Canadian SMEs boost AI spend as productivity woes bite

Employment Hero has published a survey showing Canadian small and medium-sized businesses are increasing spending on artificial intelligence, even as productivity remains their biggest challenge.

The survey of 600 senior business leaders found that 62% of Canadian SMEs are increasing investment in AI, while 41% identified productivity as their main pressure. Wages ranked next at 39%, followed by hiring and talent acquisition at 36%.

The findings highlight a gap between investment in new tools and the day-to-day pressures facing smaller employers. While many businesses are spending more on AI, the data suggests those investments are not yet easing broader operational strains.

Hiring plans remain active, though employers appear to be taking a more selective approach. Some 34% of respondents expect to expand hiring over the next six months, while a further 32% plan to hire selectively.

Business sentiment was more positive than negative. The survey found 58% of SMEs were optimistic about their outlook over the next six months, compared with 18% who were pessimistic.

Hiring discipline

The results suggest many firms are balancing growth ambitions with caution over costs and economic conditions. More than a quarter, 26%, said expansion or growth was their main financial focus over the next six months, while 41% aimed to balance growth with operational stability.

That mix of optimism and restraint reflects a labour market in which employers still want to add staff, but are applying tighter scrutiny to where those hires are made. The survey covered businesses employing between five and 1,000 people, with respondents responsible for payroll, human resources, or hiring.

Chris Pinkerton, Managing Director of Employment Hero Canada, said businesses were still investing but were being more deliberate about how they did it.

"Canadian SMEs are entering the second half of the year from a position of cautious confidence. Businesses haven't stopped investing - they're simply becoming much more intentional about where they invest. That means hiring strategically, improving productivity and looking for smarter ways to grow," said Chris Pinkerton, Managing Director of Employment Hero Canada.

AI focus

Artificial intelligence featured strongly in the responses, with nearly two-thirds of SMEs saying they were increasing spending in the area. The survey suggests AI is now being treated less as a trial project and more as part of routine operations.

Even so, productivity remains the top concern, raising questions about whether those investments are delivering measurable improvements. For smaller employers, adopting software is often easier than changing processes, retraining staff, or reorganising work around new systems.

Pinkerton said the debate had moved on from whether companies should invest in AI.

"The conversation around AI has shifted. Businesses are no longer asking whether they should invest, they're asking how they can use AI to help existing teams work smarter, improve productivity and remain competitive in an increasingly challenging operating environment," he said.

The survey offers a snapshot of a part of the Canadian economy that often faces tighter financial and staffing constraints than larger companies. That may help explain why productivity, wages, and recruitment rank so closely as concerns, even as confidence holds up and spending on technology rises.

Employment Hero provides employment software covering areas such as payroll, recruitment, and human resources. SME Pulse is a quarterly survey, and the latest Canadian edition was conducted by GWI among 600 business leaders between April and June 2026.

For employers represented in the research, the challenge appears to be less whether to pursue growth than how to do so without placing extra strain on costs and staff. The figures show that 66% expect to hire in some form, but the stronger signal may be that businesses want each investment in people or technology to produce clearer returns.