There’s a thrilling momentum that comes with business growth. Revenue climbs, opportunities increase, and new talent walks through the door. But with that growth comes an unavoidable reality: scaling a business also means expanding its people operations.
That’s easier said than done. From evolving regulations and rising employee expectations to increasingly fragmented workforces, at a certain point, the HR terrain grows more challenging and requires more time, more dedicated expertise, and more resources. In fact, the complex demands of HR at growing organizations can strain even dedicated HR professionals: nearly three-quarters (72%) of HR leaders told the Society for Human Resource Management (SHRM) that keeping up with compliance and scaling HR operations were their top stressors.
The good news: these HR challenges are entirely conquerable. It just requires having a clear, coherent, and proactive HR strategy. So, let’s explore four of the most critical HR challenges facing expanding businesses in 2025 and how to get ahead of them before they become roadblocks.
For many growing businesses, one of the biggest HR challenges is breaking through a hiring environment where key talent isn’t moving.
“It’s not surprising that recruiting is still difficult and retention is improving,” says Jim Link, SHRM-SCP and Chief Human Resources Officer at SHRM. “Organizations are responding to what is happening in the greater economic environment. It is still hard to find key skilled talent. Those people are parking themselves in their current jobs."
In other words, the labor market isn’t loosening in the ways some businesses had hoped, and a lack of qualified candidates remains the top recruitment challenge for 58% of employers. While job seekers may be more cautious and less mobile due to economic uncertainty, companies still face mounting pressure to fill essential roles as they grow. For roles requiring specialized skills or industry-specific knowledge, the talent pool feels even smaller.
Preparation Tip: To compete for passive candidates, companies need more than job ads—they need a strong value proposition. Strengthen your employer brand by highlighting flexibility, culture, and growth opportunities in job postings and careers pages. Build talent pipelines in advance through networking, alumni engagement, and employee referral programs. And consider partnering with staffing specialists or outsourcing HR functions like recruiting for hard-to-fill roles.
Employee benefits are a powerful tool for attracting and retaining talent, but as your workforce grows, so does the complexity of administering them. What starts as a simple healthcare offering can quickly evolve into a tangle of voluntary benefits, state-specific leave policies, and retirement plan obligations.
In other words, benefits administration is no longer just a back-office task; it’s a strategic differentiator in a world where “78% of employees would switch jobs for better benefits,” according to a 2024 QuickBooks survey. “Our research shows that employees are placing higher value on health benefits when it comes to their job satisfaction,” says Laurent Sellier, senior vice president, Intuit QuickBooks Payroll Solutions. “For that reason, maintaining competitive benefits packages at an affordable price is vital to employee retention.”
But here’s the catch: every new location, every new headcount milestone, and every new regulatory change can complicate your benefits stack and thus open the door to costly missteps.
Few things can derail growth faster than a compliance error. Wage and hour laws, worker classification, EEOC reporting, ADA accommodations, paid family leave, and now evolving privacy laws all fall under the umbrella of HR compliance. Complicating matters, compliance isn’t just about avoiding penalties; it’s also about earning employee trust in a world where transparency and ethics matter more than ever.
In fact, effective compliance protocols can actually help boost business. “Adeptly navigating the legal landscape, particularly when it comes to workplace equality, can help you stay ahead of the competition by offering a more attractive place to work,” argues staffing firm Randstad USA. “Staying on top of labor laws can give you a competitive edge.”
The core HR challenge here isn’t intent, however; it’s bandwidth. Many small businesses simply don’t have the in-house expertise to stay on top of regulatory changes in every jurisdiction they operate.
Growth often brings excitement—but also confusion, stress, and fear of change. When communication becomes inconsistent and feedback loops break down, employees can begin to feel like cogs in a machine rather than valued contributors.
2024 research from Gallup revealed that only 23% to 31% of employees feel engaged at work, representing a 10-year low—and disengagement rises sharply during periods of organizational change (like rapid growth). Burnout, turnover, and declining performance are the natural consequences of neglecting engagement during expansion. Worse, workers under 35 (meaning, the core workforce of the future) are the most affected.
What’s going on? Well, it’s complicated. Technology is most likely playing some role. “The biggest problem we have is that technology is taking away human touch with people,” Richard Rekhy, Vice Chair of Grant Thornton Bharat, argued to SHRM.
But bad management is also a perennial cause of engagement issues, especially when—as a 2025 Gartner report on top HR priorities finds—nearly three-quarters of HR leaders believe managers are overwhelmed (75%) and unprepared for the future (70%).
Ultimately, growth should be a milestone worth celebrating, not a trigger for operational breakdowns. Fortunately, you don’t have to handle it all internally. Whether it’s scaling recruitment, navigating benefits complexity, staying ahead of HR compliance, or sustaining engagement, today’s businesses have more options than ever—from powerful HR software to seasoned third-party support.
If you’re wondering whether your business is equipped to handle HR in-house or if it's time to bring in reinforcements, our HR Readiness Checklist is the perfect place to start. This practical tool helps you assess your current HR capabilities and identify gaps before they become liabilities.
**The information provided on this website is for general informational purposes only and does not constitute legal advice. While we strive to ensure the accuracy and completeness of the information, we make no guarantees about its correctness, completeness, or applicability to your specific circumstances. Laws and regulations are subject to change, and you should consult a qualified legal professional before making any decisions based on the information provided here.