The EU Artificial Intelligence Act – Employment Law Implications for SSC and BPO Operations

The adoption of the EU Artificial Intelligence Act (“AI Act”) introduces a structured regulatory framework that governs the design, deployment, and use of AI systems in the EU. Although the regulation primarily targets AI providers and developers, it also places specific obligations on users—including employers—who integrate AI tools in internal human resources processes or in service delivery affecting employees.

Shared Services Centers (SSCs) and Business Process Outsourcing (BPO) providers are particularly exposed, given their increasing reliance on AI in recruitment, performance evaluation, workload distribution, and process automation.

1. High-Risk Use of AI in Employment Contexts

The AI Act classifies certain uses of AI in the workplace as high-risk, which activates a stringent set of compliance obligations. This includes, but is not limited to, AI systems used for:

• Recruitment and candidate filtering;
• Employee performance monitoring and evaluation;
• Promotion, disciplinary decisions, or contract termination;
• Automated task allocation or shift scheduling.

In such contexts, the AI Act mandates that the employer (as user of the system) must ensure:

• Human oversight is guaranteed and documented;
• Data governance principles are applied to avoid bias or discrimination;
• Transparency is observed, including informing employees when they are subject to AI-driven decision-making.

Failure to meet these obligations may not only lead to regulatory sanctions but may also violate national labour laws, including the employee’s right to fair treatment, non-discrimination, and access to information.

2. Impact on Employee Rights and HR Policies

The use of AI systems for managing human capital introduces several labour law challenges:

• Consent and information rights: Employees must be clearly informed if AI tools are used in decisions that affect them. This includes the purpose, scope, and potential consequences of such systems.
• Right to human intervention: Employees must retain the right to contest decisions made or supported by AI and to request a human re-assessment, as reinforced by EU data protection and labour law principles.
• Risk of indirect discrimination: Improperly trained or opaque algorithms may disproportionately impact certain groups of employees, exposing the employer to liability under anti-discrimination legislation.
• Moreover, trade unions or employee representatives may require prior consultation, especially where AI tools significantly alter working conditions or introduce new monitoring practices.

3. Organizational Risk and Governance Requirements

SSCs and BPO organizations must implement internal governance frameworks to:

• Conduct risk assessments prior to deploying AI systems in HR;
• Maintain technical documentation and audit trails;
• Ensure roles and responsibilities are clearly defined (i.e. who configures, supervises, and interprets AI-generated outputs?).

The HR function, in collaboration with Legal and IT, must revise internal policies and employment practices to reflect these obligations—particularly in jurisdictions where labour inspection authorities may examine compliance with AI-related safeguards.

4. Contractual and Reputational Exposure

Where SSC/BPO entities provide services involving AI-generated outputs to third parties (e.g., outsourced recruitment, payroll, or training evaluation), failure to comply with the AI Act may:

• Result in contractual liability if clients or employees are adversely affected;
• Trigger data protection investigations, especially under GDPR;
• Lead to reputational harm in the context of ethical AI use and workplace fairness.

Accordingly, service agreements, internal employment contracts, and employee handbooks must be updated to reflect AI-related compliance duties.

The AI Act introduces a shift in the legal treatment of AI at the workplace—from innovation to regulation. For SSCs and BPOs, the deployment of AI tools in employment-related contexts is no longer a question of technological capacity, but of legal accountability. Employers must proactively assess where and how AI is used in relation to employees and implement the necessary safeguards to ensure compliance with both regulatory and labour law requirements.

Preparing now will allow business services providers to mitigate legal risk, protect employee rights, and position themselves as responsible adopters of AI in a rapidly evolving legal landscape.