Employee retention is the number one challenge for over half (51%) of Canadian HR leaders, yet Capterra’s 2025 HR Software Trends Survey reveals a solution may already be within their grasp. Companies using AI features in their HR software are significantly more successful at keeping their staff, with 39% reporting an increase in employee retention compared to just 26% of those not using AI.
However, there is a crucial barrier preventing businesses from reaping these rewards: a significant AI skills gap. Despite the clear benefits, the report finds that 43% of HR leaders cite a lack of sufficient AI skills on staff as a primary challenge to adoption. This creates a critical disconnect where companies possess the technology to solve their biggest problem but are unable to leverage its full potential.
“Canadian businesses are rightly focused on keeping their people because upskilling is going to be more cost-effective in the long run,” says Eduardo Garcia Rodriguez, analyst at Capterra. “However, there’s a hesitation to embrace AI, driven by a real skills gap, and as a result, the very tool that could help them succeed is being left on the table.”
The report, which gathered insights from over 3,200 HR professionals globally, including 289 in Canada, reveals several key findings:
- The AI adoption gap: While two-thirds (67%) of Canadian organizations report having AI features in their HR software, less than half (41%) actively use them. This hesitation means companies are not benefiting from tools that could address their biggest challenges.
- Upskilling is a critical hurdle: Training is a significant pain point, with 44% of Canadian HR leaders citing upskilling current employees as a top operational challenge. Furthermore, training new users on HR software is the main software-related concern for 46% of respondents. With training costs expected to increase for 63% of organizations, the need for effective training strategies has never been more urgent.
- AI risks and security remain top of mind: The hesitation to adopt AI is also rooted in valid concerns about its risks. The survey reveals 40% of Canadian HR leaders are concerned with assessing the value and risks of AI, and 42% cite understanding how AI makes decisions as a key challenge to adoption. Security also remains a top priority, with 60% considering it a critical feature when selecting new HR software.
The future of HR in Canada will be defined by how well organizations adapt to these technological shifts and evolving workforce needs. To solve the retention challenges, leaders must prioritize building AI skills and fostering a culture of continuous learning to fully leverage the technology at their disposal.
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