HR leaders will face a new series of challenges in 2026. In years past, many HR challenges were operational headaches, requiring time and effort but not a brand-new approach to strategy. This year, savvy HR leaders are stepping up as strategic partners and change managers. As a result, the landscape of HR challenges has fundamentally shifted.
The good news is companies that recognize and proactively address these new challenges will have a competitive advantage throughout the year. This article empowers leaders to understand the biggest challenges they’ll face in 2026 and offers practical strategies to resolve them.
Biggest Challenges in HR
Today’s top HR challenges operate at an unprecedented scale. Here’s what’s driving the most significant disruption across industries:
1. AI and Automation in HR
Artificial intelligence and HR automation aren’t just changing how work gets done—they’re reshaping entire job categories. HR professionals must strike a delicate balance, simultaneously implementing AI tools and managing workforce anxiety about job security. Companies that handle this transition well can increase morale and drive retention. Those who don’t risk the opposite.
Solution: Strategic workforce planning allows HR to identify which roles will evolve, which will disappear, and which new positions will emerge. HR leaders who invest in reskilling programs now will be ahead of the curve, both technologically and in terms of people management.
2. Skills Gap Crisis
The skills gap has reached crisis proportions. More than half of workers say they’ll need to learn new skills just to stay in their careers (Devlin Peck). This growing problem affects every one of HR’s key priorities, from recruiting practices to succession planning.
Solution: Traditional recruiting and onboarding approaches alone can’t close the skills gap. HR departments need to shift from “find and hire” to “develop and retain” strategies that build skills internally while creating compelling employer brands that attract emerging talent.
3. Compliance Complexity
Employment law is more complex than ever, and the changes keep coming. HR is constantly navigating new regulations on both the federal and state levels, representing an extra challenge for companies with locations across the country. Without clear workflows and proper HR software, organizations risk hefty financial and legal penalties.
Solution: Invest in a compliance management system that can track and implement changes across locations. Partner with your legal team to establish a proactive monitoring process so you’ll always be aware of the latest changes. Finally, develop standardized workflows to rapidly implement new requirements as they arise.
The Most Common Challenges in Human Resources
Beyond the headline-grabbing HR challenges, several persistent issues continue to drain resources and impact organizational effectiveness. Leaders should expect to face these challenges throughout the calendar year of 2026.
4. Holistic Employee Well-Being
In this era, employee well-being means more than medical care. Financial stress affects mental health, which impacts physical wellness, which influences job performance—and your team members expect HR to know that. 25% of employees have considered quitting a job due to their mental health (NAMI), and 72% are stressed about their household finances (The Hartford). Leaders need to address these interconnected factors as a whole.
Solution: Develop integrated wellness strategies that address financial, mental, and physical health simultaneously. Invest in best-in-class payroll software and be sure to look for a solution that can provide earned wage access. Offer comprehensive health benefits along with health savings accounts (HSAs) or flexible spending accounts (FSAs) that put workers in control of their care. In the long term, these benefits pay for themselves. Healthy employees do better work.
5. Employee Engagement and Manager Effectiveness
Employee engagement levels are falling rapidly (Josh Bersin). This isn’t a new issue, but it’s a major concern for HR. Engagement levels directly affect key HR goals like productivity, retention, and organizational performance.
Solution: 70% of team engagement stems directly from managers (Gallup). As a result, HR can have the greatest impact by focusing on manager development. Leadership training and career development opportunities aren’t just an investment in your middle managers; they’re a net positive for everyone on their teams.
6. Building Resilient Company Culture
High rates of employee burnout put extra pressure on your organizational culture. Employees face competing demands at work, not to mention the demands of their personal lives. This stress makes it difficult to focus on work and can also strain relationships among colleagues.
Solution: Employee recognition programs make team members feel appreciated and some even provide rewards for a job well done. HR can also conduct regular employee surveys to measure engagement and collect feedback on how to improve. Before you survey your team, make sure you have the capacity to implement meaningful changes based on their responses.
Challenges of HR Professionals
HR professionals face unique pressures on an individual level. Facing these issues requires both personal skill development and organizational support.
7. Shifting from Administrator to Strategic Partner
The nature of HR is changing. To keep up with external pressures—including the growing expectations of the C-suite—HR professionals need to elevate their role. Stop simply managing administrative tasks and become a strategic partner to the EC. This transformation requires leaders to develop financial acumen, data analysis skills, and the ability to translate HR metrics into business impact.
Solution: Invest in business education for HR team members. Create cross-functional projects that give HR professionals exposure to different business units. Implement HR analytics tools that provide clear connections between people metrics and business outcomes.
8. Managing Competing Priorities
HR professionals often find themselves pulled between employee advocacy and business needs; between operational demands and strategic initiatives; between immediate firefighting and long-term planning. This constant tension creates stress and reduces departmental effectiveness.
Solution: Establish clear priority frameworks and calendars that align HR’s activities with business objectives. Schedule dedicated time for strategic work separate from operational responsibilities. Implement project management systems that help balance competing demands.
9. Staying Current with Technology
The pace of HR software innovation creates continuous learning demands. HR professionals must continually master new platforms, learn about new AI capabilities, and integrate new workflows—all while seamlessly maintaining day-to-day operations.
Solution: Create structured technology learning paths for all employees, including HR leaders. Partner with vendors who provide customer support and ongoing training. Build internal technical expertise through dedicated HR systems specialists.
HR Managers Challenges
HR managers have a huge impact on the employee experience, both within HR and across the company. As a result, they will face additional HR challenges in 2026.
10. Leading Through Constant Change
HR managers must guide their teams through ongoing organizational changes while maintaining service levels and team morale. Change fatigue affects both HR staff and the departments they support.
Solution: Develop change management competencies within the HR team. Design clear communication frameworks that keep everyone informed about upcoming changes. Build resilience through team development and stress management programs.
11. Balancing Employee Needs with Business Constraints
HR managers regularly face situations in which employee needs conflict with business goals or limitations. Budget constraints may prevent desired salary increases, while business demands may require schedule changes that impact work-life balance.
Solution: Develop creative problem-solving approaches that identify win-win solutions. Build strong relationships with finance and operations leaders to understand business constraints early. Create transparent communication processes that help employees understand business realities.
12. Managing Up and Across the Organization
Company leaders outside the HR department may not intuitively understand HR’s responsibilities or strategic value. HR managers must communicate that value in a way executives will understand, making the case for the budget they need to achieve departmental goals.
Solution: Develop data-driven presentation skills that connect HR initiatives to business outcomes. Prioritize relationships with company leaders to build connections and bust departmental siloes. Implement a communication cadence that keeps HR visible to the C-suite.
HR Department Challenges
In addition to the issues that impact individual employees and HR managers, HR departments as a whole face unique challenges in 2026. Addressing these challenges requires coordinated solutions from multiple team members, and sometimes multiple departments.
13. Resource Allocation and Budget Constraints
HR is under rising pressure to do more with less, and business complexity continues to increase. Limited budgets must cover technology, training, recruitment, benefits administration, and strategic initiatives.
Solution: Implement budgeting approaches that prioritize the highest-impact activities. Build business cases that clearly demonstrate the ROI of HR investments. Explore shared services models that increase efficiency across multiple HR functions.
14. System Integration and Data Management
Far too many HR departments operate with multiple disconnected systems that create data silos, duplicate entry requirements, and incomplete reporting capabilities. This technology fragmentation reduces efficiency and limits strategic insights.
Solution: Invest in integrated HR software that consolidate multiple HR functions. This approach not only protects your data; it also streamlines workflows for everyone on your team, vastly improving the employee experience.
15. Scalability and Growth Management
HR departments must build systems and processes that can scale with business growth while maintaining quality and compliance standards. Rapid growth often overwhelms existing HR capabilities and creates operational bottlenecks.
Solution: Design standardized processes that can be replicated across locations and business units. Invest in self-service technologies that reduce HR’s administrative burden.
Regular HR Problems and Issues that HR Faces
In addition to major strategic HR challenges, leaders always need to deal with day-to-day operational issues.
- Inconsistent policy applications across different managers and departments result in employee complaints and potential legal issues.
- Time-consuming manual processes for benefits enrollment, time tracking, and performance reviews reduce strategic focus time.
- Poor internal communication causes confusion about policies, procedures, and organizational changes.
- Inadequate performance management systems fail to identify high performers or address underperformance effectively.
- Limited career development opportunities cause talented employees to seek advancement elsewhere.
- Reactive rather than proactive approaches to workforce planning leave organizations unprepared for talent needs.
- Inconsistent manager training creates variation in employee experiences and team effectiveness.
- Outdated job descriptions lead to inefficient recruiting practices and high turnover rates.
How Paycor Helps You Solve HR Challenges
Paycor’s comprehensive HCM software directly addresses the interconnected HR challenges leaders will face in 2026. Rather than forcing HR teams to manage multiple disconnected systems, Paycor’s unified platform tackles everything from compliance complexity to employee engagement within a single, integrated solution.
Compliance management features keep pace with rapidly changing employment laws, while integrated talent management combines recruiting, performance management, and learning development without requiring HR professionals to learn separate systems. Most importantly, Paycor’s automation handles routine administrative tasks, freeing leaders up to focus on strategic goals.
Solve Your HR Leaders’ Problems with Paycor
Ready to transform your HR challenges into competitive advantages? The organizations thriving in 2026 won’t be those that avoid human resources challenges—they’ll be those that build strategic capabilities to address them proactively.
Paycor’s integrated HCM platform provides the technology, data insights, and process efficiency that HR leaders need to focus on creating strategic value rather than operational firefighting.
Request a guided tour to learn how Paycor can solve your team’s unique HR challenges.