Managing people has always been at the heart of running a successful business. But as Indian startups and growing companies scale, the challenges of HRM become more complex. From staying compliant with constantly changing labour laws to ensuring payroll accuracy and building a strong employee experience, HR leaders and founders often find themselves stretched between strategy and administration.
Manual processes, scattered spreadsheets, and disconnected tools only make matters worse, leading to errors, delays, and compliance risks that can impact both financial health and team morale.
In this article, we’ll explore the most pressing challenges in human resource management that Indian businesses face today, and share practical insights on how to address them effectively.
Let’s get started!
Talent is scarce. Indian startups are battling 30-40% skill shortages in digital and leadership roles.
Compliance is evolving. Labour code updates and state-level rules demand real-time, automated tracking.
Workforces are diverse. Hybrid, remote, and gig models need flexible pay, benefits, and performance systems.
Upskilling is urgent. AI and automation call for continuous learning and internal mobility strategies.
Tech + Human = Future HR. Adoption of tools like Craze helps simplify operations without losing the human touch.
For CFOs, CHROs, and HR Heads, addressing these challenges is a strategic necessity. Every HR decision, from hiring to payroll to employee retention, has a direct impact on financial performance, compliance health, and long-term business continuity.
CFOs need predictable payroll outcomes, workforce cost optimisation, and risk-free compliance with tax and labour laws. Tackling gaps in workforce planning and regulatory readiness helps safeguard margins and avoid penalties.
CHROs and HR Heads are accountable for culture, engagement, and retention in an era where employee expectations are shifting fast. Proactively solving for well-being, DEI, and tech adoption directly influences retention, reputation, and productivity.
People Operations Leaders need unified, agile systems to manage remote teams, run accurate payroll, and close skill gaps at scale. Delayed decisions or disconnected tools can slow growth or push talent to competitors.
In short, these challenges are boardroom-level issues and not just HR’s to solve, but shared across finance, leadership, and operations. Let’s take a look at each of them now.
Human Resource Management goes far beyond recruitment and payroll. It is about building a productive, engaged, and future-ready workforce. Yet, HR professionals face several challenges that can directly impact business growth and employee satisfaction.
Talent Acquisition & Retention in a Tight Labour Market
Attracting and retaining the right talent is now one of the toughest challenges facing Indian businesses. Skill shortages across critical sectors, rising employee expectations and rise of AI-driven hiring tools mean leaders must think beyond pay packages and build strategies that align with long-term growth and employee purpose.
The ongoing war for talent and how India’s skill shortages are intensifying it
Hiring top talent is getting harder- not just because of demand, but because of skill mismatches across sectors. According to NASSCOM, industries like BFSI, manufacturing, and SaaS are reporting up to 30-40% shortages in digital and leadership-ready talent.
Add to that rising expectations around compensation, flexibility, and career growth, and it’s no surprise that attrition rates are touching 18-23% in many growth-stage companies. For founders and HR heads, retention is no longer just about CTC, it’s about strategic alignment and meaningful work from Day 1.
Role of AI-driven hiring tools and internal mobility in reducing attrition
To tackle this crunch, many Indian firms are turning to AI-powered recruitment platforms that go beyond CV-matching to assess behavioural fit, future potential, and role readiness. Internal mobility is also gaining ground as a retention lever. Instead of defaulting to external hiring, companies are identifying high-potential employees early and investing in cross-functional reskilling.
A NASSCOM survey found that 65% of organisations rely on gig workers or internal talent pools to meet project needs- a clear indicator of unmet demand for digital-ready professionals. AI tools and structured talent audits can make this repeatable, giving CHROs a defensible strategy to reduce early attrition and improve engagement.
Also Read: Tips to Reduce Employee Absenteeism and Enhance Retention
Navigating Complex Regulatory & Compliance Landscape
For Indian businesses, especially startups and SMEs, keeping up with compliance isn’t only about filing PF and TDS on time anymore. It’s about adapting to a maze of evolving labour codes, local laws, and emerging workforce norms.
Frequent updates to the Indian labour codes
India’s four new labour codes are reshaping wages, working hours, benefits, and contract terms. While implementation timelines vary by state, companies must stay prepared with systems that can adapt quickly, especially when it comes to payroll structuring and leave policies.
Complexities for SMEs
Unlike large enterprises with legal teams, smaller businesses struggle with interpreting compliance rules. From calculating overtime to issuing Form 16 s correctly, the lack of automation often leads to unintentional breaches and penalties.
Ensuring health, safety, and worker protections
Workplace safety now goes beyond factory floors. Post-pandemic norms include ergonomic setups for remote workers, access to health insurance, and digital well-being checks. HR teams are expected to create policies that reflect both legal obligations and evolving employee expectations.
Including recent moves to regulate white-collar overwork
States like Karnataka and Kerala are exploring rules to cap excessive work hours for white-collar roles. This signals a shift in compliance from physical safety to mental well-being, calling for HR policies that balance performance with rest, especially in tech and startup environments.
Managing Remote, Hybrid & Gig Workforces
Managing remote, hybrid, and gig teams is about structure, compliance, and fair access to systems and support. As work models evolve, HR must adapt faster.
Aligning policies and performance frameworks for hybrid and gig workforce models
India’s workforce mix is shifting fast. Startups and mid-sized firms are increasingly engaging remote workers, freelancers, and gig staff alongside full-time employees. But with this flexibility comes the need for consistency in policy and performance management.
Without clear expectations, gig contributors often feel out of sync with company priorities. Employers now need a single system that works for every role, whether you’re setting KPIs for a gig worker in the field or tracking OKRs for a remote developer. For HR teams, that means rethinking appraisal cycles, goal visibility, and communication cadences to ensure fairness across formats.
Payroll complexity, benefits structuring, and compliance for non-traditional employment
Gig and hybrid teams add layers to payroll processing. Variable hours, milestone-based payouts, and irregular work patterns mean static payroll tools can no longer do the job. Companies must also track eligibility for benefits like health insurance or reimbursements, which may vary by employment type and state.
For example, compliance with laws like the Code on Social Security 2020 becomes tricky when engaging contract workers or managing flexible hours. Missed deductions or incorrect filings could attract penalties. With hybrid models becoming the norm, automation in payroll, tax deductions, and benefits administration is no longer optional, it’s essential.
Useful Read: Fast Payroll Implementation: From Start to Launch
Upskilling & Leadership Development Amid Rapid Change
Rapid tech shifts and evolving market demands are rewriting the skills playbook. HR leaders must now balance future-focused upskilling with agile leadership development.
Bridging skill gaps in AI-era roles and evolving leadership readiness
The rise of AI, automation, and data-driven decision-making is shifting the skill requirements across nearly every function. But most Indian businesses still lack structured learning programs to prepare their workforce for these shifts. Roles in data science, digital HR, and even frontline operations now demand analytical thinking and tool proficiency.
HR leaders are being pushed to identify these gaps early and design future-focused development plans. Simultaneously, leadership expectations have evolved. Leaders today need to be not just strategic, but agile, tech-aware, and emotionally intelligent.
Building sustainable internal leadership pipelines and learning cultures
Hiring leadership externally is expensive and often misaligned. Companies are now investing in growing talent from within by building learning-first cultures. This means democratising access to learning, pairing emerging leaders with mentors, and embedding leadership readiness into performance reviews.
For instance, many startups now run quarterly "growth sprints" where cross-functional teams work on real business problems, creating both learning and visibility for rising talent. This approach builds long-term leadership resilience without inflating payroll.
Ensuring Workforce Inclusivity & DEI Goals
DEI in India is shifting beyond gender to include caste, region, and socioeconomic background. The focus now is on fair hiring and equitable pay across diverse groups.
Expanding DEI beyond gender to include caste, location, and socioeconomic diversity
While gender inclusion has gained ground, leading companies are now extending their focus to caste, regional, and economic diversity. There’s growing awareness around ensuring equal opportunities for candidates from Tier-2/3 towns, first-gen graduates, and marginalised communities. To be truly inclusive, hiring practices must account for structural inequalities- not just headcounts.
Building equitable hiring and pay structures across India’s urban-rural divide
Remote hiring has opened up access to rural and semi-urban talent, but wage parity remains a concern. HR teams must reassess compensation norms to reflect skill parity rather than location bias. With tools like anonymised candidate evaluation and pay band audits, companies can proactively address hidden inequities and build trust among distributed teams.
Employee Well-being & Burnout Prevention
With rising stress levels and blurred work-life boundaries, employee well-being is no longer optional. It’s becoming a core pillar of sustainable HR strategy.
Surge in exhaustion, stress, and toxic workplace behaviour post-pandemic
The pandemic reshaped work-life boundaries, and not always for the better. Indian employees are reporting higher rates of burnout, disengagement, and mental fatigue, especially in high-pressure roles like customer support, tech, and finance. Toxic work dynamics, unrealistic deadlines, and poor communication have only added fuel to the fire.
Integrating wellness, mental health support, and balanced workloads as core HR priorities
Forward-looking organisations are rethinking HR policies to treat well-being as a business-critical metric, not a checkbox. From subsidised therapy to designated recharge hours, leaders are embedding wellness into workflows. Paired with realistic goal-setting and leave policies, this shift is helping teams stay resilient, motivated, and healthier in the long run.
Technology Adoption & HR Analytics Challenges
As HR leaders shift from instinct-led to insight-driven decision-making, the growing tech stack demands new skills, mindsets, and trust frameworks.
Need for upskilling in AI to improve human-AI collaboration
AI is reshaping core HR tasks like resume screening, attrition forecasting, and workforce planning. Without upskilling, HR teams may either misuse these tools or mistrust the outcomes.
For Example, teams using resume AI need to interpret confidence scores and validate results, not follow outputs blindly.
Training helps spot algorithmic bias, ask better questions, and balance AI-driven insights with human judgment.
Integrating AI tools, automation, and analytics into HRM workflows
Simply purchasing AI tools isn't enough; they must integrate smoothly with daily HR processes. Startups are adopting AI-based attendance systems that flag anomalies and link directly to payroll. Predictive tools for attrition can add value only when supported by clean, real-time data like engagement scores and 360° reviews. The real ROI comes when automation and analytics are embedded in end-to-end workflows.
To dive deeper into this topic, read this article on Exploring How Automation and AI are Transforming HR Practices
Balancing new tech with human-centred decision-making to build trust
True technology adoption shines when paired with a human touch. For instance, Bubble Network, an early-stage startup, automated its payroll, leave, and attendance workflows using Craze.
What stood out wasn’t just automation, it was the responsive human support from their team: “Any issue was addressed quickly with great customer service,” the founder noted.
It shows how automation shouldn’t replace human connection, but strengthen it.
Sustaining Culture & Engagement During Disruption
Disruption, whether from hybrid work, layoffs, or growth spurts can quietly chip away at team culture. Sustaining engagement means being intentional about how people connect, communicate, and feel seen, no matter where they work.
Maintaining employee experience with remote, hybrid and geographically dispersed teams
When teams operate across cities or even continents, the sense of belonging often takes a hit. Companies are responding by adopting consistent digital rituals like weekly check-ins, async celebrations, and cross-functional virtual stand-ups.
For instance, a mid-size SaaS firm running remote-first adopted “virtual onboarding buddies” and informal video coffees to maintain human connection from day one.
Conflict resolution and inclusive communication across formats
Miscommunication is more likely when messages come through mixed channels- email, chat, and video. Organisations are training managers to handle feedback differently across formats and are building structured ways for employees to flag issues.
For example, a company introduced a shared “feedback journal” where concerns are logged and reviewed weekly, preventing misunderstandings from escalating and encouraging open communication.
To better understand the Factors Influencing Employee Engagement in the Workplace, read our article on the same.
Staying Transparent in Communications
Transparent communication builds trust, reduces uncertainty, and keeps teams aligned, especially during change. But many organisations still treat it as optional, not essential.
Why transparency is still rare (and costly)
In many Indian organisations, critical updates, like company direction, team restructures, or policy changes, are shared on a need-to-know basis, if at all. This silence breeds disengagement. When employees feel left out of decisions that affect them, trust drops, and so does productivity.
Transparency isn’t just ethical, it’s practical. It helps retain talent, align teams, and reduce confusion during times of change.
Why this will get harder, not easier
HR teams will be tasked with balancing confidentiality, legal obligations, and strategic timing, especially during layoffs, pivots, or acquisitions.
The future of transparency lies in structured communication rhythms: regular all-hands, consistent updates, and anonymous feedback loops. Without these, companies risk widening the gap between leadership and frontline employees.
. Addressing Skills Gaps in the Workforce
In a workforce shaped by constant digital change, identifying and bridging skills gaps is a strategic necessity that directly impacts business agility, retention, and growth.
Why is upskilling and reskilling employees for digital transformation important?
Digital skills gaps are slowing down automation and AI adoption across sectors. Upskilling helps retain high-potential employees who may otherwise feel stagnant or underutilised.
Reskilling non-technical roles into tech-adjacent functions (e.g., data-literate HR or finance teams) reduces hiring dependency. Regular capability mapping helps align employee development with business strategy. Continuous learning builds resilience against sudden disruptions in market or tech expectations.
Using AI-powered tools to identify and close skill gaps
AI-driven talent intelligence platforms can scan job roles, past performance, and engagement data to flag emerging skill gaps. For instance:
Learning platforms use AI to personalise upskilling paths, nudging employees toward in-demand skills.
Internal mobility engines suggest role switches based on skill adjacency, helping redeploy underutilised talent.
Skill benchmarking tools compare current competencies with market trends, aiding L&D teams in setting priorities.
From managing compliance headaches to engaging a hybrid workforce, the challenges HR teams face today are both operational and strategic. Craze’s all-in-one platform is built to meet these evolving demands head-on without layering on more complexity.
Here’s how Craze helps:
Compliance Built-In: Stay current with evolving Indian labour laws, PF/ESIC/Gratuity rules, and state-specific variations with automated filings and real-time updates.
Unified Workflows: Craze connects core HR, payroll, reimbursements, attendance, and IT provisioning in one suite, no more juggling between disconnected tools.
Support for Hybrid & Gig Models: With GPS-enabled attendance, custom pay cycles, and contractor payments, you can manage diverse workforces with ease.
Data-Driven Decisions: Use built-in analytics to spot attrition trends, track DEI metrics, and plan talent development based on real-time insights.
Employee Experience at Scale: Smart self-service, automated onboarding, and custom workflows help create a smooth and consistent experience for every team member, regardless of location.
Flexible, Transparent Pricing: No setup fees, minimums, or support charges. You only pay for what you use.
With Craze, startups and growth-stage companies get enterprise-grade HR tech, without the bloat or barriers. If you’re tackling these HR priorities, Craze gives you the speed, visibility, and control to move forward with confidence
From managing a dispersed workforce to ensuring regulatory compliance and closing skill gaps, HR leaders need to think proactively to address their workspace challenges. The difference-maker lies in how fast and effectively your organisation adapts. Automation, data-backed decisions, and AI-driven insights are redefining how companies engage, retain, and support their people especially in dynamic startup and growth environments.
How do technology platforms help reduce the challenges of HRM?
They automate payroll, compliance, and HR workflows, cutting errors and saving time for strategic work.
Why is compliance becoming more difficult for Indian SMEs?
Frequent labour law updates, state-specific rules, and lack of automation make compliance harder for smaller teams.
How does AI impact future HR practices?
AI helps automate hiring, performance tracking, and attrition prediction, but HR teams need upskilling to use it effectively.
How can businesses address DEI in Indian contexts?
By expanding focus beyond gender to caste, region, and socioeconomic background, and by ensuring pay equity across geographies.
Can outsourcing help manage the challenges of HRM?
Yes. Outsourcing payroll, compliance, and HR tasks saves time and reduces errors. With Craze, you get the same benefits through automation—fast, accurate, and fully compliant, without depending on external vendors.
