Employees demand investment in skills and flexibility while HR leaders face mounting costs

New research from Personio shows a growing gap between what employees expect and what companies provide, urging HR leaders to rethink how they retain talent.

Munich – September 16, 2025 – There is a growing disconnect between employee expectations and what organizations are delivering, putting pressure on HR leaders to rethink hiring, leadership development, and retention strategies. Research from Personio, Europe’s leading HR software provider for small and mid-sized businesses, reveals that more than half (51%) of employees are considering a job change within the next year as the gap between expectations and reality contributes to attrition. 

These findings come from Personio’s annual Workforce Pulse report, which surveys 6,000 employees and 3,000 HR decision-makers across Europe.* Employees considering a change cite a mix of financial, emotional, and developmental reasons for wanting to leave their current roles. Better pay (30%) topped the list, followed by stressful working environments (29%), poor work-life balance (27%), and limited career progression (26%). Meanwhile, 39% of HR leaders say talent shortages are the biggest risk facing their organizations this year. 

While the number of HR leaders expecting to make redundancies in the next 12 months has declined (60% in 2024 down to 39% in 2025), misalignment between workforce planning and business needs continues to be costly to businesses. In the past year alone, mis-hires, ineffective learning investment, skills mismatches, inadequate workforce planning, and preventable turnover have cost SMBs an average of €274,515.   

Attracting and enabling young talent becomes a workforce priority

Recruiting and enabling early-career talent is now a top concern for employers as 47% of HR leaders find it challenging to attract candidates under 30. On top of that, 55% of HR leaders say entry-level employees are less prepared than before the pandemic, which is prompting 62% of HR teams to rethink their approach to put greater emphasis on onboarding, and offering clearer career progression. The report also revealed that 66% of HR leaders now prioritize skills and potential over academic credentials, signaling a clear shift in hiring strategy.

This shift comes amid significant demographic changes, with younger generations representing a decreasing share of the workforce. At the same time, advancements in AI and automation are reshaping entry-level roles, many of which have traditionally relied on manual processes.

Despite the recruitment challenges, 64% of HR leaders say junior talent is central to their workforce strategy. 

AI adoption is outpacing employee enablement

While 66% of employees feel confident their skills will remain relevant as AI advances, only 36% claim their employer currently provides them with adequate training or support for AI tools. Beyond just a training issue, the gap creates a productivity and retention risk. 

Younger professionals are leading the charge with 58% of 25-34-year-olds actively developing AI skills. But 44% of all employees are calling for more support from their organization and strikingly, those who don’t receive it are 35% more likely to be looking for – or to have found – a new job. 

On the flip side, HR leaders do say they are making significant investments to meet evolving workforce needs, with 47% identifying AI and automation tools as a top investment priority over the next 12 months. This surpasses both learning and development (41%) and recruitment (40%). 

Qualifications are out – skills and aptitude are in

Employers and employees alike are shifting focus from academic credentials to practical skills and growth potential. A striking 66% of HR leaders now prioritize aptitude over qualifications when making hiring decisions, and 65% have already adjusted their recruitment processes to reflect this. 

Employees are equally ready for the change as 52% believe university degrees are losing relevance in recruitment, while 64% are calling for employers to focus more on transferable skills, potential, and aptitude during the recruitment process. What’s more, AI is accelerating the trend, as 43% of HR leaders claim they are already using AI for strategic workforce planning, including skills-gap analysis and forecasting. 

Younger workers want office time, but on their own terms

While younger employees still value time in the office, they want more control over how it's structured — highlighting a shift away from the traditional 9–5, which 54% consider outdated. Among  25–34 year olds, 55% say they have the flexibility to work during their most productive hours and 42% report being most productive in the office. However, 31% also admit to being more productive when working from home, suggesting that flexibility, not location, is the key to performance for this generation. Meanwhile, those aged 35 to 44 appear more ambivalent, with similar levels of productivity reported both at home and in the office. 

However, despite their productivity in the office, the younger generation remains the most resistant to rigid office mandates. A large portion of 25–34 year olds (38%) would consider leaving their job if required to be in the office more than three days a week, although 43% are currently required to attend 3-4 days weekly. In contrast, older employees (55+) are less likely to face frequent in-office requirements, with only 28% reporting they are asked to attend that often. 

Across all age groups, it’s clear that employees are seeking more control over when and how they work, with 52% saying they perform best when allowed to choose their own hours.

Lenke Taylor, Chief People Officer at Personio, says, “Talent shortages already make hiring and retention difficult, and this study shows that the challenge is growing. HR leaders have a critical opportunity to align people’s skills with business needs and create workplaces that are engaging, productive, and rewarding. That means investing in development, trusting employees to work flexibly, and hiring for potential – not just on their credentials.”

* Methodology

The research was conducted by Censuswide, among a sample of 6,001 employees and 3,003 HR Decision Makers at companies with 10-2,000 workers across the UK, Germany, Spain, and the Netherlands. The data was collected between June-July 2025. 

About Personio

Founded in 2015 and headquartered in Munich, Personio is Europe's leading provider of HR software solutions for small and medium-sized enterprises. Its all-in-one platform helps HR teams digitize and automate core processes such as recruiting, employee management, and payroll. With 15,000 customers and more than 1,800 employees, Personio is one of the most valuable tech companies in Europe. The company operates offices in Munich, Berlin, London, Dublin, Madrid, Barcelona, Amsterdam, and New York.

For further information: www.personio.com