Looking back at 2025: What the year taught SMEs about people and work

As 2025 draws to a close, many small and medium-sized businesses are taking a breath and reflecting. Not in a glossy, “annual report” way, but in a more honest, practical sense: What actually changed this year? What stretched us? And what have we learned about employing people in a small business environment?

From an HR perspective, 2025 wasn’t defined by dramatic shocks. Instead, it was a year of adjustment. For many SMEs, it marked a shift away from firefighting and towards more deliberate, thoughtful people management. That, in itself, feels like progress.

A year of realism

One of the most noticeable changes in 2025 was a growing sense of realism on both sides of the employment relationship. After several years of disruption, expectations began to settle.

Small employers became more confident in being clear about what they could and couldn’t offer. Employees, in turn, seemed more focused on stability, fairness and clarity than on chasing the next big trend. For SMEs, particularly those in rural and community-based sectors, this return to realism was welcome.

It reminded many businesses that they don’t need to copy big corporate models to be good employers. They just need to be clear, consistent and human.

Employment law: less panic, more preparation

There was a lot of conversation in 2025 about upcoming employment law reform. For some SMEs, this created understandable anxiety, especially where there is no in-house HR function.

But as the year progressed, many businesses began to take a more measured approach. Rather than waiting for change to be imposed, they started to review contracts, tidy up policies and think more carefully about how decisions are documented.

The lesson from 2025 was that preparation doesn’t have to be complicated. Small, incremental improvements, clearer contracts, simpler policies, better records go a long way in reducing risk and increasing confidence.

Flexibility found its own shape

Flexible working continued to be important in 2025, but the conversation matured. For many SMEs, especially in care, hospitality, tourism and trades, hybrid working was never a realistic option.

Instead, flexibility showed up in more practical ways: more predictable rotas, fairer allocation of hours, term-time arrangements, and honest conversations about availability and capacity. Where flexibility was handled openly and fairly, it strengthened trust rather than creating tension.

2025 reinforced that flexibility doesn’t have to mean “anything goes”. In small teams, it works best when it’s balanced, transparent and reviewed regularly.

Retention mattered more than recruitment

Recruitment remained challenging throughout 2025, particularly in rural areas. As the year went on, many SMEs quietly shifted their focus. Rather than constantly trying to attract new people, they put more energy into keeping the good people they already had.

Better onboarding, regular check-ins, clearer expectations and more supportive management made a real difference. These weren’t big-budget initiatives but they were effective.

The takeaway? In a tight labour market, retention is one of the most powerful tools small businesses have.

Managers grew in confidence

Another positive trend in 2025 was the growing confidence of line managers in small organisations. Many had been stretched thin in previous years, but with clearer guidance and support, they began to handle people issues earlier and more calmly.

Difficult conversations didn’t disappear, but they became less daunting. Addressing issues sooner rather than letting them drift prevented many situations from escalating.

Wellbeing became more practical

The language around wellbeing softened in 2025. Instead of focusing on initiatives and perks, SMEs paid more attention to workload, boundaries and realistic expectations.

For small businesses, this felt achievable. Protecting wellbeing wasn’t about doing more, it was about doing things more sensibly.

But - what does this mean for 2026?

As we look ahead to 2026, it is also worth acknowledging something openly: not every small business is heading into the new year feeling organised, confident and fully “on top” of HR.

For many SMEs, particularly owner-managed and rural businesses, 2025 was about survival as much as progress. Time was tight. Energy was stretched. HR often sat alongside everything else: operations, finance, staffing, customers, compliance, and sometimes it simply had to take a back seat.

Some businesses ended the year feeling steadier, with clearer structures and a bit more breathing space. Others are going into 2026 still muddling through, relying on goodwill, experience and crossed fingers rather than formal systems. And that’s more common than people admit.

What matters is not where a business starts 2026, but whether it feels able to take small, realistic steps forward.

For those who are already in a good place, 2026 offers the opportunity to build on solid foundations: refining processes, supporting managers, and strengthening retention. For those who feel overwhelmed, it doesn’t need to be about catching up on everything at once. Even small changes like updating a contract, clarifying a policy, having a better conversation can make a meaningful difference.

One of the most important lessons from recent years is that good HR doesn’t require perfection or constant reform. It requires proportion, honesty and support. Businesses that allow themselves to be “good enough for now”, while remaining open to improvement, are often more resilient than those chasing an ideal standard they don’t have the capacity to sustain.

2026 doesn’t need to be about doing more. For many SMEs, it will be about doing a little less, but doing it more clearly, more consistently, and with greater confidence.

And for those heading into the year with fingers crossed? You’re not alone. The fact that you care enough to reflect, question and seek clarity is already a strong starting point.

A final word

If 2026 feels like a year to pause, steady things and get clearer about how you manage people, you don’t have to do that alone. My work with small and medium-sized employers is about bringing calm, proportion and practical support; helping you make sense of HR without overcomplicating it or losing sight of the reality of running a business.

That might mean reviewing contracts, simplifying policies, supporting managers with difficult conversations, or just having someone to talk things through before they become bigger issues. Sometimes a small amount of timely advice can prevent a lot of unnecessary stress.

Most importantly, I want to wish all employers the very best for the year ahead. Running a small business and employing people is demanding, often thankless, and rarely straightforward. The effort you put in, often quietly and behind the scenes, does matter.

And to my clients: thank you for your continued trust, openness and ongoing working relationships. It’s a privilege to work alongside businesses that care deeply about their people while juggling the realities of day-to-day operations. I look forward to continuing those conversations and partnerships into 2026.