As we continue further into 2025, the outlook for the HR labour market looks promising with roles in employee relations, technology, and diversity and inclusion.
However, the competitive job market and heightened regulatory requirements mean that employers must adjust their approach to attract, retain, and develop their HR functions.
Evolving job market and demand for specialised skills
The HR market has seen a transition to an employer-driven landscape in recent times, a shift from the candidate-driven market of 2023. With a greater supply of HR professionals now available, employers have more options and may even find talent at a reduced cost.
Mid-level roles, particularly in employee relations, have become central to HR functions as businesses address organisational change and workforce management amid economic uncertainty. While we’ve seen significant moves towards specialist roles, the market continues to remain strong with transactional and operational HR roles.
Additionally, demand is rising for HR professionals with expertise in technology and analytics. The need for HR professionals to utilise data-driven insights and implement HR tools is becoming essential as companies strive for more efficient workforce management.
Roles focused on reward and diversity are also increasingly valued, especially within larger organisations that seek to refine compensation strategies and create more inclusive workplaces.
The presence of niche roles in diversity and inclusion reflects a broader trend towards the growth of equitable workplaces, although SMEs often integrate this function within generalist roles rather than dedicating specialised resources to it.
Economic impact
The demand for HR talent varies across regions, with London and the South showing more resilience in hiring, even through economic fluctuations. Conversely, northern regions are seeing more limited opportunities, partly due to budgetary caution and a ‘wait-and-see’ approach as a result of economic conditions and impending legislation changes.
The autumn Budget in 2024 and increases in the national living wage and National Insurance contributions are expected to affect hiring practices, especially within smaller businesses and sectors sensitive to labour costs, such as retail and hospitality. As businesses weigh the financial implications of these changes, some may face recruitment freezes or reduced headcount expansion.
Legislative changes and the role of HR
A major factor shaping the HR landscape in 2025 is the Employment Rights Bill, which introduces significant changes in employee protections, including unfair dismissal rights from day one, extended parental leave, and other benefits aimed at improving employee welfare.
While larger organisations are better equipped to handle these compliance demands, smaller businesses may find themselves constrained, potentially necessitating the recruitment of dedicated HR staff to manage these new requirements.
For the HR profession, this legislation could create additional job openings, as organisations seek expertise to navigate compliance effectively.
Compensation expectations
One of the main challenges facing companies in HR recruitment is balancing compensation with the skills and responsibilities required. While salaries for HR roles have stabilised compared to the post-Covid surge, there remains a gap between what HR professionals expect and what employers are prepared to offer, especially at junior-level roles.
Employers are advised to consider not only competitive pay but also comprehensive benefits packages, flexibility, and development opportunities. For instance, some jobseekers who previously earned higher salaries are now willing to accept a reduction for the right role, provided that it offers stability and a healthy work-life balance.
Speed of hiring is also a critical factor in securing the best people. Many employers lose potential hires to competitors due to prolonged recruitment processes, highlighting the importance of efficient decision-making and prompt feedback to applicants.
Organisations that establish clear recruitment timelines and involve all decision-makers early in the process are more successful in attracting desirable talent.
Working preferences
While fully-remote roles are becoming less common, many HR professionals still seek hybrid arrangements, particularly in sectors where flexibility is feasible. At the senior level, such as director positions, professionals may be more willing to relocate or commute for the right role, reflecting greater flexibility.
However, at the mid-level, relocation is less common, and HR professionals prioritise mid-level roles that align with their work-life balance preferences.
Diversity and inclusion (D&I) also remains prominent on the HR agenda, with large organisations often leading the way by investing in specialised D&I roles. Major law firms and corporations are appointing D&I specialists to ensure their policies focus on inclusive workplaces. For SMEs, where dedicated D&I roles may not be feasible, the emphasis is often on integrating inclusive practices within general HR functions.
Smaller companies can still demonstrate their commitment to diversity by appointing HR managers who prioritise these initiatives, educating leadership on inclusive practices, and implementing relevant policies that creates a supportive culture for all employees.
The role of technology
Technology, particularly artificial intelligence (AI), is playing an increasingly important role in HR operations.
Larger organisations are investing in AI tools to support recruitment, performance management, and workforce analytics, although smaller companies may still rely on workbook spreadsheets or older systems. For HR professionals, proficiency with digital tools and data analysis is becoming a key differentiator, enabling them to make better informed decisions and optimise HR processes.
Training in these areas is valuable not only for individual career advancement but also for meeting organisational needs as technology integration deepens in HR. For HR professionals, continuous upskilling is essential, particularly in technology, data privacy, and analytics.
Employers should support HR staff in developing these skills to stay competitive. As technology advances, HR professionals must stay current with trends to effectively support their organisations and leverage data insights to guide HR strategy.
Preparing for 2025
In light of these trends, employers must adopt strategic measures when recruiting HR talent throughout 2025. Companies that invest in competitive compensation, diversity, and technology, while providing career development opportunities, will be better positioned to attract and retain HR talent across the jobs market.
For HR professionals, this environment presents a chance to develop new skills, leverage technology, and play a critical role in guiding organisations through an era of transformation.
To help you make an informed choice on all things UK salary and benefits in the HR sector, download our free 2025 salary guide now.
