UK Employers Rank Reskilling as Top HR Challenge for 2025

Skill gaps, upskilling and reskilling (29.3%) has emerged as the top HR challenge for employers in the UK, according to new international research by leading European HR solutions provider SD Worx. The study, which surveyed 5,625 HR professionals and 16,000 employees across 16 European countries, shows that talent acquisition and recruitment (28%), employee well-being (27.7%), employee experience and engagement (27.3%), and employee retention and turnover (27%) follow closely behind in the top five most pressing HR concerns in the UK.

Across Europe, employee well-being took the top spot (25%), and while it headed the list in 2024 for the UK, this year it has moved to third place (27.7%, down from 35.7%). Skill gaps and reskilling, previously only the fifth most urgent concern (27.3%), now comes in at number one, signalling a shift in workforce priorities amid a tightening labour market and rising pressure on leadership development.

Talent acquisition and recruitment makes second place at 28% (down from 32.5%), employee experience and engagement stands at 27.3%, showing a slight drop from 27.8%, and employee retention and turnover completes the top five at 27%, down from 33.8% in 2024.

Some HR challenges are being cited more often by UK employers in 2025 than they were last year. Compliance with labour laws and regulations has risen to 17.5%, up from 14% in 2024 - a 25% increase. Payroll optimisation has also increased to 13.7%, compared to 9.4% in 2024, marking a 46% rise. Similarly, internal mobility and career management is now cited by 14.3% of UK employers, up from 9.4%, a 52% increase year-on-year.

Mental health remains a pressing issue in UK workplaces. 42% of UK employees say they don’t feel physically or mentally well at work, and 52% describe their jobs as mentally demanding and stressful (compared to 56% across Europe). Nearly one in four (24%) UK employees took time off in the past year due to mental health issues, with the figure standing at a lower 18% across Europe.

Meanwhile, resourcing is a major concern: 40% of UK employees say there aren’t enough people in their team (44% across Europe), and 37% expect this problem to worsen in the years ahead. UK employers echo this sentiment, with 41% reporting current staff shortages, and 43.0% expecting the situation to deteriorate further, slightly lower than the European figures of 46% and 53%, respectively. 

These workforce pressures are reflected in the latest UK employment rate figures.  Employment rates between November 2024 and January 2025 stood at 75%, indicating only modest recovery. Unemployment remained at 4.4%, while economic inactivity held steady at 22%, driven in part by long-term sickness and rising mental health-related absences. The number of vacancies fell to 908,000, continuing a downward trend, and the ratio of unemployed people per vacancy rose to 1.9, signalling intensified competition for available roles.

Mental health is also gaining political momentum. The proposed Mental Health Bill 2025 aims to modernise outdated legislation and strengthen support for those in crisis. reflecting the growing urgency to address mental health challenges across UK workplaces.

Although employers continue to view retention as a major issue, many employees remain loyal to their roles and organisations. Just 14% of UK employees surveyed are actively looking for a job elsewhere, while a further 14% want to change roles within their current employer.

This appetite for internal mobility presents a key opportunity for employers to retain and reskill talent - particularly as skill gaps and reskilling have become the UK’s top HR challenge in 2025. Developing talent from within can reduce hiring costs and strengthen engagement at a time when competition for talent remains high.

“As always, it’s about balance when it comes to HR priorities. Upskilling is essential to plug the skills gap that many businesses currently face, but to do this effectively you need happy and healthy employees that are energised in the workplace. By offering employees career guidance and training, organisations cultivate a culture that encourages growth and makes it attractive for employees to develop new competencies. Internal mobility policies are essential for this – giving employees the opportunity to be flexible with their career paths and therefore increase the likelihood that they feel fulfilled in their roles, and loyal towards an organisation,” said Laura Miller, UK People Country Lead at SD Worx.

SD Worx, the leading European HR and payroll solutions provider, assists smaller and larger organisations with their HR and payroll challenges. To keep a finger on the pulse of employers and employees, SD Worx regularly conducts in-depth surveys. The analysis of the most recent “HR & Payroll Pulse” provides organisations with valuable insights to focus and future-proof their HR and payroll strategy.

The survey was conducted in February 2025 in 16 European countries: Belgium, Croatia, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Poland, Romania, Serbia, Slovenia, Spain, Sweden and the United Kingdom. A total of 5,625 employers and 16,000 employees were surveyed. The results provide a representative picture of the labour market in each country.