holds when we change the comparison group, allow businesses to respond a quarter early, and restrict the sample to firms that were already well established when they adopted. We see no matching change in wages, consistent with businesses adding people rather than riding a broad pay increase.

Limitations

This is a correlation, not a controlled experiment: businesses choose whether and when to adopt AI, and early adopters may differ in ways we can’t observe. Our sample is Gusto customers who answered a survey, not a random sample of U.S. small businesses, so the exact magnitudes may not hold economy-wide.