Economic pressures on HR are biting

Published in December 2025, Fosway Group’s HR Realities research analyses all the critical trends and opportunities for HR leaders in the next 12 months. Here, analysts appraise the economic pressures on HR.

2025 took a harder turn as economic headwinds significantly impacted over half of HR budgets. In a major change from 2024, 89% of HR professionals now report that the economy has squeezed their budget. It’s worth highlighting that this is also having a major impact on HR’s evolving role and sense of purpose, disrupting historical priorities and creating a challenging market for HR technology solutions and service providers – even as HR seeks to drive greater business impact at lower cost.

Intention to increase investment in HR headcount falls to an all-time low

This year has seen a continued squeeze on all parts of HR investment, even those which have been relatively resilient such as HR technology and innovation, and developing HR’s expertise has also seen a decrease in spend. But, in a noticable shift, the biggest change is in investment in HR headcount. Companies expecting to see an increase in headcount have halved from 2024 to 2025 – with less than 10% expecting their investment in headcount to grow. Now, over half expect their HR headcount to decrease. This is the most negative sentiment for HR headcount over the entire 11 years of this research.

Investment Trends for HR Headcount

To reiterate our findings in 2024, the days of increasing HR headcount are over. If anything, the pressure to flatline HR headcount to existing levels, or see it reduce, has grown even further this year. The headcount squeeze from 2023 has gathered momentum over the past two years and 2025 sees a significant contraction. The pendulum continues to swing against HR teams, and the post-COVID headcount bounce has come crashing down. Longer term, HR headcount reduction seems set, and the push for greater AI automation is only likely to further embed this trend for the remainder of the decade.

Investment Trends for HR Tech and Innovation

Economic headwinds continue to bite into HR tech spend. Whilst HR technology has been by far and away the leading focus for increasing investment over the past ten years – those looking to expand their HR tech investment have declined again this year. And those expecting their investment in HR tech to stay the same are up too. We are truly in a more cost-conscious era, and vendors will need to articulate tangible gains and irrefutable advantages if they are to unleash greater spend, even for AI.

This is an excerpt from HR Realities 2025. Get the full insight and discover all the latest insight for corporate learning leaders by reading the whole report here.

What should you do next?

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Other recommended reading

• The full research into EMEA’s HR leaders is here for you to benchmark you and your team’s experience: HR Realities 2025.
• The 2025 Fosway 9-Grid^TM for Cloud HR – full report. Released in September 2025, it’s the latest market and solution trends in Cloud HCM.

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