That was until the US announced a multitude of tariffs which sent the stock market into disarray with organisations such as Apple and Nvidia being the hardest hit. The global impact was significant and whilst the worst possible scenarios are likely to be avoided, there has been increased jitteriness and slower decision making as a result. Fund raising in private markets has continued to be strong with PE firms raising more capital, but this hasn’t been matched by deal-making and IPO pipeline stalled due to the macro-economic headwinds.
Our Q1 2025 Market Report found that the financial services HR market experienced a clear upswing, with strong demand for senior strategic hires across CPO, HR Director, Talent Acquisition, Reward, and Payroll functions – many of which were newly created roles driven by transformation and growth agendas. Despite only a modest increase in overall hiring volume, clients remained focused on high-impact talent, while candidates showed renewed openness to opportunities, especially in leadership and transformation roles, reflecting a shift toward leaner, more commercially aligned HR functions. This aligns with the recent Gartner 2025 CHRO Budget Benchmark Report, which presents that HR functions are becoming increasingly lean, with one HR full-time equivalent supporting 58 employees on average. CHROs are focused on aligning staffing and spend with business priorities while operating within tight budgets — median HR spend remains just 0.80% of revenue and $2,908 per employee annually, significantly less than other corporate functions like IT or Finance.
Whilst reflecting on Q2, it remains true that the bulk of hires we have worked on have been newly created roles (vs backfills). The momentum carried from Q1 was halted as the landscape shifted meaningfully in April, following the tariff announcements. Interestingly, most of our clients remained committed to pushing ahead with their hiring plans, continuing to invest in senior HR leadership aligned to growth, transformation, and regulatory readiness. However, the candidate market responded differently. Senior HR professionals became noticeably more hesitant to engage in conversations regarding new opportunities as the quarter progressed. Many expressed concerns around job security, with concerns of being ‘first in, last out’ should market conditions deteriorate further. These concerns were informed by what they had seen happen to peers and colleagues during the more challenging periods of 2023 and early 2024. While there remains strong interest in strategic HR transformation and investment across financial services, we have seen a shift toward a more cautious and risk-aware candidate mindset, placing greater emphasis on organisational stability and long-term security when evaluating new roles.
Gartner’s 2025 outlook also reflects this cautious mindset, with only 35% of HR leaders expecting budget increases in 2025 (down from 40% in 2024), and 33% anticipating cuts. While organisations are prioritising areas like HR technology and L&D, the broader picture shows declining enthusiasm for expansive budgets, leading to more deliberate and risk-aware decision-making across the function.
Given the macro-economic uncertainty, we have seen HR leaders look more closely at the overall structure of HR and where to find efficiencies. The overall impact of this is yet to be seen but the likelihood is leaner HR teams with roles taking on broader responsibilities and ‘dual-hatting’. We have seen a continuation in the demand for commercially driven HR business partners and leaders that can align HR strategy to business outcomes. This is consistent with Gartner’s benchmarking, which shows that HR teams are being asked to do more with less – balancing efficiency and effectiveness while ensuring HR services remain strategically valuable. CHROs are evaluating not just cost but also service quality as they rethink functional design.
Across the financial services market the demand for Talent Acquisition professionals remains stable with the focal point being on hiring mid-career professionals who can own most of the day-to-day execution of recruitment; these hires are reassuring for the broader market as businesses gear up for hiring in the second half of 2025.
A further positive indicator for the market is sudden spike in junior hiring activity, with HR leaders creating new ‘second jobber’ positions. These newly created positions are largely true generalist roles coming in to support a senior team or a standalone HR leader. When hiring for these positions we’re increasingly focused on identifying top junior talent that can understand the benefits of being in a smaller relationship driven environment and the growth benefits this can have for their career. At this level of the market, we have seen salaries rise significantly as these individuals are crucial to the wider HR team’s success; this is also evidenced through longer notice periods for junior professionals. From a compensation standpoint, this has provided a dilemma as more junior salaries have increased but the mid-level roles haven’t necessarily increased accordingly. This has led to a compression in the market with junior to mid-level roles.
For more senior roles, we have seen a continuation of a ‘buyers’ market in which clients have a specific search criteria, primarily looking for talent from within the same sector. As the market dynamic shifts, we are recommending that clients explore talent from adjacent sectors to increase the size of the potential talent pool as well as diversity of thought.
Within our private equity clients, a greater focus on value creation has led to more opportunities for talent and HR professionals. There has been an evolution from a narrow talent/search focus into broader human capital support across the deal lifecycle from pre-deal due diligence through to exit readiness. Our CPO network for HR leaders in portfolio businesses has continued to expand, with regular discussions and insights shared on the adoption of AI and machine learning, particularly within performance management and talent development. This mirrors Gartner’s finding that 34% of CHROs plan to increase HR tech investments in 2025, with a strong focus on AI, talent analytics, and digitised learning platforms as enablers of strategic transformation.
CHROs have an increasingly broader role and have evolved HR strategy into a product-focused offering to the business. The development of specialist functions and a focus on improving the overall employee experience has led to innovation in the talent development and learning space. Organisations are exploring the adoption of AI and bespoke learning solutions to offer employees engaging and hyper-personalised content through interactive podcasts, gamification and app-based learning. Gartner also identifies Learning and Development as the number one investment priority for CHROs in 2025, with 39% planning to boost spend in this area—underscoring the critical importance of digital learning to workforce upskilling and retention.
Moving into Q2, people teams are increasingly investing in talent who bring systems ownership, configuration and implementation skills to the function. We’ve noticed many of our alternative investments and boutique financial services clients are increasingly moving away from enterprise HR systems like Workday, Peoplesoft or Successfactors, in favour of modern platforms such as HiBob and BambooHR. While traditional tier 1 systems remain a powerful tool for large organisations, their high cost, lengthy implementation timelines and complex interfaces often make it a poor fit for leaner teams. In contrast, more agile platforms offer more accessible pricing, faster deployment and user-friendly designs that don’t require dedicated IT teams to manage.
These newer platforms are also better aligned with the evolving needs of modern HR teams. They support a more flexible, modular approach to HR tech – allowing companies to adopt only the features they need, such as performance management, onboarding, or benefits administration. Additionally, they place a stronger emphasis on employee experience, with built-in tools for engagement, recognition, and DEI tracking – which are all key components for attracting and retaining top talent in today’s competitive market.
Security and compliance remain critical, especially in financial services and platforms like HiBob and BambooHR now offer enterprise-grade protections such as SOC 2 and GDPR readiness without the heavy footprint of traditional ERP systems. This balance between security and agility allows smaller firms to meet regulatory demands while staying nimble.
The recent Garnet report showed that 34% of CHROs are increasing investment in HR technology, reflecting growing demand for configurable, cost-efficient platforms that empower leaner HR teams and improve employee experience without adding complexity.
Following an active start to 2025, the reward market experienced a period of relative stabilisation in Q2, allowing professionals the opportunity to reassess priorities after a demanding year-end cycle. Organisations took this time to conduct thorough reviews of their year-end processes, evaluating efficiencies and identifying areas for improvement. As a result, the latter half of the quarter saw an increase in hiring activity, particularly at the junior to mid-level, with companies seeking individuals equipped with strong analytical capabilities and advanced Excel proficiency. The demand for professionals who can effectively manage projects and demonstrate intellectual curiosity has surged, driving salaries upward as talent pools tighten.
One notable factor contributing to this talent scarcity is the ongoing trend of offshoring roles traditionally aligned with reward analysts, leading to a reduced domestic talent pipeline. Consequently, organisations continue to exhibit cost-conscious behaviours and face challenges in securing London-based talent, often having to justify the value of retaining roles within the capital rather than shifting them to lower-cost locations.
At the senior level, Q2 saw significant movement, particularly within boutique financial services firms, as businesses strategically reinforced their leadership teams. This kind of senior hiring activity often triggers further organisational restructuring, which is expected to result in heightened recruitment activity in Q3 as companies prepare for the next year-end cycle.
Despite the steadiness of Q2 from a hiring perspective, cautious optimism remains prevalent across the market. Organisations continue to adopt meticulous hiring processes, with decision-makers taking a more measured approach to ensure that candidates align precisely with their evolving strategic objectives.
Interim HR activity in the second quarter has largely been shaped by caution and necessity. Most appointments were driven by urgent needs—covering maternity leave, addressing unforeseen employee relations issues, and stepping in to rescue transformation initiatives that were veering off course.
The quarter began under a cloud of political and economic uncertainty, which had a noticeable impact on budgets, hiring decisions, and overall employee morale. This environment underscored the importance of staying attuned to the broader external landscape. Despite these challenges, a strong and consistent commitment to Diversity, Equity, and Inclusion remained evident, with organisations reaffirming their values even in the face of political headwinds.
Concerns around tariffs, visa delays, and the looming possibility of a recession were particularly pronounced in the services, manufacturing, and healthcare sectors. Attention has also been brought to generational differences in how employees are coping with instability, highlighting the growing importance of transparency and authenticity in the workplace.
As the quarter progressed, sentiment began to shift. May and June saw a more optimistic tone, with HR hiring increasingly focused on supporting growth, enhancing productivity, and embedding more commercially driven behaviours and culture.
Our US team has remained exceptionally busy in Q2. For the first time, the majority of our US mandates have come from insurance businesses, many of which are experiencing accelerated growth and transformation, particularly in the mid-market and PE-backed space. Interestingly, we’re seeing a significant increase in senior HR candidates from more traditional financial services backgrounds – including banking, private equity, and asset management – actively pursuing opportunities in insurance. This movement reflects a growing perception of the sector as both dynamic and comparatively recession-resilient, offering long-term career stability alongside the chance to help shape evolving people strategies in an increasingly competitive talent landscape.
In contrast to the strong client-side demand, we’ve observed that the US candidate market, particularly within Talent Acquisition and HR Business Partner roles, has been the most cautious globally when it comes to considering new opportunities. Many candidates are adopting a risk-averse mindset, citing concerns around job security and the “last in, first out” scenarios they witnessed first-hand during the previous market correction.
Despite this hesitation from candidates, it has still been possible to get passive candidates involved in processes, and two critical factors have emerged for success. First, organisations must present a compelling, differentiated value proposition, as candidates continue to receive multiple approaches, standing out is essential. Second, the hiring process must be managed with care and empathy; candidates need to feel fully supported, reassured about role stability, and confident in the long-term vision and leadership of the business to make the leap.
Gartner’s 2025 benchmarks reinforce this shift in candidate psychology. With only a minority of HR leaders anticipating increased budgets, and a large portion preparing for flat or reduced spend, job seekers are rightfully prioritising security and strategic clarity. Successful employers will be those who communicate purpose and long-term alignment clearly – particularly in an uncertain and cautious US market.
Q2 2025 marked a pivotal period for the HR and talent landscape – characterised by cautious optimism, strategic hiring, and ongoing recalibration in response to shifting macroeconomic pressures. Despite market volatility triggered by new US tariffs and continued geopolitical unease, organisations in financial services have remained largely committed to strengthening their HR functions, with particular focus on transformation, value creation, and future readiness.
Across all markets, the emphasis has shifted toward leaner, more agile HR models, where efficiency and alignment to business goals are paramount. It’s clear that overall HR budgets are under pressure, targeted investments in HR technology, learning and development, and analytics are enabling forward-thinking CHROs to drive impact with limited resources. As businesses prepare for H2, success will hinge on their ability to navigate uncertainty with clarity, optimise their people infrastructure, and position HR not just as a function, but as a strategic engine for resilience and growth.
If you are interested in scheduling a meeting to discuss any of the above trends in more depth with our market specialists, please do get in touch at catalyst@catalystpartners.com.
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