EU AI Act: preparing HR departments for algorithmic transparency requirements

The EU Artificial Intelligence Act (AI Act), which officially came into effect on 2 February 2025, is a landmark regulation and the first of its kind.

Now, for HR departments, understanding and preparing for the EU AI Act must be more than just another tick-box exercise.

It’s a wake-up call to rethink how artificial intelligence is used in recruitment, performance management and employee engagement, ensuring every process remains fair, transparent and people-centred.

EU AI Act: key deadlines and compliance milestones

Here’s a quick breakdown of what’s already in effect, and what’s coming next:

2 February 2025

• Certain AI applications, such as emotion recognition and manipulative systems, are now banned in the workplace.
• AI literacy requirements have also come into effect for staff involved in AI operations. HR teams must ensure relevant employees understand how AI works and how to manage it responsibly.

2 August 2025

• General-purpose AI (GPAI) providers must begin documenting training data, publishing transparency reports and disclosing potential risks. This impacts vendors that HR teams may already be working with.

2 August 2026

• Full compliance is required for high-risk AI systems, including those used in hiring, promotions and performance reviews.
• Employers must conduct Data Protection Impact Assessments (DPIAs), maintain technical documentation and ensure human oversight of AI-driven decisions.

2 August 2027

• Additional transparency obligations come into force, expanding what HR teams must disclose and monitor.

How HR teams should prepare

If your HR department uses AI tools for hiring, evaluation or workforce planning, here’s what you should be doing today:

• Train your team: build AI literacy across HR roles so everyone understands the tools they use
• Be transparent: inform candidates and employees when AI is involved in decision-making and explain how it works
• Ensure human oversight: AI should assist decisions, not replace human judgment
• Conduct DPIAs: when personal data is processed by AI, assess risks and document your findings
• Monitor AI systems: regularly test for bias, errors and unintended consequences

Risks of Non-Compliance

The consequences of ignoring the AI Act are serious:

• Fines: penalties can reach up to €35 million or 7% of global annual turnover
• Investigations and restrictions: organisations may face regulatory investigations, reputational damage and operational restrictions.

HR departments are on the front line of AI adoption and now, AI accountability.

The time to act is now! Audit your tools, align with the law and strengthen your internal capacity to manage AI responsibly.

The AI Act isn’t just a legal framework – it’s a blueprint for a more transparent, inclusive and human-centred workplace.

The EU AI Act as a catalyst for HR transformation

My colleague, Dan J Grace, Director of IRIS HR Consulting Services, shared his thoughts, saying: “The EU AI Act represents far more than a compliance requirement – it marks a pivotal moment for HR leaders to redefine how their organisations engage with artificial intelligence.

“As we stand at this crossroads, the choice is clear: view the Act as a compliance burden or embrace it as an opportunity to champion ethical, human-centred AI practices that will shape the future of work.

“The Act’s phased rollout provides a practical roadmap, but the deadlines leave little room for hesitation.

“With emotion recognition systems already banned and full compliance for high-risk AI systems required by August 2026, HR teams must act now.

“The potential penalties – up to €35 million or 7% of global annual turnover – underscore the gravity of these obligations.

“But focusing solely on avoiding fines misses the bigger picture.

“The so-called ‘Brussels Effect’ ensures these rules won’t remain confined to the EU.

“Just as the GDPR became the global benchmark for data protection, the AI Act is poised to influence regulatory frameworks worldwide.

“At the heart of this transformation lies trust – the trust between organisations and their people.

“By prioritising algorithmic transparency, human oversight and continuous monitoring for bias, HR departments can turn AI from a ‘black box’ into a transparent tool that enhances human judgement instead of replacing it.”

Partner with experts in global HR and payroll compliance

The EU AI Act is an opportunity for HR leaders to champion ethical AI adoption and ensure technology empowers people rather than replacing them.

At IRIS, we help organisations around the world stay compliant and future-ready through our comprehensive Global Payroll Services and Global HR Consultancy Services.

Need help assessing your HR tech stack for AI compliance? Our experts can support you with audits, training and policy development to ensure your organisation meets both the letter and spirit of the new regulation.

About the author: Sanchayika Joshi, Senior HR Consultant at IRIS

Sanchayika Joshi is an accomplished professional specialising in Human Resources and International Employment Relations.

Holding a master’s degree in International Employment Relations from the prestigious London School of Economics, she has developed a deep understanding of the complex and evolving HR landscape.

With over a decade of experience, Sanchayika has successfully led initiatives across multiple areas of HR, including talent acquisition, employee relations, HR policy development, performance management, change management and cultural transformation.