A Workforce in Transition Prepares to Meet a Host of Challenges

Engaging a changing workforce requires data and innovation. Workers increasingly expect more than just a paycheck. In response, organizations are balancing costs with the ability to provide a compelling employee experience.

Key Takeaways

The affordability of healthcare and benefits has never been more crucial, nor more difficult to achieve.
New regulations on pay transparency may have effects beyond HR compliance.
Rapidly advancing technology has employers concerned that upskilling may no longer be enough.

HR, now more than ever, has a seat at the strategic table. The function will have an impact in their organization by leading with data.

Lambros Lambrou

CEO of Human Capital

Human Resources (HR) professionals have always been responsible for a host of important areas. Managing total rewards spend, addressing pay transparency regulations and reskilling the workforce to prepare for new technological challenges are some of the top issues on the minds of HR leaders and professionals. How employers lay the groundwork for managing these will determine how successful they are at attracting and retaining talent — noted as the fourth highest global risk in 2024.¹

Data and analytics will be crucial to addressing these challenges and ensuring a compelling employee experience.

The workforce is the backbone of the organization. Whether it’s younger workers who want more flexibility and mission-driven work, workers fighting burnout and languishing, or employees who just want to be paid fairly for the work they do and be able to afford healthcare, the demands and burdens on employers are growing. Meanwhile, employers are struggling to find workers with the existing skills needed to compete, much less the skills needed in the not-too-distant future.

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2024 Client Trends Report

Executive Summary

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We’re in a more transitional workplace today than we have been in the past. We think employers are struggling with the balance of offering employees flexibility, but still demanding performance and productivity.

Byron Beebe

Global Chief Commercial Officer, Human Capital Capabilities

It’s more than employee expectations that are putting pressure on HR leaders. New regulatory actions around pay and benefit transparency, for example, will soon force a transformation at many firms concerning how pay is determined and communicated.

It’s no wonder that an inability to attract and retain talent rose on the threats list in Aon’s most recent Global Risk Management Survey. That threat is backed up by the finding that six in 10 employees in our 2025 Employee Sentiment Survey are at least considering changing jobs. Other risks that have a strong workforce component, like damage to reputation and increasing competition, also made the top 10.

Additional workforce-related emerging risks that businesses are facing today include:

Healthcare affordability: Costs are rising steadily, and employers don’t feel as though they can or should continue to pass those increases along.
Pay transparency and equity: Regulatory changes will cause a compliance headache for companies that don’t prepare. But the bigger challenge may be what comes next.
The impact of new technology: AI has garnered headlines for how it might replace workers, but AI is as much a skills opportunity as a risk.

60%

of employees say they are either moving to a new job, might seek a new job or definitely will seek a new job.

Source: Aon’s 2025 Employee Sentiment Study

Outlook on Healthcare Affordability

Healthcare costs are consuming an increasing share of total rewards spend, and real costs are continuing to rise for both employers and employees. Our recent survey of U.S. health plan sponsors found that costs increased 9.2 percent in 2025, up from 8 percent in 2024. Even after plan changes were made to help affordability, costs were still up 7.3 percent for 2025, an increase from 6.5 percent in 2024. And this doesn’t include the nearly 6 percent increase in employee contribution that employers passed along to their workers. A similar story applies outside the U.S. as well. The global trend rate is in double digits for the second consecutive year at 10 percent.²

These cost increases are having a negative impact beyond healthcare. Employers are paying more, and also adding more costs to employees. Total rewards budgets are being swallowed up just to maintain the status quo, leaving companies in a bind. Employers were nearly unanimous in citing benefits as important or extremely important to attraction and retention of employees,³ and employees ranked health benefits as the most valued benefit among all but the oldest of workers.⁴

Total rewards are about tradeoffs. A dollar spent on healthcare is a dollar that isn’t spent on retirement or wages. Aon is projecting total rewards spend to increase 22 percent in the U.S. over the next four years. Nearly half of that overall increase is expected to come from healthcare costs alone.

10%

The global medical trend rate is in double digits for a second consecutive year.

Source: Aon Global Medical Trend Rates Report 2025

As costs rise, personalization is going to need to be front of mind. Focus on benefits to support each employee’s unique needs and circumstances. Be ready to make trade-offs and look at it holistically across all people costs.

Farheen Dam

Health Solutions Leader, North America

Outlook on Pay Transparency and Pay Equity

Despite modest gains in recent decades, the gender pay gap remains a persistent issue — sitting at approximately 16 percent in the U.S.,⁵ 13 percent in both the European Union (EU)⁶ and in the UK.⁷ Those numbers are the same as in 2023, and tend to be even larger for women with children. While progress has been made, it’s not nearly fast enough. Even a modest cumulative gap can create massive inequality in retirement.

Pay transparency and equity are about more than compliance with new regulations and laws across the globe — they get to the heart of the culture and fabric of an organization. Addressing these topics is also about accountability on several fronts. For example, are companies living up to their stated values by paying their employees equitably?

The emerging regulatory frameworks around pay transparency — namely the EU Directive on Pay Transparency and the patchwork of U.S. state laws — are a first step toward reducing, if not eliminating, the gender pay gap. Public sentiment supports that goal, as do most employers.

Outlook on Technology

The World Economic Forum lists the skills expected to be the fastest growing in the next five years, and it’s no surprise that the top three answers are technology based: AI and big data, networks and cyber security and general technological literacy. But by far the most talked about issue in technology is AI. Companies of all sizes and industries are beginning to find ways to use AI tools to increase efficiency. However, when it comes to this emerging capability, companies are racing to get a handle on the massive opportunities AI presents, as well as its potential threats.

Employers are seemingly preparing for the skills challenges ahead. About eight in 10 employees said they are confident that their employer is investing in their skills to keep up with changing technologies. There is, however, a disconnect between senior leaders, of whom nearly a quarter believe AI will significantly replace jobs in their field, and entry level employees, who are half as likely to believe so.⁸ Together with other business leaders, the HR function must be ready to embrace change and undertake challenges arising as AI continues to disrupt the workforce. And doing so starts with having the right skills in place.

Investment in improving and strengthening employee skills and competencies with AI tools will be key. This includes building data literacy, analytics and programming skills, as well as supporting soft skills like critical thinking, creativity, collaboration and emotional intelligence.

31%

of founders and C-suite executives believe AI will require new skills. Only half as many entry level employees believe so.

Source: Aon 2025 Employee Sentiment Study

People are worried about AI taking away roles, but we know that repetitive tasks can hurt employee engagement. Having AI complete those tasks instead can help free up an employee to focus further up the value chain, improving engagement.

Magnus Roe

Global Chief Data & Analytics Office

“Rather than focus on how AI might eliminate jobs, companies should consider the ways it will create demand for specific skills,” said Lisa Patel, head of talent for Europe, the Middle East and Africa. “The skills needed to manage the technology can also create new jobs.” However, many companies are concerned about their ability to reskill their current workforce to use these emerging technologies.

“Clients are worried that they may not be able to reskill and upskill their workforce. They may need a new workforce,” says Byron Beebe, global chief commercial officer, human capital capabilities. The process will undoubtedly require a mix of hiring for new skills and upskilling and reskilling the current workforce. A good place to start is by first understanding where a company’s skills gaps exist.

Case Study

How Aon Helped M&G Wealth Develop New Advisor Skills

Everywhere across the financial services landscape, the outlook is changing quickly. People's needs and priorities are more diverse than they've ever been. UK financial advice firm M&G Wealth reached out to Aon's Talent Solutions with an objective to engage more people to seek advice and help them achieve long-term financial wellbeing. The client wanted to better understand the make-up of a highly successful advisor of the future, including the skills needed to achieve great client outcomes in a rapidly evolving world.

"The work we did to prepare our current workforce and recruit a new generation of advisors was all about making connections, building trust and maintaining long-lasting relationships with our clients," explained Ross Liston, CEO of M&G Wealth Advice.

How Businesses Can Prepare for Change

There are three opportunities businesses need to consider when approaching some of the biggest challenges facing their workforce.

Opportunity 1

Balance Health and Benefit Spend with Employee Value

To keep costs in check and provide competitive health and benefits to employees, companies are trying to reduce ineffective spend, mainly through value-based strategies. These include:

Steering employees to high quality providers
Using analytics to identify and mitigate the effect of high-cost claimants
Wellbeing strategies — especially physical and emotional wellbeing to help mitigate high healthcare costs and increase overall business performance

Opportunity 2

Take a Wider View of Total Rewards Gaps from Hire to Retire

Pay transparency is coming, but to describe it as being solely about pay — or transparency — only tells part of the story. Pay transparency is often framed around narrow measures like being required to put salary ranges on job listings. But as countries start to enact legislation based on the EU Directive on Pay Transparency, it’s clear that what’s meant by pay is broader than salary. Simple transparency isn’t enough — employers must take steps to address gaps as well. To adequately address this potentially disruptive event, companies need to start laying the groundwork now. One way to do so is through pay equity consulting. There are four main steps in the process:

It starts with a pay equity audit, to determine the extent to which an equity gap exists, and whether it is statistically significant.
Once that baseline data is determined, focusing on overall job architecture and skills-based criteria rather than market-based criteria or job titles, will identify the root causes of the gap and what problematic pay practices may have led to them.
From there, remediation strategies and equity monitoring will help employers close the gap and keep it closed.
Finally, focusing on financial wellbeing can have the knock-on effect of solving challenges like pay compression and close pay gaps.

The pay transparency movement isn’t slowing down. The earlier employers implement more equitable practices, the better positioned they’ll be when full transparency comes to fruition.

Opportunity 3

Manage Workforce Skills to Stay Ahead of New Technology

Many companies that aren’t typically concerned with technology are starting to notice the disruption of AI and other new technologies. “We have data around compensation for technology professionals, which only ech companies used to be interested in,” says Aon’s Beebe. “Now every company is a tech company. They all need to hire people with that skill set, and there’s a limited and highly competitive talent pool to choose from.”

Using a workforce skills framework allows organizations to develop a strategy to identify skills gaps and acquire the necessary digital skills that may be missing now and in the future. Additionally, employers are increasingly interested in assessing and hiring for transferable competencies, behaviors and abilities, which enable the workforce to operate in a more agile and resilient way.

AI and other emerging technologies have the potential to change the game on things like headcount, which can cause uncertainty and fear. It’s important for companies to partner with advisors to educate themselves from a talent, health and skills perspective. This will help create a roadmap for companies to explore what new technologies can do.

Making Better Decisions About Workforce Needs

Workforce challenges are unique, in part because everyone — from the C-suite to the entry level line worker — is a part of the workforce. What companies have done for their employees since the pandemic is remarkable. But now, companies face an inflection point. Leaders are trying to find ways to focus on performance, without alienating the wellbeing and needs of their workers. Achieving this takes considerable planning and well-thought-out communication.

How do companies balance the needs of their business with the needs of their people? Those who succeed will be those who find that balance by listening to what their employees need and moving forward through compromise. Only then will companies effectively attract, retain and sustain their talent in today’s ever-evolving, complex world.

Workforce challenges aren’t going to go away. They will, like the workforce itself, change over time. But leaders who embrace those challenges and tackle them with compassion, resolve and confidence in their practices will be better informed and better advised. And they will be ready to meet the next set of challenges by making better decisions.

No matter who you are and where you are on your life’s journey, you want a company that’s going to meet you where you are and support you. And companies that are concerned with hiring the very best talent are going to do that.

Farheen Dam

Health Solutions Leader, North America

Making Better Decisions

The road ahead will be filled with both challenges and opportunities, as organizations face a multitude of complexities in the areas of trade, technology, weather and workforce. These timely megatrends require new workforce strategies and a holistic approach to risk management.

By proactively harnessing the power of data, embracing new technologies and remaining ahead of growing risks — from the global supply chain and changing climate, to the current cyber landscape and retention of critical talent — organizations can navigate uncertainty, make better decisions and transform challenges into opportunities. With the right tools and capabilities in place, business leaders can be confident in their decisions and ultimately open new doors in an increasingly interconnected world.

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Aon’s Thought Leaders

Magnus Roe

Global Chief Data & Analytics Office
Farheen Dam

Health Solutions Leader, North America
Lisa Patel

Head of Talent, Europe, the Middle East and Africa; Head of Health, United Kingdom
Byron Beebe

Global Chief Commercial Officer, Human Capital Capabilities

¹ Aon Global Risk Management Survey 2024
² 2025 Global Medical Trend Rate Report, Aon
³ 2025 Aon U.S. Health Survey
⁴ 2025 Aon Employee Sentiment Study
⁵ National Equal Pay Day 2024, U.S. Federal Register
⁶ Statement by Vice-President Jourová and Commissioners Schmit and Dalli on the occasion of the European Equal Pay Day, European Commission
⁷ The gender pay gap, U.K. House of Commons
⁸ Aon 2025 Employee Sentiment Study

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