Digital HR meets the skills revolution: Five priorities for 2025 

Generative AI, automation and data-driven tools are shifting HR's focus from administration to workforce strategy, creating opportunities to address future skills, workforce agility and employee wellbeing. However, challenges like legacy HR tech stacks and changing market dynamics continue to challenge progress.

In 2024, I worked with clients struggling to upgrade their HR tech and upskill both their HR teams and general workforce. Here are the five conversations I’ll be having with HR in 2025:

Many organisations still rely on outdated core HR systems. To advance through the digital HR maturity curve, modernising or replacing these systems is essential. While new technologies are tempting, reevaluating tech stacks through the lens of employee experience is critical. HR leaders should focus on scalable, cloud-based platforms that enable seamless data sharing and collaboration. The transition may be complex but it is essential for building a resilient and agile HR function. 

AI enhances talent management, workforce analytics and engagement, with 61% of companies reporting productivity gains from generative AI. By streamlining processes and providing data-driven insights, AI not only boosts efficiency but also empowers HR teams to focus on strategic initiatives that drive organisational productivity. However, more than any other business area, HR must ensure fairness, transparency and data security. Success with AI requires a clear digital HR vision and mindset; Mercer Leapgen’s Digital Equation for Success provides a holistic approach that guides organisations through these steps before addressing the necessary process and technology changes. 

Shifting from job-centric models to skills-based frameworks remains slow but crucial. This transition demands changes to every people process and an evolution away from job centred language towards skills, and more importantly, requires both HR teams and hiring managers to understand how this applies to them. Rethinking work involves recognising that roles are increasingly fluid and that a focus on skills allows organisations to adapt more readily to changing demands. To effectively reward talent, organisations must align their compensation and recognition strategies with skills development and performance outcomes. AI can help identify skill gaps, but HR must create targeted talent strategies and sustainable roadmaps. Skills must become the core language of work, guiding hiring, development, and workforce planning.

Post-pandemic, employee expectations continue to fluctuate; quiet quitting, return-to-office mandates and AI-driven job insecurity presents challenges to HR in balancing wellbeing with business objectives. The new work deal emphasises the importance of flexibility, autonomy and a supportive work environment, which are essential for attracting and retaining talent in this evolving landscape. Employees with mental health benefits are less likely to leave (42% vs. 27%) and burnout risk remains high (81%). HR must invest in flexible work, wellness programmes and upskilling to maintain engagement and competitiveness as an employer of choice, whilst supporting wider strategic objectives.

Purpose-led work drives engagement: employees who perceive their company's mission, vision and values as aligning with their own are significantly more likely to recommend their employer as a great place to work (70% vs. 25%) and to feel a sense of personal accomplishment in their roles (72% vs. 29%). HR and business leaders in 2025 must focus on building transparent, responsible innovation practices, two-way dialogue about emerging technologies and ensuring that corporate actions consistently align with their values to maintain employee trust and ultimately engagement in the long term. 

As digital HR and AI evolve, the opportunity to redefine HR has never been greater. Modernising systems, embracing AI, focusing on skills, automating processes and safeguarding engagement will transform HR into a strategic enabler. Organisations that navigate this transition will thrive in a future of agility, innovation and people-centric workplaces.