What Are the Biggest HR Challenges of 2026?

In this article we discuss:

• The Biggest HR Challenges of 2026
• Adopting the Right HR Tools for Success

Human resources (HR) is at an inflection point. It has already become a core strategic function for the enterprise, shaping talent management and workforce planning in ways that directly impact business success—a far cry from the administrative HR function of the past.

Now, with AI embedded into enterprise operations, HR teams are at the helm of a new set of opportunities:

• Enabling adoption of AI tools across the workplace

• Upskilling the workforce to use emerging technology confidently 

• Building a culture that embraces digital transformation 

• Ensuring their organization remains human-centered

But are HR leaders ready to meet the moment? 

Workday research found that 62% of leaders say their people, processes, and technology don’t work effectively. Recognizing the biggest challenges in human resources right now and how to solve them is the first critical step to getting ahead in 2026.

The Biggest HR Challenges of 2026

Companies can often be too focused on putting out internal fires rather than looking at wider market shifts—and that’s a major mistake. These are the biggest challenges facing HR teams and companies in the year ahead:

1. High-potential voluntary turnover
2. Skills-based workforce management
3. Hybrid AI/human collaboration
4. Trust in AI across HR

Challenge 1: High-Potential Voluntary Turnover

Workday research found that in 75% of industries, companies are experiencing a year-over-year increase in voluntary turnover from their best employees. When high-performing talent looks elsewhere, HR leaders must look inward: What’s causing employees to want to leave? And what can we do to turn it around?

In many cases, people are looking for opportunities to advance their careers. That means a first step toward better retention is a focus on upskilling and internal mobility to provide opportunities for professional growth within the company.

Equally critical is getting a handle on workforce data to gain insight into the root of the challenge. It can answer key questions like:

• Is turnover more prevalent in certain business units or leadership levels?
• Are employees leaving after a certain amount of time?
• What are the most commonly-cited reasons for leaving in exit surveys?
• How have turnover trends changed for us over time?

With data-backed answers to these and similar questions, HR leaders can take targeted action to mitigate turnover risk and create an employee experience that builds long-term loyalty.

Challenge 2: Skills-Based Workforce Management

Skills are the new currency for a successful workforce. The business world changes too quickly for workforces to be built on rigid org charts or job descriptions. Instead, agility and growth is powered by a focus on building a workforce that contains the skills needed to drive an organization forward. 

Despite this, less than a third of leaders say their organizations currently have the skills they need to succeed in the future. To catch up, leaders need to shift toward skills-focused strategies that align the skills they have now with their goals for the future. Key practices include:

• Skills-based hiring: Seeking new talent with practical skills and potential for learning (vs. solely relying on traditional qualifiers like degrees and employment history)
• Upskilling and reskilling: Formalizing programs to develop skills within the current workforce that align with future strategy and goals
• Skills data tracking: Using workforce management platforms to track skills within the organization to avoid skill gaps and steer an intentional skills strategy for the future

The payoff of success here is significant—81% of business leaders surveyed by Workday say that transitioning to skills-based approaches is increasing their potential for economic growth. 

Challenge 3: Hybrid Human/AI Collaboration

Enterprise AI has evolved quickly over the past year. At the start of 2025, conversations were largely focused on AI adoption and change management to help employees embrace what was still a new technology for them.

Entering 2026, the challenge is finding the right balance between human and AI workforce responsibility. As AI automation and AI agents for HR play a more central role in operations, it’s crucial to ask: What’s handled by AI in our workflows, and where do humans still execute? When AI handles tasks, how do we maintain human oversight?

Organizations won’t be able to realize the full value of AI without updating roles, processes, and expectations to match how work is actually getting done. This is where many stall. Workday research found that nearly 40% of the time saved by AI is offset by rework, and 89% of one subset surveyed said that the majority of roles at their companies still haven’t been updated with AI capabilities.

HR leaders can help move the organization beyond pilots and into intentional execution by aligning human strengths with AI-enabled work in a way that’s measurable, governed, and sustainable.

Challenge 4: Trust in AI across HR

HR is feeling AI’s impact across both day-to-day execution and strategic planning. Workday’s CHRO AI Indicator Report found that among HR AI pioneers, AI is already driving value in areas like performance management, skills management, and recruitment and onboarding.

Strategic workforce planning also benefits from AI as a scenario-modeling tool—helping leaders to anticipate future demand and make forward-looking decisions with greater confidence.

Even so, HR still lags behind other core functions like finance and operations in AI adoption, largely due to persistent concerns around data privacy, compliance, and bias. In 2026, building trust will require more than experimentation: It calls for strong change management, clear governance, and the right controls and expert solution providers to ensure AI is used responsibly.

Adopting the Right HR Tools for Success in 2026

The shift from administrative oversight to strategic leadership is more than a change in perspective; it is a fundamental redesign of how organizations function. For HR leaders to close the gap between their people and their technology, they need tools that eliminate silos and provide a single, clear view of the workforce. In 2026, success belongs to teams that can turn raw data into actionable insights that drive business performance.

Bridging that 62% disconnect requires a commitment to integration and a focus on human-centered design. Technology should serve the strategy, not the other way around. By choosing platforms that prioritize skills, facilitate mobility, and foster trust in AI, HR leaders can ensure their organizations remain agile enough to pivot when the market demands it.

Ultimately, the goal is to build an environment where talent can thrive alongside new technology. Moving past initial adoption and into a period of intentional execution is the hallmark of a modern HR function. By solving these core challenges today, you not only prepare for 2026, you ensure your organization has the resilience to lead well beyond it.

Top talent is at risk: 75% of industries currently show an increase in high-potential voluntary turnover. Understand the potential market impact and strategies to retain your strongest performers in this Workday report.

This article has been updated since it was first published in January 2025.