UK employers rank reskilling as top HR challenge for 2025
Wellbeing falls to third position as employers prioritize reskilling to respond to labour market pressure
According to a new study by SD Worx, the UK’s top HR concern is addressing skill gaps and upskilling.
Employee well-being topped the list across Europe (25%), but in the UK it dropped to third place this year (27.7% compared to 35.7%). Skill gaps, which were previously only ranked fifth in importance (27.3%), now rank first, indicating a shift in priorities in the workforce amid tightening labor markets and increasing pressure on leadership development.
The second highest ranking category is talent acquisition and recruitment at 28.5% (down from 32.5%). and employee experience and engagement are at 27.3% and 27.8% respectively. Employee retention and turnover round out the top five with 27% and a drop of 33.8% from 2024.
UK employers are citing HR challenges more frequently in 2025 than last year. Compliance with labour laws has increased to 17.5% from 14% in the year 2024, a 25 percent increase. Payroll optimization has increased by 46% to 13.7% compared to the 9.4% of 2024. In the UK, 14.3% of employers cite internal mobility and career development, up from 9.4%. This is a 52% year-on-year increase.
UK workers are under pressure due to high stress levels and lack of teamwork
Mental health is a major concern in UK workplaces. In the UK, 42% of employees report that they are not feeling physically or mentally healthy at work. 52% say their jobs are mentally stressful and demanding (compared to 56% in Europe). Nearly one-fourth (24%) of UK employees have taken time off due to mental issues in the last year. This figure is lower in Europe, where it stands at 18%.
Resourcing is also a big concern. 40% of UK workers say that there aren’t nearly enough people on their team (compared to 44% in Europe), and 37% predict this problem will worsen over the next few years. UK employers share this concern, with 41% citing current staff shortages and 43.0% expecting it to worsen. This is slightly less than the European figures, which are 46% and 53.3%.
The latest UK employment rates reflect these workforce pressures. Between November 2024 to January 2025, the employment rate was 75%. This indicates a modest recovery. The unemployment rate remained at 4,4% while the economic inactivity stayed at 22%. This was due to long-term illness and increasing mental health-related absences. The number of vacancies dropped to 908,000 continuing the downward trend. However, the ratio of unemployed to vacancies increased to 1.9, signaling a more intense competition for jobs.
Mental health has also gained political momentum. The proposed Mental Health Bill 2020 aims to modernise outdated laws and improve support for those who are in crisis, reflecting the increasing urgency of addressing mental health challenges at UK workplaces.
One in ten employees actively seeks another job
Despite the fact that employers still view employee retention as an important issue, many workers remain loyal to their jobs and organizations. Only 14% of UK workers surveyed were actively searching for another job, and a further 14% wanted to change their role within their current employer.
Employers can take advantage of this appetite for internal mobility to retain and reskill their talent, especially as the UK is facing a major HR challenge by 2025 in terms of skill gaps and reskilling. Talent development from within can help reduce hiring costs, and increase engagement in a time of high competition for talent.
As always, HR priorities are about balance. To close the skills gap, many businesses are facing today, it is important to upskill their employees. But to do so effectively, you need healthy and happy employees who are energised at work. Organisations can cultivate a culture of growth by offering career guidance and training to employees. This will encourage them to learn new skills and develop their competencies. This is why internal mobility policies are so important. They give employees the flexibility to choose their career paths, which increases the likelihood they will feel satisfied in their role and loyal to an organization.
The international employee survey
SD Worx is the leading European provider of HR and Payroll solutions. It assists both smaller and larger organizations with their HR and Payroll challenges. SD Worx conducts regular in-depth survey to keep tabs on employers and employees. The latest “HR & payroll Pulse” analysis provides valuable insights for organisations to focus their HR and payroll strategies and future proof them.
In February 2025, the survey was conducted across 16 European countries, including: Belgium, Croatia Finland, France Germany Ireland Italy Netherlands Norway Poland Romania, Serbia Slovenia Spain Sweden United Kingdom. The survey was conducted with a total of 5 625 employers and 16 000 employees. The results give a good representation of the labour markets in each country.
About SD Worx
SD Worx is a firm believer that success begins with people. SD Worx believes that a successful workforce not only builds a thriving business, but also benefits the society.
SD Worx is the leading European provider of HR and payroll software and services for organisations and employees. SD Worx offers software, services, and expertise in payroll and reward, human resource management, and workforce management. SD Worx is a company with deep roots in Europe. It has led the way since the 1980s, together with employers large and small, for employee engagement to ignite success.
SD Worx is trusted by over 95,000 organisations in Europe, both small and large. Nearly 10,000 colleagues work in 27 countries. SD Worx is a leading company in the world for calculating the salaries of 6 million employees. In 2024, the company generated a revenue totaling EUR 1,180 billion.
Visit www.sdworx.com for more information or follow us on LinkedIn
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