8 Biggest HR Challenges for 2023 (+ Solutions)

With the US workforce rapidly evolving, many companies are falling behind in dealing with the changes. HR professionals are still working through the aftermath of the COVID-19 pandemic. Meanwhile, a shift in workers’ priorities and an economic slowdown have led to new trends and challenges in HR in 2023.

Those who don’t adapt will see an impact on their bottom line. They’ll find it hard to keep their workforce engaged and productive. They’ll also struggle to attract and retain talent, facing expensive hiring costs in what should be a cost-cutting environment.

In this article, we look at the 8 biggest HR challenges for 2023. What’s more, we provide practical solutions to help you stay ahead of the curve and navigate these changes effectively.

8 Biggest HR Challenges for 2023 (+ Solutions)

Challenges 🔴

High employee turnover

The last few years have seen a large number of employees leaving their jobs—a phenomenon known as “the Great Resignation.” McKinsey found that the voluntary quit rate went up by 25% in the years following the pandemic.

Workers are switching jobs, taking sabbaticals, starting their own businesses, and even retiring early. They’re placing a higher value on their personal lives. 

A Pew study also found that 63% of employees quit because they weren’t happy with their pay. Other top reasons to leave included no career advancement and employees feeling disrespected at work. 

Talent and skills shortages

As if employee retention wasn’t already challenging enough, HR departments are also struggling to hire. In fact, the Manpower Group found that 77% of employers are finding it difficult to backfill roles. 

The declining population, changing immigration laws, and work fatigue have led to a lack of talent in the labor market. 

Moreover, the market is experiencing skills shortages. People aren’t upskilling fast enough to keep up with change. For example, technology is on the rise everywhere. But there’s still a shortage of tech-savvy workers who’ve learned how to use technology at work.

As a result, organizations are understaffed and struggling to meet business demands. This impacts their bottom line and reputation with customers. 

Solutions ✅

Offer competitive pay and benefits 

With costs of living increasing, offering a competitive pay rate to workers can give you a major advantage in today’s labor market. It’ll improve employee retention and help you stand out in a competitive hiring landscape.

Consider offering attractive benefits packages if you’re unable to offer higher pay. Today’s workforce values work-life balance. Benefits such as flexible working or a generous time off policy can help you attract talent and keep existing team members loyal. 

Help workers grow in-house

Promote growth by providing your workers with plenty of training and development opportunities. This will not only retain them but also allow you to upskill and cross-skill your team. You can fill important roles in your company with your current workforce without hiring externally—a trend known as quiet hiring. 

Additionally, ensure that your workers are stimulated and learning at work. If they’re bored, consider moving them to another role to encourage horizontal growth. 

In this way, your employees won’t need to go elsewhere to grow their careers. Plus, you’ll increase the attractiveness of your company in the external job market. 

Recognize employees’ efforts

Appreciate your employees when they perform well. You can thank them privately through a message or email. Alternatively, you can give them a shout-out on the company newsfeed or offer awards such as employee of the month. 

Finally, consider involving top performers in business decisions. For example, ask for their suggestions about how to improve the company’s online ratings. This is a way of showing them that you value their input and can help them feel respected at work. 

Challenges 🔴

Declining employee engagement 

A Gallup report suggests that only a third of US employees are feeling engaged in their work. Leading causes include unclear job expectations and disconnection from companies’ missions. 

Disengaged employees are less productive and more likely to quit, adding to the existing struggle with high turnover. They also produce lower quality work, damaging your reputation with customers. 

The rise of “quiet quitting” 

Another Gallup poll showed that up to 50% of US workers are quiet quitting. This is when workers stick only to their key responsibilities. They stop going over and above their assigned duties. Some workers refuse to work beyond contracted hours. Others skip non-mandatory meetings and distance themselves from coworkers.

Quiet quitting started off as a way to combat work-related burnout. But it’s also contributed to high disengagement levels. Quiet quitters occupy a spot in your workforce but have mentally checked out of their jobs. They’re also less likely to innovate, thus reducing your company’s competitive advantage. 

Social isolation 

A recent article in the Harvard Business Review reported that 40% of today’s employees feel isolated at work. Some of this can be attributed to an increase in remote work. But this is also one of the challenges facing frontline and in-field businesses. Employees working across different locations can feel disconnected from their company and coworkers. 

Solutions ✅

Set clear goals and expectations 

Managers and company leaders should help their workers establish clear goals at work. All other engagement tactics are meaningless if an employee is unsure of what they need to achieve.

It’s up to the HR team to ensure that manager and leadership development training covers best practices for goal-setting. In general, employee goals should be SMART: specific, measurable, achievable, relevant, and time-bound.

Encourage managers to check in with their workers in one-to-one or group settings. This helps ensure that their workers are clear on what’s expected of them. Managers need to define what needs to be done, when, and how success will be measured.

Exchange feedback with employees 

Establish a performance management process for your company. For example, ask managers to provide workers with regular weekly or monthly feedback. You can also have a formal appraisal every 6 months. This way, you can support workers who need help and keep top performers motivated to continue their good work.  

It’s equally important to gather feedback from your workers. Regular check-ins or employee opinion surveys are a great way to track how employees are feeling. Survey tools also let you hear from workers who are spread out in the field, making them feel heard and valued. 

Finally, you can use these insights to improve company culture and the employee experience.

Help employees find purpose in their work 

Now more than ever, people want their work to have some purpose. Help employees connect to the company’s mission. This way, they can understand how their work contributes to organizational success.

You can do this by clearly communicating your company’s mission in your employee handbook and during onboarding. You can also celebrate with workers when a company goal has been met. You might even involve them in business decisions to make them feel more invested in the company’s mission. Organizing volunteering or asking them to mentor junior coworkers is another way to help them feel more fulfilled at work. 

A McKinsey report found that workers whose purpose aligns with that of their company are more engaged and loyal.

Foster a culture of connection and belonging 

With isolation on the rise, it’s essential to create a sense of belonging across your workforce. Communication tools that offer work chats let workers engage in one-to-one or group settings. Social feeds are also a great way to let employees post updates, thank each other, and send wishes. 

You can also organize company events to help strengthen team spirit. For distributed teams, virtual events and holiday parties can help workers bond and feel like they’re part of a community. 

Challenges 🔴 

Economic uncertainty  

The global economy has been impacted by COVID-19, geo-political tensions, food and fuel crises, and more. Mass layoffs coupled with rising costs of living have led to stress and anxiety for people across the world. A recent study showed that 52% of 35,000 global workers are worried about how economic uncertainty will impact their job security. More than 33% are explicitly concerned about losing their jobs. 

Poor mental well-being and employee health

A 2022 workplace survey found that 92% of employees are undergoing mental health challenges that impact their work. In another study, over 30% of workers reported emotional exhaustion and physical fatigue. 

Workers are mentally and physically stressed. Some are even facing depression and anxiety about losing their jobs. This is likely to result in reduced productivity and an increase in sick days taken. 

Poor team morale

When employees are going through a rough patch at work in their personal lives, the effects can be felt throughout the company. Although some workers may be okay, watching their coworkers leave or get laid off can also be upsetting. This can have a negative impact on the overall productivity and morale of the company. 

Solutions ✅

Communicate openly and transparently 

Where possible, keep employees updated with any changes that the business is experiencing. For example, if the company is going through a rough financial patch, you could be transparent about this with your workers. 

You could also ask for their input and help in navigating a challenging period. They’re more likely to stay resilient when they have information and are aware of the steps being taken to get back on track. 

But, be careful about how much you share and with whom. Some employees may not take the information well and it may cause them more stress. 

Provide resources and support

Share information about internal policies and procedures to put them at ease. For example, if workers are worried about losing their jobs, let them know what support the company provides to laid-off workers. This could be a severance payout, positive letters of recommendation, or support in finding another role. 

You can also offer mental health support. This could be counseling, resilience training, meditation apps, or employee assistance programs. 

Offer mental health days 

Let employees take mental health days off when they really need it. This can help them rest and recharge so they can come back to work stronger. 

Be available 

Establish an open-door policy and encourage workers to approach you with any questions and concerns they may have. 

Challenges 🔴

Shifting worker priorities

During the COVID-19 pandemic, many people were furloughed, working remotely, or taking a break from work. Many could work while spending time on personal commitments. They spent more time with family, took up hobbies, and looked after their health. 

It’s hard for workers to go back to the way things were before. Priorities have changed. Employees rate work-life balance higher than before COVID-19. HR professionals need to adapt and find ways to offer flexibility to their employees.

Flexibility for non-desk or frontline workers 

One of the latest challenges in HR is finding ways to offer flexibility to in-field or frontline employees. These workers need to be present for their jobs, so working from home—which has now become synonymous with “flexibility”—isn’t an option. 

Separating flexible working from quiet quitting and disengagement 

Flexible working is here to stay. But, there’s also a rise in quiet quitting and employee disengagement. You can’t assume that employees working from home are disengaged. However, some workers could be using flexibility to “quiet quit,” leading to lower productivity levels. 

It’s difficult to identify and address quiet quitting when you can’t physically monitor workers. This is certainly one of the trickier HR issues to deal with in 2023. 

Solutions ✅

Embrace and promote flexible working and work-life balance 

In a survey of over 1,500 US workers, 96% said they needed flexibility at work. You need to adapt and offer flexible working if you want to attract and retain top talent. Plus, with greater control over their time, workers are happier, more energetic, and can perform better.

But how do you do this with a distributed team?

Think of creative ways to offer flexibility to non-desk workers

Workers in construction, healthcare, retail, and other frontline industries need to be at their job sites. But flexibility is more than just working from home. 

For example, you can let employees choose their preferred job sites. You can also offer flexible scheduling in their shifts and allow for shift swapping. Also, you can give them some extra time off when they’ve worked more than their required hours. 

Set and track goals 

Give workers a clear set of goals and track their progress on these This is a great way to ensure that they’re staying productive even when working flexibly. If certain workers are underperforming, consider putting them through a performance management process. Support them in improving their performance without necessarily taking flexibility away. 

Challenges 🔴

The use of technology in HR 

A Forbes article recently suggested that using technology in talent management is top of mind for HR leaders. This makes sense. The current workforce, comprising mostly millennials and Gen Z workers, is very tech-savvy. These workers are used to accessing everything on their smartphones. 

However, a PWC study found that only a quarter of business leaders believe that technology is being used efficiently in HR management. This can put companies at a major disadvantage in engaging employees and attracting new talent. 

Companies are being put in the hot seat online

With the rise of social media, many companies have been called out online for their working practices. Workers who are unhappy with their working environment now have a platform to share their experiences. Negative posts shared on Twitter, LinkedIn, or Glassdoor can lead to low team morale. They can also put companies at a disadvantage in the job market.  

Sometimes, employees also share inappropriate content online. Even if it’s posted to their own profile, it can damage a company’s reputation by association.

Solutions ✅

Use HR management software

The best way to leverage technology is to use an app for human resource management. Depending on the functionalities available, these systems can help manage several HR functions. Think training, time tracking, document management, and so much more!

Our advice: Use an all-in-one HR solution like Connecteam. It can simplify everything from people operations to employee engagement. It has features such as surveys, training tools, a file management system, an in-app chat, and more. Plus, it has a mobile app that you and your employees can access on the go. Sign up for a free trial and check out all of its features.

Make the most of artificial intelligence (AI) tools

2023 has seen the rise of advanced AI such as ChatGPT and Bing AI. These tools can instantly write job descriptions, create performance review templates, and more. You could even ask the tool for ideas on team-building activities, offsites, and more. Then, you can adjust the outputs to suit your needs.

AI tools’ abilities are remarkable. We recommend learning how to use them as soon as possible.

Create an official social media policy for your company

Create and implement a suitable social media policy for your employees. You can make this strict or lenient depending on your company’s preference. For example, ask employees to avoid posting any company-related content on social media. 

You should also make sharing hate speech and other inappropriate posts online against ‌company policy. Make sure your social media policy is easily accessible by placing it on your company intranet or employee handbook. 

Challenges 🔴

Working with low budgets across HR functions 

In periods of economic distress, many companies need to cut their costs to make up for potential losses in revenue. The most common cost-cutting measures include layoffs, fewer offsites, reduced bonuses, and more. All of these impact HR and can damage employee experience. 

Hidden costs of cost-cutting 

Cost-cutting can have several long-term impacts on employees. In a 2019 survey, Gartner found that cost-cutting led to a 7% decline in employee engagement. The number of employees who were meeting or exceeding their goals also dropped by 5%. 

Further, some workers may experience more stress if their company engages in cost-cutting. This is due to the stress of not knowing what will happen with their company and their job. Plus, these workers may spread panic throughout the company. 

Solutions ✅

Tighten spending on non-essential items  

Eliminate or reduce items that are “nice-to-haves.” For example, put stricter control on travel expenses like flights and accommodation. Or, if you have an annual company offsite, consider organizing it at a cheaper location until company finances are back on track. 

You could even have an honest conversation with employees or send out a survey to check if there are any benefits that aren’t being used at the moment. You may find that a majority of your workers don’t use a specific perk that you’ve been paying for. This is a good time to replace it with non-monetary benefits such as more paid time off or volunteer days. 

Prioritize only the most impactful employee engagement activities

Prioritize activities that align with the company’s goals and boost company morale. For example, you could use low-cost recognition programs such as simple thank-you notes or public recognition on the company newsfeed. 

You could also reduce the number of team outings while still giving importance to the ones that employees love most, like holiday parties. 

From a training perspective, stick to courses that are impactful and provide the best value for money. Negotiating with vendors or moving training in-house can also help you save money on trainer fees, travel budgets, and so on.

Quiet hire 

Quiet hiring is a great way to close skills gaps without paying heavy recruitment costs or hiring expensive contractors. Identify employees who are already exhibiting the required skills and promote them to the new role. Or, find employees who aren’t in the right job and move them to a new role to make the most of their abilities. 

Challenges 🔴

Preventing discrimination 

The last decade has seen a great focus on Diversity, Equity, and Inclusion (DEI) both inside and outside of work. Today’s workers don’t want to be associated with any discrimination around gender, race, disability, sexuality, or other factors. Companies that don’t value DEI are at risk of damaging their reputation with workers, customers, and investors. They’re also simply behind the times.

Dealing with retaliation 

Some workers retaliate against DEI practices for a number of reasons. For example, they are afraid of change and unsure how DEI initiatives will impact their jobs. In a few cases, employees may believe companies hire or promote unqualified people based on race or gender to show that they’re meeting DEI goals. Lastly, DEI may go against a few employees’ personal beliefs, causing them to retaliate. 

Solutions ✅ 

Hire, promote, and compensate fairly 

Aim to be an equal opportunities employer. This means you hire candidates based on their merits rather than race, gender, age, or other traits. 

Also, have a clear set of guidelines around promotions and pay increases. Make sure you follow these and that employees are rewarded for good work rather than for their backgrounds. 

Implement a strict anti-discrimination policy 

Establish and implement a strict policy against discrimination at work. This should include what kind of behaviors are discriminatory. Workers should also be aware of how to report discrimination and what actions the company will take in these cases. 

Include this policy in your employee handbook or somewhere employees can easily access it. 

Provide the right training 

Educate your workers on why DEI matters. Provide unconscious bias training so they can help ‌build and maintain an inclusive workforce. This will also help them understand how they can be allies to their diverse coworkers.

Encourage inclusion across business practices

Establish employee resource groups where workers can run diversity-focused events. Make work sites disability-friendly where possible and celebrate holidays across all cultures. These gestures are great ways to make all employees feel valued and safe.  

Challenge 🔴

Regulatory and compliance requirements are constantly changing 

The regulatory landscape is constantly evolving. Companies can face penalties for not complying with federal, state, or local labor laws. 

For example, one of the biggest HR issues today is ‌strict data privacy laws. Employees’ and applicants’ personal and health information needs to be kept confidential. This includes protecting digital copies from unauthorized access. Some laws even require you to delete information from your systems after a certain amount of time has elapsed. 

In addition, HR professionals need to stay on top of new regulations to ensure that nothing slips through the cracks. An example of this is that more states are pushing for pay transparency. A recent report suggests that 1 in 4 workers will soon be covered by laws that require businesses to be transparent about their wages. 

Solutions ✅ 

Stay updated 

Research federal, state, and local labor law websites regularly. You can also subscribe to publications that specialize in this news so you’re always aware of any new regulations in place. 

Stay organized 

Store all HR documents, compliance forms, certificates, and personnel records securely. Cloud-based document management software can let you store, manage, and access files instantly. Some systems even set up expiry dates for documents so you can review them regularly and ensure everything is up to date. 

Learn more by reading our review of the best HR document management software.

Consult an expert when in doubt 

When in doubt about certain regulations, reach out to the relevant labor body or consult an attorney. It’s always better to be safe than to find yourself in a complex legal battle. 

Summary

With a looming recession, a shift in employee priorities, and a talent shortage, 2023 is off to a challenging start for HR professionals.

They must re-engage and retain their employees through training, flexibility, recognition, and more. But they also need to cut costs, follow regulations, and promote DEI in their companies.

In this article, we explore the top 8 trends that HR teams need to look out for in 2023. We explain both HR challenges and solutions so you can effectively lead your workforce through change.