This has been a challenging start to 2025 for HR professionals across the UK, who are under pressure from economic forces, skills shortages and government policy, new research shows.
A survey from elementsuite, part of HR and payroll software company Zellis, reveals that more than 80 percent of respondents say recent National Insurance changes have negatively affected cost management and workforce planning. Retail, agriculture and real estate sectors were among the hardest hit. Meanwhile, 62.5 percent report that ongoing economic uncertainty has prompted changes in hiring strategies.
Despite these issues, many HR professionals are taking a more strategic approach. A majority (74.5%) feel prepared to navigate economic changes in the year ahead. Over half (50.3%) remain optimistic about the business outlook. HR is now increasing its focus on long-term workforce planning, employee wellbeing and strategic decision-making.
The survey was conducted in collaboration with HR Ninjas, the UK’s largest free online HR community. Lizzie Henson, founder HR Ninjas, praised the resilience of the profession, saying, “No matter what gets thrown in their way, we’ve seen time and time again how the HR community rolls up their sleeves, comes together and figures it out.”
Technology and AI adoption increases despite budget concerns
The survey reveals a steady rise in the use of AI and HR technology. Over half (53.1%) of HR teams are actively piloting or exploring AI tools, while 17.9 percent report they are already using them. This comes as 20.4 percent of organisations say they will increase HR tech budgets in 2025, despite wider cost control measures.
HR’s role is also becoming more strategic, with 72.5 percent saying their responsibilities have evolved in the past three years. The trend is strongest in larger companies with between 1,000 and 4,999 employees, where 80 percent report a significant shift in the function’s influence on organisational direction.
Victoria Beaven, HRIS partner at elementsuite and member of HR Ninjas, said, “What I found most fascinating about the findings in this report is that it’s a raw and honest reflection of the current reality of HR in 2025: balancing cost pressures with people priorities, navigating evolving government policies and ensuring organisations remain agile in a constantly shifting landscape.”
Workforce planning, retention and wellbeing top the agenda
Redundancy is on the horizon for some, with 31.3 percent of HR professionals expecting job cuts during the year. The risk is most pronounced in retail, education and hospitality, while small businesses with fewer than 50 employees appear less likely to downsize, with only 13.6 percent considering reductions.
Recruitment and retention remain problematic for many teams. While 62.5 percent of organisations have modified their hiring strategies, only 42.6 percent are confident in their ability to attract the right talent. Just 21.8 percent report an improvement in staff turnover.
Employee wellbeing is the leading HR priority in 2025. A total of 43.5 percent of HR leaders say their organisations will boost wellbeing investment this year. The highest levels of investment are in education (55%), hotels (55%) and financial services (54%).
Diversity and inclusion still a priority
The report also found that diversity and inclusion remain central to HR planning. Nearly 60 percent of professionals consider equity, diversity and inclusion a high or moderate priority, despite ongoing financial pressures. Not-for-profit and public sector organisations showed the highest levels of commitment, at 87 percent and 81 percent respectively.
The research highlights a divide in business strategy between sectors focused on survival and those pursuing growth. A third (33.1%) of organisations are prioritising cost-cutting, particularly in education, retail and manufacturing. By contrast, growth-driven industries such as IT and communications, professional services and utilities are increasing their focus on innovation and business expansion.