Employers will likely continue to face challenges in attracting and retaining skilled employees this year. In fact, an EY report revealed that a staggering 38% of employees are expected to leave their jobs in 2025. Despite the looming threat of employee turnover in 2025, there was a consistent decline in employee quits throughout 2024. This suggests that workers have remained in their current positions, possibly due to a decrease in optimism about the job market. However, market trends could potentially shift back to workers feeling more confident in exploring the job market in 2025. Similar to EY’s report, Eagle Hill Consulting’s latest employee retention index indicated that employee turnover could increase through the early stages of 2025. These recent reports suggest that employers may need to refine their strategies for attracting and retaining talent in the coming year.
This article delves into five key attraction and retention trends that employers should closely monitor in 2025.
Unemployment Rates Above 4%
While the job market has outperformed expectations for some time, economists predict a slowdown in hiring. The unemployment rate is expected to remain elevated compared to recent years, which have hovered between 3.5% and 4%. The latest market projections suggest that the rate will rise from 4.1% to 4.4% in 2025, bouncing back from the recent decline. Consequently, the labor market is anticipated to remain competitive throughout the year. If unemployment rates increase in 2025, some of the leverage workers have gained in recent years could potentially shift back to employers.
The Rise of AI and Automation
Artificial Intelligence (AI) and automation are undoubtedly reshaping the future of work. AI’s capabilities have prompted many employers to equip workers with these tools or integrate them into their organizations to streamline workflows. Employers have successfully applied AI across various job roles and tasks, including HR practices, customer service, and software development.
A recent World Economic Forum report estimates that machines and algorithms will perform more current work tasks than humans in the coming years.
By 2025, AI is projected to create 97 million new jobs, particularly in data analysis, software development, and cybersecurity. This shift in the job market allows workers to focus on more engaging tasks, enhance efficiency and innovation, and make better-informed decisions. While some mundane jobs may be at risk of automation, experts generally agree that the overall impact of growing technologies will lead to an increase in the labor market. For employers, this means that many of the jobs they hire for in the coming years may require more advanced skill sets.
Increasing Demand for Weight Loss Drugs
Another emerging trend is the increasing demand for weight loss drugs. An analysis by investment bank J.P. Morgan suggests that an estimated 9% of the U.S. population could be on glucagon-like peptide-1 (GLP-1) drugs by 2030. Initially developed to treat diabetes, GLP-1s are now gaining popularity for weight loss. As organizations refine their offerings for 2025 and beyond, more employers are under pressure to provide coverage for GLP-1s for weight loss purposes. Considering the average monthly cost of around $1,000 per individual, workers may seek employer-sponsored coverage for weight loss drugs and make employment decisions based on these offerings.
However, employers face concerns about the long-term effectiveness of GLP-1s, which require extended periods of use. A 2024 survey by the International Foundation of Employee Benefit Plans revealed that while the majority of employers (57%) cover GLP-1s solely for diabetes treatment, one-third (34%) offer coverage for both conditions. Furthermore, a Mercer survey indicated that over a quarter of employers are considering adding coverage for GLP-1 drugs for weight loss in 2025 or 2026. As employers align their benefits offerings with employee preferences, the inclusion of GLP-1s for weight loss is becoming increasingly prevalent.
Organizations must carefully consider the pros and cons of offering benefits when competing for talent. In addition to GLP-1 coverage, some employers are implementing controls to target those who need it most and will benefit the most, increasing their ROI.
The Push for Return to Work
Workplaces are gradually returning to pre-pandemic norms. The JLL’s Future of Work survey revealed a significant surge in organizations expecting employees to work full-time on-site, from 34% in 2022 to 44% in 2024. 95% of employers now require employees to be on-site at least once a week.
Many employers are becoming “office advocates,” scaling back flexible work policies and mandating five-day in-office workweeks. Conversely, the percentage of “hybrid adopters” (those who allow remote work at least once a week) has dropped from 77% in 2022 to 56% in 2024.
Several high-profile companies have implemented stricter return-to-office policies. Amazon, for example, announced that corporate employees will be required to work in the office five days a week starting January 2025, up from the previous three-day requirement. This follows similar moves by major employers like Boeing and UPS.
As the job market stabilizes, employers have more leverage over workers and are increasingly requiring in-office work. However, it’s crucial for employers to strike a balance between business needs and employee preferences.
Gig Work Popularity
Gig work is gaining popularity and acceptance, particularly among younger individuals. Millennials make up the largest percentage of gig workers.
Workers, particularly Generation Z (Gen Z), have been gaining traction in recent times. According to recent TransUnion research, over half (62%) of U.S. adults earn income through gig platforms. Many gig economy workers report higher job satisfaction compared to traditional job holders. The flexibility and control offered by gig work make it an appealing option for earning a living.
Recognizing the allure, accessibility, and flexibility of gig work, organizations are increasingly finding themselves in competition with it. To stay ahead, traditional employers are exploring ways to match the gig economy’s advantages by offering autonomy, schedule flexibility, and faster access to earnings. For instance, on-demand pay, also known as earned wage access, allows employees to receive their wages as soon as they’re earned. Alternatively, gig workers can serve as a valuable alternative to traditional employees in addressing current attraction and retention challenges.
Summary
Employers can remain competitive in an evolving labor market by continuously monitoring employees’ needs and preferences throughout the year. As the labor market shifts in favor of employers, organizations can enhance their talent strategies to identify, advance, and retain more skilled workers.
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