Ask any small business owner what’s keeping them up at night right now, and chances are, it’s not cash flow – it’s people. Or more specifically, finding them, keeping them, and somehow competing with the big names offering more perks, more pay, and more prestige.
If you’re running an SME in the UK, you’ll know first-hand how fierce the talent market’s become in 2025. There’s no shortage of people looking for work – but expectations are high, and the old ways of hiring and managing just don’t cut it anymore. However, you’ve also got more tools, and more opportunities, than ever before. You just need to know how to play your hand well.
The Hiring Headache (and How to Rethink It)
The numbers are stark: 69% of organisations say it’s become harder to find the right people,1 and 64% are struggling to attract candidates who actually fit the bill.2
So what’s the workaround? Increasingly, businesses are shifting focus from hiring ready-made candidates to developing their own. According to Hays, 80% of employers are now open to hiring people who lack some of the listed skills, provided they show potential.3 Apprenticeships, returner programmes, even those fresh out of uni – it’s all fair game. And it works. When you hire a student or career switcher and give them space to grow, you’re not just filling a vacancy, you’re building loyalty from the ground up.
The Retention Problem Isn’t Going Away
Even if you find the right hire, keeping them is another story. And early attrition is brutal: 20% of employees quit within the first 45 days of employment.4
In my experience, this often comes down to expectations clashing with reality. The role isn’t what they thought. The onboarding’s rushed. Or maybe no one checked in after week two.
SMEs tend to overlook this bit, focusing all their energy on recruitment. But in a small team, losing someone early can knock everything off balance. One strategy is to introduce a 30-60-90-day onboarding plan, with regular chats and clear development milestones. Sometimes it’s those small systems that make the biggest difference.
Why Gen Z Can Be Your Secret Weapon
There’s a persistent myth that Gen Z is flaky or entitled. I’ve found the opposite. What they want: meaning, growth, flexibility – isn’t indulgent, it’s smart. And if you meet those needs, they’ll stay and thrive.
Younger employees, especially apprentices and grads, are hungry to prove themselves. They just need the right environment.
SMEs often assume they can’t offer a proper career path – but what you can offer is breadth. Let junior staff try new things. Rotate them through projects. Mentor them. It’s these opportunities that Gen Z values most – and where small businesses have a real edge.
Flexibility Still Wins
Hybrid work isn’t just a fad – it’s baked into the expectations of today’s workforce. Nearly a third of UK workers are now hybrid,5 and 66% of UK businesses had adopted flexible working by 2024,6 and that number continues to rise in 2025 as more employers embrace alternative workplace models.
This doesn’t mean every job has to be remote. But flexibility, in whatever form makes sense (staggered hours, compressed weeks, core-hour policies) makes a noticeable difference.
That said, don’t make flexibility a privilege for just your desk-based staff. Fairness matters. If your shopfloor team is always in while others work from home, resentment can build fast. Creative solutions – like rotating shifts or giving time-in-lieu for weekend work – can help level the playing field.
Technology’s Quiet Revolution in HR
If you’ve dabbled in hiring software or dithered over an HRIS, now’s the time to commit. An Insight Global Survey indicates that 99% of hiring managers use AI in the hiring process, with 98% reporting significant improvements in efficiency for tasks.7
For a stretched HR manager, or a founder doing it all themselves, these tools are game-changers.
But a word of caution: these systems aren’t infallible. Algorithms can bake in bias, so human oversight is still critical. Use the tech to support your judgement, not replace it.
Wellbeing Is No Longer a ‘Perk’
It’s hard to overstate how central wellbeing has become to workplace culture. The cost of poor mental health in UK workplaces is now estimated at £51 billion.8 That’s not just absences – it’s presenteeism, burnout, and quiet quitting.
SMEs might not have in-house counsellors or fancy wellness apps. But they do have influence. When a founder models healthy behaviour – switching off in the evenings, encouraging breaks, checking in with the team – it sets the tone.
Some of the most effective changes cost next to nothing: monthly wellbeing check-ins, no-meeting Wednesdays, walking meetings, or just normalising conversations about stress. The return on this isn’t fluffy – it shows up in retention, productivity, and morale.
Inclusion and Culture: Not Just a ‘Big Company’ Concern
Many SMEs want to be inclusive but don’t know where to start. Here’s the good news: you don’t need a diversity department to make change. Review your job ads. Diversify your hiring channels. Ask your team where they see barriers. Inclusion is as much about mindset and micro-decisions as it is about policy.
And remember – Gen Z is watching. This generation expects authenticity. If your business celebrates difference and gives everyone a voice, it’ll show; and it’ll attract people who want to build something with you.
Where Small Businesses Have the Edge
Running a small business in 2025 means navigating complexity daily. You’re managing clients, keeping the lights on, and still somehow expected to be an expert in people strategy. It’s a lot.
But you also have advantages that no FTSE 100 company can replicate. You can move fast. You know your people. You can create a culture where individuals are seen, not processed.
The trends we’ve covered – flexibility, development, wellbeing, inclusion – they’re not corporate terms. They’re real levers for building resilient, human-focused teams. And when you get it right, you’ll find that talent isn’t just something to compete for. It’s something you grow, nurture, and retain; often against the odds.
So if you’re thinking about your next hire, maybe don’t start with the perfect CV. Start with potential. And if you’re wondering whether to hire a student or give a young person their first real shot, don’t hesitate. Talent doesn’t just arrive fully formed – it grows where someone gives it the chance to take root.
Sources:
1 – Wecreateproblems.com, 100 Recruitment Statistics and Trends for 2025 and Beyond – January, 2025
2 – Onerec.com, Hiring harder than ever? Three quarters of employers struggle to find quality candidates – March, 2025
3 – Hayes.co.uk, The rise of skills-based hiring: prioritising potential over experience – undated
4 – Devlinpeck.com, The top 10 employee onboarding statistics of 2025 – January, 2025
5 – Ons.gov.uk, Is hybrid working here to stay? – May, 2022
6 – Startups.co.uk, Flexible working is set to explode in 2024 – January, 2024
7 – Insightglobal.com, Balancing Tech & Talent for Great Outcomes – undated
8 – Peoplemanagement.co.uk, Poor mental health costing UK employers £51bn a year, report reveals – May, 2024
