Highly responsive and business-aligned HR functions are noted for their understanding of the business and its operational requirements, both existing and anticipated. It is the latter point that often separates great HR planning from modest-to-solid goal setting. Looking ahead into the new year, with challenges facing both business and HR leaders and their teams appearing substantial, anticipation looms as more critical than ever. As a result, reviewing and considering the potential impact of 2026 HR trends is essential for CHROs, CPOs, HRBPs, and talent leaders in companies of all sizes and scales across industries. 

Key trends affecting the outlook for this new year indicate potentially significant challenges for many organizations, their leaders, and their employees. Consider the primary concerns that many U.S. and global market analysts are promoting as critical issues that business and HR leaders need to be prepared to deal with:

Increasing market volatilities 

Geo-economic polarization and disrupted trade arrangements are driving increased multi-jurisdictional complexities that companies need to navigate. Financial markets are signaling weaknesses in key indicators related to asset valuations, foreign exchange rates, corporate borrowing levels, and an overreliance on narrow investment bases. Individual nations and states are creating laws and regulations that companies operating within their jurisdictions must comply with, making multi-jurisdictional planning, execution, and compliance a challenge.

Technology advances and projections are creating uncertainties in operations and labor

The explosive growth, excitement, attention, and institutional investments in artificial intelligence, machine learning, and robotics are bringing anxiety to leaders and workers alike about the nature of operations and work in the near future. Commitments to leveraging these technologies to beat the competition, achieve exponential productivity gains, and reduce the impact of shrinking labor markets are stoking concerns about how work will be conducted and the requirements to optimize the workforce around those.

Losses in institutional trust

Difficulties can be expected due to a significant loss of trust in government, corporate, and social leaders and institutions. These are driven by a combination of misinformation, socio-political polarization, degradation of traditionally independent sources of “truth, breakdowns in social institutions (religious, community, social), and expanding financial inequalities. Layoffs in the U.S. are further eroding trust in the most visible and leading organizations. Employee trust in their leaders is estimated at only 48%.

Labor market constrictions 

The issues of constricted labor markets in many parts of the world, with significant shortages in critical professions and career fields, continue unabated. Skills shortages are plaguing companies that need workers skilled in advanced manufacturing, AI and related technologies, medical care delivery and distribution, retail, and education. Immigration restrictions are poised to limit the availability of international workers and graduate students who have powered much of the U.S. employment growth in the previous 5+ years.

A closer look at 2026 trends that are expected to impact HR plans

As market and technology uncertainties dominate the press and airwaves, there are related and subordinate factors that are critical 2026 HR trends and require the attention of CHROs and CPOs. As organizations shed workers in the name of reducing labor costs, improving productivity through workflow and responsibility redesigns, and driving the adoption of advanced technologies, the pressure to ensure these decisions deliver creates unique challenges for HR.

Weak job markets are expected to continue

The World Economic Forum (WEF) reports a level of caution, with 32% of HR leaders expecting labor markets to continue to weaken and 42% projecting no change. There are several areas for concern, with segments of employers retreating from hiring for various reasons.

First, large employers are laying off workers at the highest level since the pandemic, aiming to generate more sustainable returns by reducing headcount. Of equal concern is The Washington Post's reporting that small companies (500 or fewer employees), which employ more than 40% of all U.S. workers, have largely stopped hiring to shield themselves from anticipated financial difficulties in the coming year.

A reluctance to hire for entry-level jobs is evident, even among graduates from previously high-demand professions such as engineering, software, accounting, and finance. This appears to be due to increased automation and AI use in these fields, and sadly, is impacting younger workers (aged 22-25) in AI-exposed fields, who saw their employment opportunities decline by 6%, at the same time as their more experienced peers’ employment grew 6-9% in the same fields.

Where job growth is occurring represents an interesting, but mixed bag of roles. WEF predicts that 170 million new jobs will be created in the next 10 years, led by: 

• Agricultural workers
• Vehicle drivers
• Software and applications developers
• Building trades
• Retail workers
• Nursing and personal care aides
• Teachers
  
  

Labor market shortages and challenges

As birth rates continue to drop, the demographic realities of workforce availability remain unavoidable. Global fertility rates are at record lows, while the WEF reports that 39% of skills will become obsolete and require updating (“upskilling”) or replacement (“reskilling”), exacerbating workforce shortages due to outdated or incorrect skill mixes.

Regrettable turnover continues to plague employers (though weak job markets mean more people are staying in their jobs primarily for economic reasons), and it is among the most concerning 2026 HR trends. Some industries are feeling the pain significantly more than others, as Workday reports that high-performer turnover rates are increasing year over year. For example, retailers are experiencing 64% higher turnover among their top contributors, while they are leaving healthcare at a 28% higher rate and professional services at a 14% higher rate.

Artificial Intelligence (AI) is expanding, but slowly for most organizations

One of the most influential 2026 HR trends is the rapid movement towards the adoption of AI technologies. 93% of IT leaders say they plan to implement AI agents before the end of 2026, citing a pressing need to mature from Generative AI to Agentic AI. The reason? While GenAI has shown early adoption value for generating insights and creating content, the productivity gains are reported as negligible. In fact, McKinsey reports that among European firms exploring gen AI, only 19% of core HR processes were improved. On the other hand, Agentic AI holds the promise of automating self-driving workflows, thereby increasing productivity by performing analyses, making decisions, and completing tasks. 

That said, adoption rates are constrained by a set of realities that, to date, have hampered efforts to generate sufficient returns on investments. For example, widely reported issues with the reliability and trustworthiness of outputs, with many agents producing error-prone, fabricated (”hallucinate”) information, and suffering from poor memory of previous prompts and responses. In fact, Gartner projects that over 40% of agentic AI projects will be canceled by the end of 2027, “due to escalating costs, unclear business value, or inadequate risk controls.” 

Another issue is that AI Agent technologies are not yet able to autonomously expand their applications beyond a very specific task. Current agents are limited to narrowly defined use cases that involve repetitive activities whose outputs fall within well-established limits, are low-risk, and whose potential errors are easily spotted. Further insights come from studies by Scale AI and the Center for AI Safety, which found that when programmed to perform a variety of work tasks, AI systems from multiple vendors performed poorly, successfully completing no more than 2.5% of the tasks tested. 

That said, the 2026 HR trends include HR technology providers adding substantial AI capabilities and use cases. For example, Oracle reports that it has 24 AI Agents built into its latest release(s) of its Fusion HCM HRIS platforms. And Workday reports that business leaders say they are currently using AI to write job descriptions, screen resumes, schedule interviews, assess candidate skills, onboard new hires, prevent identity fraud, and check references and backgrounds.

A focus on employee skills is evolving into a talent requirement

As AI applications, tools, and infrastructure continue to evolve and expand into operational workflows, the basic nature of many jobs is undergoing significant change. Tasks that were once completed by employees are now outsourced to systems or are at risk of being handled by automated solutions in the short term. As a result, one of the key 2026 HR trends is the focus on how some skills are becoming more or less valued or obsolete, requiring organizations to assess all job tasks and associated skills and redefine those needed for each role.

Skills-based HR is much talked about, but, as i4CP reports, only 12% of large organizations have current, ongoing efforts in skills-based practices, and another 44% have only started planning or piloting theirs.

However, the value of such an approach is substantial, as it holds the promise of providing decision support and guidance on hiring criteria, learning and development needs and pathways, talent deployment and redeployment, and gaps that hinder business growth and operational achievements. 

At the same time, caution is required, as using skills as the basis for such decisions and guidance has its downsides. For example, the guidance can suffer because the skills information, by itself, fails to provide context for how they are applied to specific roles and job tasks. For example, “interpersonal skills” is too generic, as its application varies depending on how employees use it to handle customer complaints, deliver employee feedback, manage conflict, or build constructive peer relationships in a competitive culture and work environment.

In addition, assessing and validating skills is complex. Consider that skills assessment includes four (4) levels for consideration: 1) understanding if an individual possesses the skill, 2) their level of proficiency, 3) how frequently it is exercised, and 4) how effectively they are used to achieve win-win outcomes that sustain and expand relationships. Part of this requires an appreciation that skills are gained and exercised, and they often fall into the trap of underuse and degradation as attention to them fades under the guidance of new management, work demands, and circumstances, new team sub-culture, or culture drift.

Leadership and management workloads and capabilities are suffering

As drivers of strategic direction, culture, engagement, leaders, and middle managers are crucial, yet they are struggling with the demands of their roles. The situation does not seem to be improving, with the turbulence in economic, commercial, and labor markets and the pressure to adopt AI raising their anxieties and work demands. DDI reports that frontline leaders are three times (3X) more likely to be concerned about AI’s impact than their senior leadership counterparts, primarily due to uncertainty about what to prioritize and how to lead through its adoption and implementation. In addition, Emtrain's workplace culture research found that leaders fell short in their responsibilities to manage team conflict and to understand how their position influences the team environments they oversee.

Well-being increasingly comes front and center

A number of factors have made employee wellness and well-being a larger, more prominent concern requiring a response, making it one of the most critical 2026 HR trends. The WEF's recent global study cited, for example, major concerns about rising mental health issues and growing value polarization within workplaces. Political polarization has crept into organizational work lives, with reports of eroded psychological safety, reduced collaboration, and an unwillingness to engage with colleagues who harbor different social or political viewpoints.

At the same time, burnout rates among workers and managers alike are escalating and are increasingly prevalent among Gen Z and Gen Alpha workers. For example, McKinsey found that employees in Europe miss 37 working days per year (15% of total scheduled days), due to physical and mental health issues, commuting challenges, or a lack of childcare or elderly care.

Outdated HR operating models and work designs are becoming an issue

The substantial increase in pressures on their leaders and teams represents one of the major, if hidden, 2026 HR trends that need to be addressed. The speed and volatility of external and internal forces are driving the need for greater agility and resourcefulness in how HR teams deliver value and business support. They call for HR to redefine its purpose by adopting a new operating model that reframes the mission from “managing human resources” to ensuring the organization is perpetually ready for future challenges and opportunities. This requires a formal reexamination or reassessment of where HR adds business value, and how it can better deliver that in support of business, financial, and operational outcomes.

Priority HR enhancements needed now to meet future requirements

1. Plan and project better with more sophisticated workforce planning 

Building more comprehensive and accurate workforce modeling capabilities can be as simple as making workforce supply and demand analysis a core HR offering or introducing employee skills as an additional basis for analysis. But perhaps most concerning is McKinsey’s finding that only 12% of U.S. companies have workforce plans beyond a single year. The lack of a longer-term projection makes accurate talent planning for skills acquisition, development, outsourcing, or automation that is responsive to strategies and market realities difficult, if not impossible.

2. Prepare for and manage the adoption and growth of AI applications

As 82% of executives plan to adopt AI agents over the next 1-3 years, productivity gains from AI implementations are poised to increase substantially. The potential for massive changes in how and who perform the work of organizations is coming, and it requires HR to focus on this as one of the most significant 2026 HR trends. Planning to leverage strategic change management processes to prepare employees, understand the implications, and address workforce skill and size changes will be essential. 

HR leaders should prepare to map the expected impact of any business unit or functional AI adoption plans on their employees, jobs, tasks, and work processes.

Regardless of the current state of AI experimentation, piloting, adoption, and impact in the organization, getting it better prepared this year will drive successful implementations in the coming years. This means focusing on the business, as opposed to (while not ignoring) the needs of HR. Partner with line leaders, IT, and Legal to create a strategy, policies, and a governance structure over the use, testing, and implementation of AI and related technologies. Create structured AI literacy programming, including boot camps, training, practice and application labs, pilot testing, recognition and rewards, and communications platforms and programs for transparency and awareness.

3. Improve assessment and hire smarter

Responding to fewer job opportunities (to hire or replace workers), reduced employee bases (from layoffs), changing job requirements (due to technology adoption), and increased turnover among top performers and HiPos calls for more detailed and disciplined attention to hiring. This means that candidates (external, for transfer, or for promotion) should be subjected to more structured, accurate, and reliable assessments to reduce the risk of poor matches. 

For external hiring, consider that McKinsey reports an average acceptance rate of only 56% in the U.S. Matching candidates for technical and soft skills is only the beginning, as failure and new-hire turnover rates are often driven by other factors. Consider assessing them for cultural and team fit, proven capabilities and successes, comprehensive skills match for now and future relevance, and the likelihood of retention. At the same time, evaluate the candidate experience (CX) as a driver of improved quality-of-hire and offer-acceptance rates. 

Assess current employees for their potential, continuous learning, adaptability, and cross-functional skills overlap. Leverage skills-based assessments and development methodologies to identify strengths of matches. 

Given the company’s AI strategy, develop a formal, validated assessment of AI-relevant skills for use with external candidates and existing employees.

4. Focus harder on retaining top talent 

With fewer opportunities to hire, as the risk of losing top performers increases, and the productivity and collaboration value of tenured workers is more trusted, addressing the key 2026 HR trends demands a focus on employee retention. This means doubling down on employee listening strategies, beefing up employee experience (EX) efforts and outcomes, and segmenting and addressing the needs of top performers and high potentials (HiPos). 

Target managerial development as a top priority by focusing on de-bureaucratizing their tasks, upgrading their development, and reducing their performance goals and criteria to only the most impactful. Emphasize the need for them to provide (and receive) feedback, and reestablish the manager-employee connection to make the relationship more individually tailored, developmental, and trusting. Provide on-demand job aids to guide managers in providing feedback, holding constructive skill and career development discussions 

Evaluate employee mobility and advancement opportunities, processes, policies, and programs. Consider adopting skills-based career matrices, tailored development paths, and advanced LMS and talent marketplace platforms that enable intelligent self-service guidance for skill and career development. Create engaging learning via experiential methods, labs, projects, and short-term assignments. Consider mass development through multi-course “academies” to develop new skills relevant to current and future roles by function, BU, product or service, or job level. 

Finally, manage employee well-being proactively and comprehensively, going beyond the traditional EAP and health benefits by offering support for physical, psychological, and financial well-being. Fostering trust and psychological safety through training and monitoring, and implementing early-warning assessment methods.

5. Reconfigure the HR organization for agility and responsiveness

Responding to the full range of emergent and continuing challenges that make up the 2026 HR trends places tremendous pressure on the function to begin evolving how (and who or what) its services and support are designed and delivered. Start now by addressing key opportunities for automation and outsourcing, targeting administrative and compliance activities that hinder strategic consulting and dynamic responses to operational barriers to business success. Create experiments in cross-HR functional deployments to address critical issues or crises. Establish outcome-based HR planning, goals, and deployments to enhance business alignment and HR team focus.

Initiate targeted development of HR function expertise in organization design to prepare for the effects of AI adoption, HR consulting skills to best address external influences that are impeding organizational performance, and HR data literacy for improving decision support as advanced analytic platforms and AI-generated insights become more commonly available.

Relevant Practices & Tools

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