article by Hannah Copeland, HR Business Partner – WorkNest

Latest research* has found that 70% of HR professionals highlighted the cost of living as their most significant challenge for 2023.  

This was closely followed by retention (69%) and recruitment (55%). A third of those questioned also see skills shortages (34%) as a significant HR challenge next year, and employee engagement (24%).  

Echoing this, half (50%) of HR professionals believe retention will be the stage of the employee lifecycle in which they will face the most challenges in 2023, followed by recruitment (44%). 

Interestingly, only 6% of HR professionals think the most significant challenges will come from in-life employee management (onboarding and offboarding). Yet if they could manage this better, then they could impact the high resignation rates and not need to face recruitment challenges. 

With the cost of living crisis and the repercussions this will have throughout 2023, three-quarters (75%) of HR professionals revealed that mental health and wellbeing would be the most crucial area for HR to support employees over the next 12 months. 

This was followed by performance management (50%), diversity, equality and inclusion (48%) and hybrid and flexible working (48%). Other areas also mentioned by HR professionals included financial wellbeing and cost of living. 

Being efficient is essential, and HR professionals want to help streamline their processes further with secure HR platforms and having a solid budget to help them achieve their goals. Almost three in 10 (29%) respondents revealed their HR technology budget will increase in 2023, while 37% said their budget would stay the same next year.   

Making the most out of employee data allows businesses to remain effective, respond to trends, and support building a high-performance culture in their organisation. According to our survey, 92% of HR professionals will be using people analytics to drive their HR strategy, yet over a third (34%) have no certainty about their tech budget for 2023.  

Interestingly, almost half (49%) of HR professionals admitted they’re not looking at cost savings in their organisation, despite the majority stating that the cost-of-living crisis will be their biggest challenge next year. However, almost two in 10 (18%) HR professionals divulged that their organisations would reduce headcount to drive cost savings, and 10% were pausing recruitment. 

Hannah Copeland, HR Business Partner at WorkNest, commented on the results, “HR teams across the UK have a challenging year ahead. The cost of living is at the top of everyone’s mind regarding how they manage and support their employees through this difficult time. Unfortunately, many businesses will be forced to make cuts and may encounter tremendous retention and recruitment issues as employees look to improve their salaries in the face of rising costs. 

“Keeping employees engaged, having regular conversations with them to understand their worries and supporting them with mental health and financial wellbeing will be critical over the next 12 months. Organisations will need to be working through robust and fair redundancy consultation and selection exercises and make sure that employees are treated with empathy and respect if they are impacted; remembering that no redundancies can be made on discriminatory grounds otherwise, they could face various legal challenges. 

“The next year requires HR to be smart by being more efficient and using people analytics to find the root cause of certain issues. For example, if several resignations come from one team, question it. Were exit interviews conducted to understand why they all left? Is the line manager the common denominator here? If so, does capability need to be analysed?” 

*WorkNest surveyed 105 respondents at CIPD Annual Conference and Exhibition in Manchester on 9th and 10th November 2022. HR professionals, including managerial and senior-level decision-makers, attended CIPD Ace.