Inflation emerged as the biggest challenge and fastest-growing concern for HR professionals in 2022, according to the “State of the Workplace Report” released today by the Society for Human Resource Management. Inflation increased by 13% from 2021.

“Our research also depicts that labor shortages are continuing to impact organizations,” said Johnny Taylor Jr., president and CEO of SHRM. “Employees, HR professionals, and HR executives reported recruiting and retaining talent among their top five priorities for 2023.”

The report found that 80% of HR professionals are concerned about how the economic situation may affect their organizations, 48% worry about budget cuts, and 86% worry about the consequences for employees’ lives.

However, despite the economic concerns, 74% of HR professionals expect their organizations to expand their workforce this year. In addition, the job market will continue to favor job seekers, and the talent crunch will not ease in the near term.

According to the report, mental health was the third greatest external challenge for organizations in 2022, cited by 72% of HR professionals. For 2023, strengthening mental health benefits or coverage is a priority for 51% of HR professionals, an increase of nine points over 2022.

“Based on this report, 2023 is going to be a pivotal year for both employees and executives. We expect to see big changes in regard to budgetary concerns — while still considering talent and retention challenges,” Taylor said.

The report surveyed 1,793 HR professionals in the US. A sample of 276 HR executives was also used to provide additional information to supplement results from the HR professional sample. A third sample of 585 non-HR employees was used to provide a separate perspective.