Three HR trends for 2025: How to navigate the future with confidence? 

Organisations in Australia and New Zealand are grappling with a fast-changing landscape that includes economic and political uncertainty, the rise of AI, and seismic shifts in how we work and think about our roles.

In an insightful webinar discussion, HR Trends 2025, experts from Mercer and ANZ shared their thoughts on what lies ahead – and how we can navigate through the challenges.

“HR directors, business leaders and employees are facing into a hailstorm of changes,” said Cynthia Cottrell, Workforce Solutions Leader at Mercer and host of the panel discussion. “And it’s happening against the backdrop of continued high cost of living and an evolving geopolitical environment. We still have challenges with pay, equity and transparency – and we’re still working in an environment where up to 82% of employees say they feel at risk of burnout.”

With HR budgets under increasing pressure, employee burnout a growing concern, and skills shortages looming, we need to adapt quickly. HR leaders will play a crucial role in driving the culture change required for success.

While demand for highly skilled workers remains strong, on the whole the market has slowed down with fewer jobs advertised, lower turnover and stabilising salary budgets. 

“Results from Mercer’s Total Remuneration Survey show that total salary increase budgets for 2025 are forecast to remain on par with 2024 at 4% for Australia and 3.8% for New Zealand. And while merit salary increases rose to 3.8% for Australia, this looks likely to ease to 3.6% in 2025,” said Chi Tran, Mercer Workforce Solutions Partner.

This year’s data also shows that hiring is easing, with employers not planning on adding new talent or hires.

“Employee turnover is now back to pre-pandemic levels. In fact, 87% of employers in Australia and 90% in New Zealand are either able to manage turnover or don’t see it as an issue. This marks the highest level of confidence we’ve seen in the past four years,” said Tran.

With heightened confidence in their ability to manage turnover, employers are turning their attention from hiring to retaining, motivating and upskilling their workforce.

The Mercer 2024 Global Talent Trends reveals that financial pressure is the most common trigger for employee burnout. Remuneration is not the only way employers are mitigating this risk.

Benefits have a strong role to play in retaining and motivating employees, particularly flexibility. According to those surveyed in the study, employees would consider giving up a 10% pay increase for more flexibility. More than just hybrid working, flexibility can include compressed hours, the ability to reduce hours or work part time.

To fully embrace flexibility requires a different approach to work. Leaders need to manage by outcomes, rather than time in office. And as well as focusing on individual flexibility, teams will need to be empowered to manage their flexible needs collectively.

In spite of having more flexibility, people are still working longer hours and struggling to adapt to new ways of working. Generative AI has exploded in the last year as a way to potentially increase productivity, and organisations are racing to harness its potential. In 2025, we can expect to see a widespread shift from experimentation to action. According to an Oliver Wyman Forum report, 98% of organisations plan to use AI within the next two years, with 61% already on board and reporting increased productivity.

“For many of us 2023 was a year of learning about AI, and 2024 was a year of experimentation. I think next year we’ll see AI become a strategic pillar for every organisation,” said Jared Cameron, Mercer Workforce Solutions Principal.

As we move forward with AI, HR teams will increasingly play a valuable role. They can help people transition to different ways of working, navigate the impact of AI on individual roles, and use AI to support different stages of the employee lifecycle.

While AI strategy will continue to be led by the IT function, it will take a strong partnership with HR to succeed. Jared said HR leaders could become early AI adopters in three ways.

“Get involved with IT, talk to vendors about their AI roadmap to start using it as soon as possible, and tap into the AI trailblazers in the organisation for ideas and tools,” he suggested.

Hiring for skills and capabilities rather than traditional roles is not a new trend, but it looks to gain greater ground in 2025 as AI starts to impact more jobs. And while fewer employers may be looking to hire externally, according to the Mercer 2024 Global Talent Trends, many are still anxious about skill shortages with 46% seeing this as a top threat to their business. This means they will be looking internally to develop the skills the organisation needs.

The same is true of employees, with data showing that 53% of Australian employees and 46% of HR leaders are looking to their organisation to teach them the skills they need should their roles be affected by AI.

Many organisations are taking a skills-based approach in internal recruitment.

In this year’s Mercer Australian Benefits Review, we found 60% of organisations now have a learning and development program available for the whole organisation, up from 53% in 2023.

All this focus on upskilling and reskilling will lead to increased need for reward programs to support skills attraction and development.

“Skills-based pay is gaining traction across the Asia-Pacific region. In Australia, 20% of organisations who participated in our recent survey say they have some form of skills-based pay rewards program in place,” said Tran.

In a relentlessly changing world, organisations need to adapt to new ways of working, focusing on greater flexibility, harnessing the power of AI, and the shift from jobs to skills. HR leaders will play a critical role in guiding and shaping their organisational culture to thrive in 2025 and beyond.

Want to thrive in 2025? Watch the webinar on demand for all the insights or contact us to learn more.