HR Trends 2025: Our Pay & People Predictions 

By Rameez Kaleem

Introduction 

As we prepare forenter 2025, leaders should expect significant changes within the role of HR. 

This is being influenced by several factors, including technological changes and evolving employee expectations—particularly from Generation Z individuals who are starting to make up a larger proportion of the overall workforce. 

These emerging trends are reflected in data across many industries—as shown in 3R Strategy’s latest Global Salary Planning Report. As a result, leaders are going to need to shift their focus for 2025.
 

Real Wage Growth Continues 

For the first time since the pandemic, employees are set to see real wage growth next year. The Global Salary Planning Survey revealed that with UK inflation below 2% and median pay increase budgets around 3.5%, many leaders will have some good news to share with employees in the coming months.  

While inflation is not expected to fluctuate much this year, there can still be factors driving higher than expected volatility. However, some research suggests that we may even see it fall again in the second half of 2025. This comes after several challenging years where pay increases struggled to keep pace with inflation. 

Pay Transparency Becomes Non-Negotiable  

As well as the ongoing change in employee expectations, there’s growing pressure from new global regulations for organisations to become more transparent. One key influence is the EU pay transparency directive, which is going to be effective from June 2026. 

As well as this, research shows that 64% of candidates won’t apply for roles without visible salary ranges, and this trend is particularly strong among Generation Z workers. Leaders should, therefore, be embracing transparency across several dimensions: 

• Publishing salary ranges  

According to 3R Strategy’s report, only 26% of organisations currently publish salary ranges internally. This number is expected to increase significantly in 2025. Beyond just attracting talent, this practice demonstrates commitment to fairness and helps build trust with potential employees. Organisations should ensure ranges are realistic and reflect actual pay practices rather than aspirational figures. 

• Communicating to employees about how pay is set, managed and can progress 

In the report, it was found that 57% of organisations communicate about pay principles in at least some countries. However, there’s significant room for improvement. 

Clear communication about pay can build trust, improve engagement, and help manage pay expectations. When employees understand how pay decisions are made, it can reduce pressure for pay adjustments and help employees recognise the fairness and reasoning behind their current pay level. 

Preparing for the EU Directive  

The EU Pay Transparency Directive implementation in June 2026 requires significant preparation.  

Even for organisations solely based in the UK, choosing not to adopt transparency could cause bigger challenges when employees begin to realise what’s happening in the EU and other countries across the world. 

Also, following the UK General Election in July 2024, it’s likely that the Labour government will decide to adopt some of the same rules. Transparency brings a world of benefits to organisations and employees, so getting ahead of the deadline will also get you ahead of competitors. 

Organisations should focus on: 

• Gender-neutral job evaluation systems  

Of those surveyed, 39% of organisations didn’t have a job evaluation scheme in place. This gap can make it challenging to maintain consistency in managing pay and reward across an organisation. 

These systems must be based on objective criteria that eliminate historical biases in how different types of work are valued. This includes reviewing existing methods to ensure they don’t inadvertently favour traditionally male-dominated roles. 

• Detailed gender pay gap reporting 

Only 28% currently report by job level or grade as well as the overall gender pay gap. Expanding our reporting helps identify where interventions are most needed and enables more targeted solutions.  

• Clear pay progression frameworks  

This is essential in helping employees understand how their salaries can grow over time. These frameworks should be transparent about the criteria for advancement and the corresponding pay increases.

Evolution of Performance Management  

Traditional annual reviews are undergoing a fundamental transformation. The shift toward continuous, development-focused approaches reflects the need for more flexible and responsive performance management frameworks.  

Key changes include: 

• Regular feedback replacing annual ratings and the ‘normal distribution’ approach in many organisations.  

This approach allows for more timely corrections and support to be given as well as better alignment between employee development and organisational needs. It also helps prevent the anxiety and disruption often associated with annual reviews. 

• Development-focused conversations happening between leaders and employees.  

Having regular career conversations and check-ins emphasises future growth rather than past performance. This shift acknowledges that in rapidly changing business environments, building capabilities and rewarding contribution are often more valuable than dwelling on historical performance. 

• AI-powered performance analytics are emerging as valuable tools. 

AI could become a huge part of providing objective insights into employee contributions in 2025. These tools can help identify patterns and trends while reducing bias in performance assessments. However, they should complement, not replace, human feedback. 

Skills-Based Hiring 

Rather than focusing primarily on years of experience or specific industry background, organisations are increasingly evaluating candidates based on their potential, adaptability, and alignment with organisational values. 

Organisations are finding that candidates who demonstrate strong potential and align well with company values can quickly develop necessary technical skills through targeted development programs. 

Not only that, but it is driving organisations to explore new ways of understanding their own employees. It provides opportunities to identify availability of critical skills to build and develop their ‘bench strength’.  

This may have implications for reward strategies in relation to if/how skills are rewarded, and whether this can trigger a move away from contribution or performance-based reward models.

Conclusion  

Looking ahead to 2025, the world of work continues to evolve beyond traditional approaches to pay and people management. If these predictions come to light in the new year, it will offer a promising, but we should remember that competitive pay alone won’t define successful HR strategies.  

The organisations that will thrive are those that combine fair pay with genuine transparency, replacing outdated approaches with an open dialogue and honest conversations about pay decisions.

About the Author  

Rameez Kaleem has worked in reward for 20 years, both in-house and as a consultant. He has a wealth of experience in job architecture design, bonus/sales incentives, pay structures, and equal pay. In 2015, he founded 3R Strategy to help more organisations build a culture of trust through pay transparency.