5 Human Resources Trends to Watch in 2025

Human resources leaders have a unique mandate. Companies often claim that people are their greatest asset. Our Client Trends Report identified workforce as one of the four "megatrends" that will shape the current moment for companies large and small. That means HR has a big role to play, especially as companies are increasingly focused on employees' wellbeing and sustainability as a whole — not just during their time at work. While their purview maintains close alignment with other departments, HR professionals know their success depends on ensuring that both the company and its employees can thrive.

This current moment presents HR leaders with both new and familiar challenges, including:

• Meeting the needs of an evolving workforce
• Complying with changing regulations around pay and benefit equity
• Implementing more effective wellbeing programs that impact business performance
• Facing continued cost pressures, with double digit increases in health costs for two years in a row
• Considering new technology, which still dominates the conversation, especially around responsible adoption

It is with this backdrop that HR leaders are called to exercise their dual mandate: Take care of employees while driving results for the business. Addressing these five trends is a good place to start:

Trend No. 1 Designing Total Rewards for an Evolving Workforce

The current diverse workforce has some big advantages. The perspectives and experience of older workers, for example, complement the willingness of younger generations to challenge the status quo. The generations in between have a unique set of technology skills and a learned resourcefulness that serve both employer and employee well.

Generational differences are just one way in which the workforce is evolving. There are a few common characteristics that will define the workforce of the future. Most of those characteristics revolve around the ability to adapt — to new technologies, a focus on transferrable skills, remote and collaborative work, and to new experiences and perspectives. It’s this adaptability and flexibility that will importantly bring a diverse group of workers, and with it, new challenges when it comes to total rewards.

Benefits is an area where we see a disconnect between what employers offer and what employees want. A primary reason for this disconnect is that too many organizations take a one-size-fits-all approach to total rewards, leading to vastly different experiences in how employees perceive employer support based on their individual characteristics and circumstances. Closing these gaps in the total rewards experience plays a crucial role in driving a positive sense of belonging for individuals and for company culture overall. Employers should be investing more in understanding their own workforce and segmenting individuals according to their needs and preferences.

In Aon’s Employee Sentiment Study of more than 9,000 employees across the globe, almost half ranked above average pay and meaningful benefits first among considerations when joining a new employer. Total rewards is clearly an essential component of attracting and retaining talent. That’s why a holistic total rewards approach designed to adapt to the needs of a diverse workforce is the best way for employers to create a strategy that works for everyone.

Building a Holistic Total Rewards Framework

Total rewards tend to be managed in silos. Different facets of total rewards are managed by disparate teams, with limited cross-functional collaboration. This can lead to inconsistent rewards, not to mention employees misunderstanding the full value of the reward package they receive. The result is a missed strategic opportunity to reinforce key business objectives and support systems that are in place to help employees thrive both personally and professionally.

A holistic framework allows organizations to integrate total rewards into a unified strategy, enabling a more seamless and impactful employee experience. For example, by connecting compensation strategies with career pathways and wellbeing initiatives, employers can better attract, retain and engage employees, driving business results. Companies need to think about what their employees value and what tradeoffs they are willing to make. This includes traditional benefits like medical insurance, retirement savings and paid time off, as well as transportation allowances, hybrid and remote working, voluntary benefits and career development.

The most important step is to find out what employees value across demographics. Our Employee Sentiment Study uncovered preferences per generation for different elements of total rewards:

Given rising medical costs, it’s no surprise that medical coverage and health insurance ranks at or near the top for all generations. However, it is instructive that some benefits rise in importance as employees age, like retirement savings and dental insurance. On the other hand, areas like career development decrease in importance.

4 Steps to Achieve a Holistic Total Rewards Framework

There are certainly challenges inherent to building a holistic total rewards framework. Following these steps can help overcome these challenges and place organizations in a position to succeed — particularly when attracting and retaining talent.

1. Collect and analyze integrated workforce data. Knowing who your workers are, what their needs are, what benefits they value and what benefits they use is an important first step. Many employers lack integrated systems that can look at the whole picture.
2. Use data to segment the workforce. Create personas, which are descriptive categories that fit a reasonable subset of the workforce, with distinct characteristics to reflect the target employee value proposition and employee experience.
3. Create systems to monitor and evaluate the effectiveness of programs. Are employees signing up for voluntary benefits like pet insurance or legal services? Do career coaching sessions go unfilled? Constant monitoring is necessary to not only justify program expenses, but also consider important data points when adding, adjusting or eliminating programs.
4. Communicate offerings effectively. Different audiences need different messages. Communication should be strategically delivered to employees based on their preference and circumstance, and should not only reflect what benefits are available, but also explain why they are important and how they work.

There will always be differences among workers, whether based on age, family status, gender or any number of other characteristics. That said, the distinctive experiences of the current generations in the workforce over the course of their careers — be it from multiple recessions to a once-in-a-century pandemic — suggest that managing people is an ongoing task that will present unique challenges and enormous opportunities for decades to come.

Trend No. 2 Transparency and Equity in Total Rewards

Employers have known for some time that pay transparency regulations are on the horizon, thanks in part to the publicity surrounding the EU Directive on Pay Transparency. But HR leaders shouldn’t get too caught up in pay transparency terminology — in fact, the movement goes far beyond these two words. Pay, as defined in the EU Directive, doesn’t just mean compensation; it means retirement and health benefits, bonuses and perks. And transparency doesn’t just refer to showing salary ranges in job postings; it means doing the challenging, but important work of analyzing and reducing the pay gap for people doing similar work. In short, pay transparency means changing the way companies hire, compensate and reward employees.

Employers Aren’t Ready

Aon’s 2024 North America Pay Transparency Readiness Study shows the challenges ahead. Sixty-three percent of companies do not currently communicate salary ranges to employees, based on 626 responses from companies located both inside and outside of North America. A further 69 percent do not have a pay transparency communication strategy, and only about half of companies have conducted an independent pay equity analysis thus far.

More Than Pay, More Than Transparency

Employers may not be grasping the full range of what pay transparency means. “In the past, if you had a small budget for merit increases, you could make it up to people by giving them a title,” says Kate Evert, a partner in Aon’s North America Talent Solutions practice. “But that’s not going to work anymore, as it will disrupt salary bands. Titles will be linked to pay ranges, and they’ll have to be consistent.”

Perks and allowances are another potential hazard. Any discretionary bonuses, allowances or benefits will need to have a clear and objective rationale behind them. The biggest concern is benefits, and how they fit into the transparency and equity conversation. While narrowing the pay gap between men and women is the first priority, the retirement savings gap may be an even bigger challenge. For example, during the pandemic, women left or took a pause from working in greater numbers than men. This means more women lost years of retirement savings — exacerbating what was already a growing gender gap.

Building an Equitable Framework

The steps for creating an equitable salary framework are clear for employers, but that doesn’t mean they are all equally important.

1. First, employers should do an independent pay equity analysis to identify and address existing gaps. The target is a 5 percent gap, and anything beyond that needs to be mitigated to comply with the EU directive. It’s important to start this now, as employers may need multiple budget cycles to close existing gaps.
2. The next step is the most critical. Employers need to address their underlying job architecture. “Job architecture is foundational to everything else you do,” says Kelly Voss, head of rewards advisory in the North America Talent Solutions practice. “This is where issues will bubble up, and if you have a weak foundation, you can’t build on it.” Creating a solid job architecture framework will make the rest of the process easier and align your company’s strategy to its roles, incentives and rewards.
3. One key element of job architecture is its requirement to be underpinned by an analytical job evaluation approach to compare roles across functions and families. This will ensure a gender-neutral basis for grading roles. Discretionary compensation must also be based on objective, gender-neutral criteria. It needs to be explainable and documented, along with the entirety of the performance management process. This is an area where tools like scorecards and defined targets can be helpful.
4. The final step is to build a comprehensive plan to communicate new processes and frameworks to employees. Prepare people managers for the potentially difficult work of managing the transition.

Compensation is a very personal and sometimes emotional topic. This is especially true for older workers, who may consider the notion of pay transparency foreign. It’s also possible that they have disproportionately benefitted from an inequitable system in the past. Considering these variables, it’s extremely important that managers are prepared to deal with the consequences of increased transparency. Employees who are paid less for the same work are going to be unhappy about that fact. Their first point of contact to express that displeasure is their immediate supervisor, who likely played little or no role in creating the inequities.

Creating a Lasting Culture of Transparency and Equity

The pay transparency movement will ultimately build better trust in the fundamental employer-employee relationship. If employees know they are being paid according to a transparent process based on objective criteria — and that future raises, bonuses and promotions will be based on those criteria — they will likely feel more engaged and connected to the organization.

Trend No. 3: Maintaining a Productive Workforce by Moving from Wellbeing to Sustainability

It’s hard to talk about the modern workforce without discussing wellbeing. Many leading companies no longer see wellbeing as solely a health and benefits matter; they view it as interwoven with performance and culture. Put simply, sustainable performance driven by wellbeing is a business issue, not just an HR issue.

For too long, employers ignored the wellbeing of their workforce, as it was seen as entirely the employee’s responsibility and incidental to their performance. But once employers made the connection that a healthier, more engaged employee was a more productive employee, wellbeing shot to the top of HR leaders’ priorities. The next evolution of that concept is moving beyond wellbeing itself and into how wellbeing can drive sustainable performance.

The Connection Between Wellbeing and Performance

There are three ways that improved employee wellbeing can boost performance: cost optimization, employee engagement and productivity.

1. Cost. Better wellbeing means a healthier workforce, which means fewer and less severe health insurance claims and absenteeism. In addition, healthier employees are generally happier and more satisfied in their roles, which not only creates a positive work environment, but also helps organizations to retain talent for longer periods, reducing turnover costs. All of that leads to lower overall costs.
2. Engagement. A more engaged employee is a more productive employee, which can contribute to organizational growth and success in the long term.
3. Productivity. By tracking an employee’s wellbeing, employers can potentially identify root causes of performance issues. For example, an employee with poor emotional wellbeing might feel stressed by their workload, which can hurt their productivity. If that happens, helping that employee address their emotional wellbeing is not only the right thing to do, but it can also result in positive business outcomes.

Wellbeing Starts at the Top

It is perhaps not surprising that the higher up in an organization an employee is, the more likely they are to be satisfied with their employer and benefits — and thus, the more likely they are to thrive. But it’s also important for leaders, including HR leaders, to model behavior that prioritizes wellbeing. It’s the employee’s responsibility to take care of their own wellbeing, but it is leaders’ responsibility to create a culture where that is possible. As such, human sustainability KPIs should be measured and tracked alongside other business success metrics, and incentives should be linked to them accordingly.

Senior leaders, especially, should be held accountable for creating a culture where employees can prosper. When leaders make even small steps regarding wellbeing — for example, taking all of their allotted time off and truly disconnecting — they create a permission structure for their workers to do the same. Conversely, when leaders talk about the grueling hours they work, it doesn’t inspire teams so much as it sets up an expectation for everyone else.

How the Wellbeing of Managers can Drive Performance

One novel challenge in the new era of pay transparency is the emotional wellbeing of employees, specifically those who are first-line people managers. Research suggests that a manager’s lack of sleep can affect the performance of their teams,¹ so it stands to reason that a manager’s mental health and emotional wellbeing has the same effect. Managers need the skills to lead their teams in a sustainable way. Imagine managing a department of 20 people, half of whom are finding out for the first time that they are paid less than the other half. Difficult and emotional conversations are inevitable, and some HR leaders are concerned that many managers are not prepared when it comes to their own emotional wellbeing. Giving managers the resources they need to take care of themselves and successfully navigate these difficult conversations will not only lead to better results from the manager, but it may help prevent disruption in the team as well.

Work-Related Stress Isn’t the Only Stress at Work

Employees come to work as whole people, with families, friends, pets, hobbies and more that don’t get left behind when the workday starts. That means that poor social, financial and work-life wellbeing can easily become poor emotional wellbeing, as stress from home doesn’t always stay at home. That’s one place where employee benefits can make a difference. Aon’s Employee Sentiment Study found that people with life and disability insurance, which can provide some measure of financial peace of mind, were 10 percent less likely to report being chronically stressed (meaning “always” or “often” stressed) at work. Similarly, employees with access to work-life balance programs were 20 percent less likely to be chronically stressed.

Three Steps Toward an Integrated Approach

1. Improve healthcare outcomes. Identify population health risks through data to support targeted and inclusive health solutions to the right people at the right time.
2. Focus on individual, team and organization. Leverage employee listening, digital assessments, data-led insights and scalable learning solutions to drive a culture of wellbeing beyond the individual.
3. Drive human sustainability. Integrate healthcare and wellbeing data into core talent and business strategies by connecting insights to productivity outcomes.

Embedding wellbeing in the culture of a workplace doesn’t happen overnight, but it does pay dividends throughout the process. Being a part of an organization that cares about the wellbeing of its workers is, in and of itself, an attractive part of any employee value proposition. But when that culture of wellbeing becomes a culture of sustainable performance, it sets up the organization for long-term success.

Trend No. 4 Elevate Total Rewards ROI With Improved Governance and Operations

Benefit budgets are being squeezed as employers try to meet employee expectations without increasing costs. Rising healthcare costs have forced many employers to use a greater portion of their overall benefit budget for the same level of care. As employers look for ways to save costs while still providing competitive benefits, they are turning their focus to improving governance and operations of health and retirement benefits to lower administrative costs, gain economies of scale and increase efficiencies.

Many organizations have benefit programs that have evolved over time to meet expanding business and employee needs and expectations and hence complex to administer. Individual initiatives like wellbeing sprung up out of a desire to improve outcomes, leaving HR professionals with a patchwork of different programs. Far too often employers don’t have a good handle on what they are offering, how much it costs and what their employees value.

Once an employer has the full scope of what they currently have and what they need, they can begin the process of figuring out which benefits are both important to employees and aligned with the company’s values. They can also determine how programs can be added, subtracted or changed to meet those needs. For example, if sustainability is a big part of an organization’s identity, one possible way to express that through benefits is with an allowance that can be used for public transportation, bikes or other sustainable methods of travel instead of traditional car benefits. This provides choice for employees, while still upholding the company’s values.

4 Ways to Improve Governance and Save Administrative Costs

Generating cost savings while improving benefits epitomizes the dual mandate of HR leaders. Do more with less, then measure, refine and continuously evaluate. Whether outsourcing administrative tasks for global strategy or technology to allow better flow of data, greater transparency and communication, or using collective retirement solutions to offer better outcomes and less risk — it’s clear that an all-of-the-above approach to cost savings is needed.

Trend No. 5 Managing the Impact of AI on the Workforce

In 2024, we experienced the continued adoption of artificial intelligence (AI) across industries and business functions, impacting how work is done and what skills are needed for our workforce. A study by Microsoft showed that 78 percent of workers in the U.S. are using AI in the workplace, many times outside the walls of the company. The same study also revealed that 55 percent of early career employees are using generative AI for career coaching and mentoring. Although managers may not see this in the workplace, there is a trend of workers using generative AI every day behind the scenes. Aon’s own research based on a data analysis from the Radford McLagan Compensation Database, found that the number of jobs affected by AI varies widely by industry. For example, nearly a third of roles (and more than two thirds of headcount) will be affected in the technology sector, while only about one in five roles and headcount will be affected in retail.

Human resources leaders have an important role to play in at least two ways. First, as Fei-Fei Li, the co-founder of the Institute for Human Centered AI, says,² “AI is a tool, and its values are human values, meaning HR leaders should always implement AI with the organization’s values in mind.” Second, HR can lead the business in determining where to implement generative AI and equip the workforce with the skills to use it productively.

Here are additional ways HR should take the lead:

1. Prepare for workplace transformation.

The shifting baseline driven by people entering the workforce with generative AI requires companies to rethink their workforce strategies and prepare for the future. HR needs to partner with the business to define what skills are needed for today and tomorrow. How will those workforce skills be acquired? What is the strategy for workforce skills development? Answering these questions provides companies a competitive edge. This includes addressing the concerns of employees who feel threatened by AI's impact on their jobs and ensuring that AI is used ethically in workforce management. By fostering a culture of trust and transparency, companies can mitigate potential negative effects of AI adoption and ensure the workforce is equipped to harness the technology.

2. Invest in employee development.

As AI continues to transform the workforce, it is crucial for organizations to invest in their employees’ professional development. According to early data from Aon’s Employee Sentiment Study, more than 80 percent of employees feel confident that their employer is investing in their skills development and training to prepare for the future of work. Furthermore, about 38 percent of respondents in the same study say they are confident or somewhat confident their skills and experience will stay relevant. However, there is a potential disparity between the optimism of employees and various estimates indicating that more than half of jobs will be disrupted by AI. “AI can both replace and create jobs,” says Muir Macpherson, human capital analytics leader at Aon. “It will often be integrated seamlessly into processes, making it almost invisible to end users. Trust in AI, particularly in internal processes, is crucial.” This suggests that businesses should develop a clear skills strategy to communicate with their workforce that supports colleagues in the transition into a more AI-enabled future of work. Additionally, current hiring trends indicate that there is tremendous demand for specialist AI skills.  Employees with these skills command a premium. One avenue to ensure these skills are available is through reskilling initiatives. Pursuing this approach provides employees confidence for the future, ensures the readiness of a workforce for the changing world of work and offers substantial financial benefit to employers. 

3. Leverage AI to enhance the employee experience.

AI and machine learning are increasingly adopted in benefit enrollment, reducing costs and improving equity and care quality. Innovative AI models help cut administrative costs and inefficiencies, especially in primary care. AI tools expand access to benefits, boost engagement, predict expenses, ensure compliance and support enrollment. Natural language processing powers HR chatbots, virtual assistants and telehealth services, enhancing accessibility and affordability. AI also aids in remote monitoring, patient scheduling, record management and surgical robots — improving overall healthcare with personalized interactions and smarter analytics. 

4. Understand and communicate the changing regulatory environment.

As AI regulations evolve, employers face increased fiduciary liability. It is imperative for companies to remain informed about these developments to ensure compliance and understand the ethical implications of AI in workplace management. Kevin Fyock, a leader in Aon’s North America Health Solutions team, notes that the adoption of AI in the healthcare sector remains slow due to ethical and compliance concerns, as well as the complexities involved in managing protected health information. “Employers should engage with their vendor partners to inquire about their AI models and future plans and subsequently communicate this information to their employees.”

5. Implement effective AI governance.

HR’s role in AI governance is vital, as it underscores the importance of cross-functional collaboration to ensure consistent communication and support for employees. Developing a comprehensive content library with resources and information on AI can aid this effort. Organizations should communicate the availability and capabilities of AI tools to employees, highlighting best practices and use cases. Documenting and sharing AI governance practices, including privacy protections and the role of the AI governance council, fosters trust among employees. Additionally, AI's impact on workplace platforms and decision-making tools is also gaining attention from regulators. The EU AI Act and state-level laws require increased disclosure, AI monitoring and consent for its use. Due to these evolving regulatory requirements focused on AI, employers should assume a proactive posture to monitor legislation and remediate emerging compliance issues.

Beyond the Trends

Despite the mandate to optimize the company’s most important asset, HR professionals are being asked to do more with less. Sometimes, like in the case of pay transparency and equity, it’s more than just a new program or process — it’s an entirely new way of thinking about how workers are compensated, trained and promoted. Sometimes, like in the case of total rewards, it’s a lot less, as budgets continue to shrink. However, if HR leaders can focus on a few key areas — making data-driven decisions, looking out for workers and relating strategy back to core values — they can fulfill their mandate to fuel the success of employer and employee alike.

Aon’s Thought Leaders

Piotr Bednarczuk
Senior Partner, Talent Solutions, Europe, the Middle East and Africa

Byron Beebe
Global Chief Commercial Officer, Human Capital

Heidi Burnett
Senior Partner, People Organization and Human Sustainability

Michael Deeks
Head of Human Capital Integrated Solutions and Innovation, Global Human Capital Management

Stephanie DeLorm
Global Advisory & Specialty Go-to-Market Leader, Human Capital

Kate Evert
Partner, Talent Solutions, North America

Susan Fanning
Head of Wellbeing Solutions, Health Solutions, Asia Pacific

Janet Faircloth
Senior Vice President and Thought Leadership Leader, Health Solutions, North America

Carlos Ferreyra
Head of Advisory and Specialty, Health Solutions, Latin America

Kevin Fyock
Innovation and Commercialization Leader, Health Solutions, North America

Aria Glasgow
Partner, Talent Solutions, North America

Rick Jones
Senior Partner, Wealth Solutions, North America

Jane Kwon
Associate Partner, Total Rewards, North America

Steven Leigh
Associate Partner, Wealth Solutions, United Kingdom

Muir Macpherson, PhD
Leader of Talent Analytics, Talent Solutions, North America

Doug Melton, PhD
Global Leader of Client Analytics, Human Capital

Céline Ng Tong
Global Business Development Director, Global Benefits, United Kingdom

Ernest Paskey
Leader of Workforce Transformation and Analytics, North America

Marc Pajarillo
Partner & Solutions Architect, Talent Solutions, North America

Anthony Poole
Partner, Talent Solutions, Europe, the Middle East and Africa

Meghan Rausch
Vice President, Health Solutions, North America

Kembre Roberts, PhD
Senior Vice President, Health Solutions, North America

Marinus van Driel, PhD
Partner, Talent Solutions, North America

Kelly Voss
Head of Rewards Advisory, Talent Solutions, North America

Jackie Waller
Associate Partner, Talent Solutions, United Kingdom

¹ Sleep Well, Lead Better, Harvard Business Review
² Issues in Science and Technology, Spring 2024