People function meets HR challenges to become strategic powerhouse

A major survey has found that 73% of people professionals are now more involved in strategic business decision-making activities, from workforce planning to organisational transformation. It also reveals the growing importance of engagement, retention, recruitment, and wellbeing — including financial wellbeing. In the face of mounting economic pressures, the comprehensive integration of people expertise is emerging as a critical support system that organisations increasingly rely on.

What’s the Mood? HR’s Take on Business 2025, was conducted by the HR Ninjas community. It’s based on a survey of 490 UK-based HR professionals from diverse industries.

In this blog

How are HR practitioners becoming more strategic? 

What impact are current HR challenges having? 

What are the key priorities for HR today? 

How is technology supporting strategic HR leaders? 

Conclusion and key takeaways

How are HR practitioners becoming more strategic? 

HR practitioners are demonstrating their strategic evolution in just how prepared they feel to address the raft of economic challenges. These include a hike in Employer National Insurance contributions, a new National Minimum and Living Wage coming into force, and ongoing inflation fluctuations.  

Around three out of five HR professionals say they have been negatively affected by these, and other, recent government changes. This includes new employment legislation. But an impressive 76% of respondents point out that HR is playing a critical role in helping organisations deal with the economic pressures they face.  

Embracing a more comprehensive approach integrating advanced HR, payroll, and workforce management enables more powerful and nuanced decision-making on — for example — compensation strategy, financial wellbeing programmes, and engagement initiatives—all of which directly impact retention and organisational performance.

In fact, 75% of those surveyed indicated they are already on top of the situation, adapting their strategies to cope and actively planning ahead. A further 67% are also benefitting from the support of the leadership team, which involves collaborating to navigate workforce challenges.  

What impact are current HR challenges having? 

Professionals face a range of current HR issues. Today’s economic and business climate is tough. Labour costs are soaring, particularly in sectors with large frontline workforces. Energy price hikes and rent increases are also squeezing margins.  

As a result, most organisations are tightening their belts, with 33% of those questioned actively introducing cost-cutting measures. Although approaches to tackling the situation vary, 31% of respondents plan to make either major or minor redundancies. 

Despite these HR challenges however, a surprising 50% of professionals say they feel positive about the current UK business climate. On the downside, two out of five (40%) feel the opposite in the face of numerous challenges and uncertainties. 

What are the key priorities for HR in 2025? 

The top HR priorities this year are employee wellbeing, recruitment, and retention. But this situation does vary based on industry. For example, wellbeing tops the list in agriculture, education, health and social care, and hotels – perhaps reflecting the stress levels that can exist here.  

Given this concern, are organisations investing more in wellbeing initiatives like mental health support and financial education? The picture is mixed. While 44% of HR professionals plan to increase how much they spend in this area, the rest say it is unlikely; many expect spending to remain flat.  

Recruitment and retention are a key focus for the construction, hotels, professional services, retail/wholesale, and transport sectors. Many of these are among the sectors experiencing particularly high employee turnover levels and skills shortages. 

Nearly two thirds (63%) say external factors, including rising costs, have brought about either moderate or significant changes to their hiring strategies. Two out of five (40%) find recruitment challenging but manageable in today’s climate. For another 18%, it is increasingly difficult. But a further 43% believe they are still succeeding in attracting new talent. 

As for the flipside of recruitment in the form of retention, a mere 22% say they have successfully reduced employee turnover. Nearly half (48%) say it has remained steady, but for just under a third (30%), it has actually got worse. 

How is technology supporting strategic HR leaders? 

At a time of economic uncertainty and rising cost pressures, you could be forgiven for expecting to see HR tech budgets shrink. But for forward-thinking organisations (20%), the opposite is true.  

Other employers, on the other hand, are simply becoming more targeted and strategic in their spending. This means they are investing in tools to help boost efficiency, automate workflows and produce a measurable return on investment. 

Interestingly, around 44% of respondents believe that technology and automation are among the biggest trends shaping the HR function right now. In fact, a huge 71% say they are working with AI in some form. Most are still figuring out how to harness it to enhance working practices.

Conclusion: HR, the critical business partner 

Organisations navigating significant change, driven by economic challenges, technological advancements, and a difficult talent market. However, today’s HR professionals are stepping up as strategic leaders by combining HR expertise with payroll and workforce management to deliver solutions that directly address pressing business needs and contribute to organisational success in these uncertain times.

By implementing practical employee wellbeing programmes that tackle both mental and financial health concerns, while also improving how companies attract and keep valuable staff, HR teams are helping businesses stay competitive and resilient. Encouragingly, more HR departments are now using AI tools to make better use of their people data—enabling smarter decisions about staffing, costs, and business planning that demonstrate HR’s growing value as an essential partner in shaping company strategy and future success.

Key takeaways 

• HR has evolved into a strategic powerhouse with 73% of professionals now involved in key business decisions through integrated HR, payroll, and workforce management.
• Despite rising costs and new legislation affecting 60% of HR teams, 76% report playing a crucial role in helping organisations navigate economic pressures.
• Employee wellbeing, recruitment, and retention top HR priorities for 2025, with 44% planning increased investment in mental health and financial education initiatives.
• Technology adoption remains strong with 20% increasing HR tech budgets and 71% now working with AI to enhance efficiency and deliver measurable ROI.
• Integrated HR, payroll, and workforce management approaches enable better decision-making around compensation, wellbeing, and engagement—directly improving retention and business performance.

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“What’s the Mood?” Read the full report 

Delve into how HR professionals are tackling the challenges, opportunities, and priorities of today’s market landscape.