What Are the Biggest HR Challenges of 2025?

This article outlines six of the biggest challenges facing HR leaders and teams in 2025 and strategies to overcome them. Challenges include AI adoption, upskilling, meaningful DEI, and retaining top talent.

Blaise Radley January 29, 2025
A woman in a HR meeting listening attentively

In 2025, human resources (HR) as we once knew it is becoming a thing of the past. Traditionally focused on administrative support and policy, HR is now a frontline strategic function—a shift that’s presenting both exciting opportunities and complex issues for companies to navigate.

The biggest HR challenges stem from a range of trends: hybrid as the new norm, AI-driven workforce management, HR leadership development, and more. These challenges are requiring HR leaders to rethink their priorities, department structure, and day-to-day operating model.

According to Gartner, a major gap exists right now between the percentage of HR leaders who recognize this need for HR transformation in 2025 (87%) vs. those with a fully integrated strategic plan (27%). To attract top talent and maintain a resilient workforce, companies must bridge this gap and make HR a true strategy driver.

In this guide, we’ll discuss the biggest HR challenges you should know as we enter the new year, ways to address them, and how to integrate HR into high-level business strategy with purpose and clarity.

Key Takeaways

  • HR has shifted to a more strategic role, requiring leaders to tackle challenges like hybrid work, AI, and diversity, equity, and inclusion (DEI).
  • Internal mobility and growth opportunities are key to retaining top talent in 2025.
  • AI is transforming HR, but its success depends on upskilling workforces and building trust in new technologies.
  • Authentic, measurable DEI initiatives (vs. performative and public-facing efforts) are essential.
  • HR-led leadership collaboration and commitment to continuous improvement are critical to future-proofing HR strategies.

The Biggest HR Challenges of 2025

Demands on HR professionals in 2025 are diverse and formidable, and reflect broader transformations reshaping the world of work. From addressing workforce fragmentation to navigating technology’s growing impact, HR leaders must confront challenges head-on. These are six of the most pressing issues defining the HR landscape in 2025.

Challenge 1: Talent Acquisition and Retention

2024 saw confirmation that the Great Resignation is over and the Big Stay is here in its place—workers are embracing job stability where they are as hiring slowdowns abound. However, this doesn’t mean they’re happy to stay static in their roles. HR teams must increase their focus on internal mobility in 2025—creating opportunities for employees to grow, develop, and advance within the organization.

A case study of hiring practices at Workday revealed significant benefits to improved internal mobility. Over the last several years, one-third of new Workday roles were filled with internal candidates. In that time, internal hires were an astounding 82% more likely to be rated a “top performer” than external hires. Making internal moves also improved sentiment and growth, and resulted in higher retention rates.

Workday research found that internal candidates were 82% more likely to be rated “top performers” than external hires.

To keep top employees around, HR will also need to keep up with changing employee expectations and preferences—especially those driven by generational shifts. Younger employees entering the workforce value a flexible work-life balance and a diverse and inclusive culture, with many established employees beginning to adopt these same priorities.

Organizations that fail to adapt to evolving worker preferences risk turnover and prolonged gaps in filling critical roles. Traditional approaches to employee retention and recruitment—centered on salary and benefit packages alone—are no longer enough. Instead, companies must prioritize roles that foster personal growth and cultivate work environments that reflect inclusive, values-driven cultures.

Challenge 2: AI-Driven Workforce Management

To achieve the nuanced and sophisticated workforce management needed to meet elevated employee expectations, HR needs the support of advanced technology like artificial intelligence (AI). AI gives HR teams transformative tools to identify top talent, track performance, and match employees with projects and roles aligned with their skills and values.

AI can also handle the vast amounts of data HR departments now manage. AI software drives efficiencies by automating time-intensive tasks like resume screening, candidate shortlisting, and interview scheduling so HR teams can focus on strategic work. 

Implementing AI in HR makes the function as a whole faster, smarter, and more precise. Workday research found 83% of IT decision-makers say it’s making their businesses better, and 94% are investing in it now. That means AI is not just a business enhancer but also a growing competitive imperative.

Challenge 3: The Upskilling Imperative

The rapid pace of technology advancement and changing workforce dynamics is reshaping industries and leaving skills demands in constant flux. Traditional job roles are evolving while entirely new ones are emerging, creating an urgent need for continuous learning. Upskilling both hard and soft skills is proving to be a top HR challenge.

For example: While 9 in 10 companies say they recognize the AI imperative when they make technology purchase decisions, 74% report that AI know-how is lacking among senior leadership. Without leaders able to head digital transformation efforts, many organizations struggle to keep up with new tech demands.

On the other hand, younger generations—digital natives who are naturally more tech-savvy—often lack the soft skills required to navigate business relationships effectively. A recent Worklife article reported that only one quarter of Gen Z employees believe they know how to network or negotiate. Time spent focused on digital relationships and media has hindered traditional human-centered skills.

74% of companies report that AI know-how is lacking among senior leadership.

For HR leaders, this means no singular upskilling program or area of focus will address employee needs completely. They’ll be challenged to create diverse upskilling programs and opportunities designed for a variety of employee groups and skillsets.

Challenge 4: HR Leadership Development

HR leaders are under increasing pressure to expand their focus beyond traditional functions and take on a more strategic role within their organizations. As workforce dynamics grow more complex, leaders’ responsibilities now include driving organizational culture, spearheading upskilling initiatives, and developing mid-level leaders to align with broader business goals.

This shift requires HR leaders to balance competing priorities while building their own leadership capabilities. Many find themselves tasked with influencing organizational strategy at the highest levels while simultaneously ensuring their own teams are equipped to execute these priorities.

Without intentional development, HR leaders risk being stretched too thin to make any lasting impact. In fact, Workday research found that HR is the least satisfied function with the sheer volume of administrative tasks employees must complete. More encouragingly, however, leaders see immediate value to be gained by adopting tools and technologies that enhance efficiency across HR activities.

The challenge will be in focusing on HR leadership development specifically so that their advancements can have ripple effects across the company. By equipping HR leaders with the expertise they need to guide the rest of the organization forward long-term, you’ll further foster more positive attitudes around transformation and change in other departments.

Workday research found that HR is the least satisfied function with the sheer volume of administrative tasks employees must complete.

Challenge 5: Achieving Meaningful DEI

Diversity, equity, and inclusion (DEI) can no longer be treated as aspirational or symbolic. Employees and stakeholders alike now put a continuous and critical eye on whether organizations actually live up to their DEI commitments. Authenticity and measurable outcomes are nonnegotiable.

Forbes’ recent analysis of corporate DEI’s evolution hits the nail on the head, outlining the need for less performative and more “invisible” (read: truly embedded, policy-driving) DEI strategies decentralized to all parts of the organization. If employees feel they are being pandered to, retention will fall and employee satisfaction will suffer.

The spotlight is on HR to build cultures where inclusion is not just encouraged but also ingrained. Employees need to see DEI in action—in decisions about compensation, growth opportunities, and team dynamics. Anything less risks eroding trust and engagement.

Companies are turning to technology to support this effort—as strategic DEI rises in importance, 94% of organizations are leveraging tools like AI and data analytics to make it impactful. Likewise, HR software that enables regular employee feedback can promote stronger psychological safety and employee mental health.

Challenge 6: Effective Change Management

The whirlwind of fast-changing workplace trends and technologies means HR leaders are challenged to manage disruption while maintaining employee confidence and trust. Rising concerns about job displacement, shifting roles, and other changing workplace dynamics often lead to resistance, requiring HR to address these fears directly.

The Workday 2024 Employee Experience Trends report highlights the real struggle employees have with organizational change. Between 2016 and 2022, support for change plummeted from 74% to just 43%. At the same time, employee scores for transformation and change are notably lower than for other key areas of the employee experience.

Team members need to understand how changes align with organizational goals and their own roles and responsibilities. For HR leaders, managing change effectively means balancing innovation with empathy. They must support employees through transitions, provide the tools they need to adapt, and foster a culture in which progress feels like an opportunity—not a threat.

Strategies to Overcome HR Challenges

With the biggest HR challenges for 2025 in mind, a few critical focus areas emerge for HR leaders in the coming year.  

Start by embedding flexibility into your workforce strategy. The unpredictability of economic conditions, generational shifts, and technology adoption means rigid plans will fail. Instead, leverage AI tools for workforce modeling and scenario planning, enabling your team to anticipate changes and pivot effectively. This approach not only addresses immediate needs but also builds resilience for the future.

Next, focus on leadership alignment. HR cannot drive meaningful change without buy-in from other leaders. Regular, structured conversations with the C-suite can uncover where HR’s priorities—such as talent mobility, DEI, and skills development—can directly support organizational goals.

Equally important is creating a culture of adaptability and growth. Employees must feel they have the tools and support to succeed in new roles or workflows, alongside flexible work arrangements. Establish lifelong learning ecosystems that integrate development into daily work. Pair this with transparent communication about how changes benefit both employees and the organization, ensuring trust is built at every step.

Finally, continuous improvement is the thread that ties everything together. Use data from employee surveys and program analytics to regularly check your strategies and evolve with workforce needs. This ensures HR doesn’t just react to challenges—it leads the organization through them with confidence and clarity.

By addressing these interconnected priorities holistically, HR leaders can transform their departments into engines of innovation and adaptability, ready to shape the future of work. 

Let 2025 be the year your HR team leads the way, turning challenges into transformative opportunities. Learn how Workday HR solutions can help.

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