15 HR challenges in 2026 and how to solve them

HR challenges are the problems that make it hard for an organization to hire, keep, develop and pay people well while staying compliant. In 2026 the biggest ones are talent shortages and skills gaps, low engagement, retaining top performers, changing labor and pay laws, and putting AI to work in HR without losing trust.

TL;DR:

• The top HR challenges in 2026 are skills gaps and hard-to-fill roles, low engagement, keeping top performers, new labor and pay laws, and adopting AI safely.
• SHRM found 69% of organizations still struggle to fill full-time roles, and 28% now need new skills for those roles.
• Gallup puts global employee engagement at 20%, its lowest level since 2020, and manager engagement fell 9 points since 2022.
• AI use in HR tasks rose from 26% to 43% in one year, so governance (bias audits, candidate notice, human review) is now an HR job.
• EU member states had to bring in the Pay Transparency Directive by 7 June 2026: pay ranges for applicants and no pay-history questions.
• Fix one challenge at a time: pick the one hurting the business most, assign an owner and track one metric for 90 days.
• Skills-based hiring helps with several challenges at once: faster shortlists, fairer decisions and better data on quality of hire.

What are HR challenges?

HR challenges, also called HR issues, are the recurring problems HR teams face in managing a workforce: finding and keeping talent, building skills, keeping people engaged and healthy, paying fairly, staying compliant and running HR systems that work. They come from both inside the business (growth, restructuring, new tools) and outside it (labor markets, laws, technology and the economy).

Most of these problems are not new. What changes each year is the pressure behind them. In 2020, HR teams had to design remote work almost overnight. In 2026 the pressure comes from AI, skills shortages, tighter budgets and a wave of new rules. SHRM's 2026 top five workplace issues name AI regulation, rising benefits costs, workforce shortages, compliance in a changing legal environment and caregiving as the issues employers face most.

Solving HR challenges well takes a plan rather than a reaction: clear priorities, an owner for each problem, and data to show whether the fix works. Teams that do this attract, develop and keep the people the business needs. For the wider picture of how HR shapes company culture and success, see the Testlify HR guide.

What does the HR function cover?

The HR function covers every stage of the employee lifecycle, from hiring to exit, plus the policies, pay and data that hold it together. Each area below is where one or more HR challenges usually show up.

• Recruitment and hiring: sourcing, screening, interviewing and onboarding new people, often led by HR managers and TA teams.
• Employee relations: handling conflicts, complaints and sensitive cases fairly.
• Performance management: goals, feedback and reviews.
• Training and development: skills, leadership and career growth.
• Compensation and benefits: pay structures, benefits design and pay equity.
• Compliance: labor law, data privacy and workplace safety.
• Diversity, equity and inclusion (DEI): fair processes and an inclusive culture.
• Engagement and retention: keeping people motivated and staying.
• HR data and analytics: measuring what works and reporting to leadership.

What are the biggest HR challenges in 2026?

The biggest HR challenges in 2026 fall into five groups: talent and hiring, engagement and culture, skills and growth, compliance and pay, and technology and AI. The table lists all 15 with why each is harder now, the first fix to try and the metric that shows progress.

Key takeaway: Most HR teams cannot fix all 15 at once. Start with the group that hurts the business most, which for most growing companies is talent and hiring.

How do HR teams solve talent and hiring challenges?

HR teams solve talent and hiring challenges by hiring on proven skills, speeding up early screening and giving top performers reasons to stay. SHRM's 2025 Talent Trends survey of 2,040 HR professionals found 69% of organizations still struggle to fill full-time roles, the same level as 2016.

1. Talent shortages and skills gaps

Talent shortages hit hardest in roles where the required skills keep changing. SHRM found that 28% of organizations now require new skills for full-time roles and 47% have updated existing roles to include them. Waiting for the perfect resume leaves roles open for months.

How to solve it: Write job requirements as skills, not years or degrees. Widen the pool to career changers, internal candidates and people without degrees, then test for the skills that matter. Build talent pipelines through internships, referrals and strategies to attract top talent such as a clear employer brand. SHRM also found organizations offering flexible work report less recruiting difficulty (22% versus 29%).

2. Hiring quality at speed

Hiring teams are asked to fill roles faster without lowering the bar. High application volumes and AI-written resumes make screening by resume less reliable, and slow processes lose the best candidates to faster employers.

How to solve it: Put a short, role-specific skills test or structured interview at the start of the funnel, so every candidate is judged on the same evidence. Agree on scoring criteria before interviews begin, keep the candidate experience simple and mobile-friendly, and track quality of hire, not only time to hire. The guide to common recruiting challenges covers each funnel stage in more depth.

3. Keeping top performers

Employee retention remains one of the most expensive HR challenges. Overall quits are low: the US Bureau of Labor Statistics reported a quits rate of 1.9% in August 2026. The risk sits with the best people. Workday's Global Workforce Report found voluntary turnover among top performers rising year over year in 75% of industries.

How to solve it: Hold stay interviews with high performers before they start looking. Show clear career paths and internal moves, review pay against the market every year, and recognize good work often. Make managers accountable for regretted attrition on their teams. More ideas are in the guide to effective employee retention programs.

How do HR teams solve engagement, well-being and culture challenges?

HR teams solve engagement, well-being and culture challenges by supporting managers first, offering flexibility with clear rules, and building fair processes everyone can trust. Gallup's State of the Global Workplace puts global engagement at 20% in 2025, the lowest since 2020, and estimates low engagement costs about $10 trillion, roughly 9% of global GDP.

4. Low engagement and manager strain

Engagement drives productivity, retention and customer results, and managers drive engagement. Gallup found manager engagement fell to 22%, down 9 points since 2022. Disengaged managers lead disengaged teams.

How to solve it: Give managers smaller teams where possible, training in coaching and feedback, and time to manage. Run short pulse surveys, act on one or two themes each quarter, and tell people what changed. Build recognition into everyday work, and use an employee engagement strategy that ties engagement to clear goals.

5. Employee well-being and mental health

Well-being now covers mental health, financial stress and caregiving, not only physical health. SHRM research found working caregivers report strain on their finances (53%), physical health (49%), mental health (48%) and careers (38%).

How to solve it: Offer an employee assistance program (EAP), flexible schedules and caregiver leave, and make sure people know how to use them. Train managers to spot burnout and distress and to start supportive conversations. Protect work-life balance with reasonable workloads and meeting-free time.

6. Hybrid and flexible work

Remote and hybrid work became normal after the pandemic, and many employees now see flexibility as part of the job. Return-to-office mandates create tension and can push good people out.

How to solve it: Decide work models by role and team, not by blanket rule. Write team agreements on core hours, in-office days and response times. Give remote staff the same access to tools, information and promotion as office staff, and keep the community alive with regular check-ins and in-person meetups.

7. Inclusion under legal change

Diversity, equity and inclusion is under more scrutiny in 2026. SHRM notes that executive orders, court rulings, shifting EEOC priorities and state laws are creating uncertainty around inclusion programs. The goal of fair treatment for every worker has not changed.

How to solve it: Focus on fair, documented processes that apply to everyone: structured interviews, consistent scoring, transparent promotion criteria and equal access to development. Use mentoring and bias training, measure pass-through rates at each hiring stage, and review programs with legal counsel. The guide to common types of hiring bias shows where bias enters hiring.

8. Multigenerational and global teams

Many workforces now span five generations, from baby boomers to Gen Z, and often several countries. Each group has different expectations about communication, flexibility and careers, and every country has its own laws and time zones.

How to solve it: Set shared values and a few global standards, then let local teams adapt policies to local law and culture. Run cross-generational mentoring in both directions, so younger staff share digital skills and older staff share experience. Build cross-cultural collaboration with clear, consistent communication across time zones.

How do HR teams solve skills and development challenges?

HR teams solve skills and development challenges by mapping the skills they have against the skills they need, then closing the gap with training, internal moves and succession plans. Development is also a retention tool: people stay where they can grow.

9. Upskilling and reskilling

Roles change faster than training programs. AI is reshaping tasks in most functions, and one-off courses do not keep up.

How to solve it: Build a skills inventory for critical roles, using skills assessments to find real gaps rather than self-ratings. Offer short, role-specific learning (microlearning, corporate learning platforms, on-the-job projects) tied to career paths. Encourage self-directed learning and reward people who apply new skills.

10. Succession planning and leadership

Succession planning is often left until a key leader resigns. Without a plan, critical roles sit empty and knowledge walks out the door.

How to solve it: List the roles the business cannot afford to leave empty and name at least one possible successor for each. Identify high-potential employees with clear criteria, give them stretch projects and leadership training, and review the plan in regular talent reviews. Promote from within when a ready candidate exists.

11. Performance management and feedback

Annual reviews often come too late to change anything and can feel unfair. Employees want regular, specific feedback and clear goals.

How to solve it: Move to frequent check-ins on a small number of clear goals. Train managers to give specific, evidence-based feedback, calibrate ratings across teams to reduce bias, and separate development talks from pay decisions where possible. Track goal completion and how fair employees find the process.

Pro tip: Use the same skills you hire for as the skills you review and develop. One shared skills language across hiring, reviews and learning makes every HR decision easier to compare and explain.

How do HR teams solve compliance and pay challenges?

HR teams solve compliance and pay challenges by tracking new rules early, auditing current practice and fixing pay structures before regulators or candidates ask. In the EU, the European Commission's equal pay rules required member states to bring in the Pay Transparency Directive by 7 June 2026.

12. Changing labor laws

Labor laws change at local, state, federal and international level, and mistakes lead to fines, lawsuits and damage to the employer brand. SHRM lists forthcoming federal rules on overtime thresholds and worker classification among the issues HR leaders need to plan for.

How to solve it: Keep a compliance calendar for every location where you employ people. Audit hiring, pay, leave and record-keeping practices at least once a year, train managers on the rules that affect them, and use tools that log decisions. A legal compliance checklist for hiring is a good starting point.

13. Pay transparency and benefits costs

Pay is under pressure from two sides. Living costs and health care inflation push benefits costs up, while pay transparency laws make pay structures visible. Under the EU directive, applicants get a right to pay information before they take up a job, employers may not ask about pay history, and employers with 100 or more employees report gender pay gaps.

How to solve it: Build pay bands for every role and publish ranges where the law requires it. Run a pay equity review and fix unexplained gaps before reporting starts. Benchmark pay and benefits against the market each year, and design benefits people value, such as health cover, retirement plans, well-being support and flexible work.

How do HR teams solve technology and AI challenges?

HR teams solve technology and AI challenges by adopting tools one use case at a time, connecting them to a single source of employee data, and putting clear rules around AI. SHRM found AI use in HR tasks climbed to 43% in 2025, up from 26% in 2024.

14. AI adoption and governance

AI now screens resumes, runs interviews, drafts job descriptions and answers employee questions. Adoption brings speed but also risk: biased models, poor candidate notice and decisions no one can explain. Rules are growing. New York City's Local Law 144 requires a bias audit and candidate notice before employers use automated employment decision tools.

How to solve it: Write an AI policy that lists approved tools, what they may decide and where a person must review. Ask vendors for bias audits, data security certifications and explainable scores. Tell candidates and employees when AI is used, train HR staff to use the tools well, and start with one use case with a clear metric. Change also needs care: explain why the tools are coming, involve the people who use them, and avoid launching too many changes at once.

15. Disconnected HR systems and admin load

Many HR teams run separate tools for recruiting, payroll, benefits, performance and learning that do not share data. Teams retype information, reports conflict and HR spends time on admin instead of people. Smaller companies without a dedicated HR team feel this most.

How to solve it: Choose a core HR system as the single source of truth and connect other tools to it through integrations. Automate routine tasks such as offer letters, reminders and record updates. Track the key HR metrics leadership cares about, so data informs decisions instead of only filling reports.

How should HR leaders prioritize HR challenges?

HR leaders should prioritize HR challenges by business impact: start with the problem that costs the business most right now, assign one owner, pick one metric and review it after 90 days. Trying to fix every challenge at once spreads budget and attention too thin.

1. List the signals: Open roles, early attrition, engagement scores, audit dates and skills gaps from the last two quarters.
2. Score each challenge: Rate impact on revenue or risk and how hard it is to fix. Start where impact is high and effort is moderate.
3. Assign an owner: Each challenge gets one accountable person, not a committee.
4. Pick one metric: Use the metric in the table above, with a baseline and a 90-day target.
5. Review and move on: After 90 days, keep what worked, drop what did not and take on the next challenge.

Across the teams we work with, hiring is usually the first lever, because it is easy to measure and every other challenge depends on having the right people.

How can skills assessments help with HR challenges?

Skills assessments help with several HR challenges at once: they widen talent pools, speed up screening, reduce bias and give data on quality of hire. LinkedIn's Future of Recruiting 2025 found 93% of TA professionals say accurately assessing skills is crucial to improving quality of hire, yet only 25% feel highly confident they can measure quality of hire.

Testlify is an AI-native skills assessment and interviewing platform built for this. Hiring teams can pick from 3,500+ tests across tech and non-tech roles, or turn a job description into a role-specific assessment, then add AI interviews by video, voice or chat. Every candidate gets the same questions and scoring, and results come with an explainable breakdown per skill.

• For talent shortages: Test skills directly, so career changers and candidates without degrees can prove they can do the job. Read why skills-based hiring is changing talent acquisition.
• For hiring speed: Automated scoring ranks candidates into a shortlist, and Testlify reports 55% faster time to hire for its customers.
• For fairness and compliance: Structured scoring, 20+ proctoring checks and a third-party NYC Local Law 144 bias audit support defensible decisions.
• For disconnected systems: Testlify connects with 100+ ATS and HRIS platforms, so scores flow back to the tools your team already uses.

Ready to tackle your hiring challenges?

Hiring is the HR challenge that touches every other one. Browse the Testlify test library to find tests for your open roles, or start a 7-day free trial, no credit card needed, and see how skills-based screening shortens your next shortlist.

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