The Top Hiring Challenges Businesses Will Face in 2026

Hiring has never been simple. But 2026 is shaping up to be a year where employers must rethink long-standing assumptions about talent, retention, and workforce planning.

Executives and HR leaders are facing a strange mix of pressure: job growth in many sectors, fewer available workers, shifting expectations, and rapid adoption of automation. Roles are evolving faster than training programs can keep up. Workers are rethinking their priorities. And hiring teams are expected to deliver results despite tighter talent pools.

It raises an obvious question.

How do companies attract and retain the right people when the definition of the “right person” keeps changing?

This article explores the broader labor outlook for 2026, highlights the biggest hiring obstacles organizations will encounter, and offers practical steps leaders can take to prepare.

The 2026 Labor Outlook: Growth Meets Constraint

Employment is still expanding across many industries. According to the U.S. Bureau of Labor Statistics employment projections, total employment is expected to rise by 4.7 million jobs between 2022 and 2032. Healthcare alone is projected to add 1.8 million positions, reflecting aging populations and greater demand for care services.

Yet growth does not automatically translate into easier hiring.

Demographic shifts are reducing workforce participation. The same projections indicate the labor force participation rate will fall from 62.2% to 61.4% by 2032. Fewer available workers combined with rising job creation means competition will intensify.

Meanwhile, employee movement remains high. Data from the Job Openings and Labor Turnover Survey shows job openings hovering around 9 million with quits rates staying elevated. Workers continue to explore new roles, pursue flexibility, or exit industries entirely.

Add technological disruption to the mix. The World Economic Forum Future of Jobs Report suggests that 23% of jobs will change between 2023 and 2027, and employers expect nearly half of core worker skills to shift within five years.

Growth. Scarcity. Change.

That combination defines the hiring reality leaders must navigate.

Challenge #1: Persistent Talent Shortages

Talent shortages are no longer cyclical. They’ve become structural.

The ManpowerGroup global talent shortage survey found that 75% of employers struggle to fill roles — more than double the rate reported a decade ago. Technology, engineering, and customer-facing roles remain among the hardest to staff.

Why is this happening?

Several forces are converging:

• Retiring workers leaving skill gaps behind
• Younger workers prioritizing flexibility over stability
• Specialized technical roles expanding faster than education pipelines
• Global competition for remote-ready professionals

The result is longer hiring cycles, higher salary expectations, and greater reliance on contract talent.

Some organizations are already exploring alternative pipelines, including apprenticeships and internal mobility programs. Others are looking at early-career pathways such as no experience job opportunities to widen their candidate pool.

Simple idea. Big impact.

Challenge #2: AI and Automation Redefining Roles

Automation isn’t replacing hiring challenges — it’s reshaping them.

A significant share of jobs face partial automation. The OECD Skills Outlook reports that 27% of workers are in occupations at high risk of automation. At the same time, 60% of companies expect to expand their use of AI and data technologies within the next few years.

This creates a paradox.

Companies need fewer people for repetitive tasks but more people who can work alongside technology, interpret data, and make judgment-based decisions. Unfortunately, many workers lack those skills. The same OECD research indicates that 36% of workers struggle with basic digital problem-solving.

Hiring managers are caught in the middle. They must recruit for roles that didn’t exist five years ago while reskilling current teams fast enough to keep up.

And job descriptions are evolving quickly.

Instead of fixed responsibilities, many roles now revolve around adaptability, cross-functional thinking, and learning agility.

Challenge #3: The Expanding Skills Gap

The skills gap is often mentioned, but the depth of the issue is frequently underestimated.

Employers estimate that 44% of worker skills will change within five years, according to the World Economic Forum report. Yet only about 40% of adults participate in job-related training annually across OECD countries.

That gap creates several hiring headaches:

• Candidates meet experience requirements but lack technical capabilities
• Technical candidates lack soft skills such as communication or problem-solving
• Hiring managers struggle to define skill requirements for evolving roles
• Training investments lag behind business needs

Even when companies hire successfully, productivity delays can occur while employees build missing competencies.

This is pushing more organizations to prioritize potential over credentials.

Learning speed is becoming as valuable as experience.

Challenge #4: Hybrid Work Expectations and Workplace Flexibility

Work preferences have shifted permanently.

Employees now view flexibility as a standard benefit rather than a perk. Remote and hybrid options influence job acceptance, retention, and engagement.

However, hybrid hiring introduces complications:

• Expanded candidate pools increase competition for top talent
• Salary benchmarking becomes difficult across geographic regions
• Culture building requires deliberate effort
• Performance measurement evolves beyond visibility

For HR leaders, the challenge isn’t just offering flexibility. It’s designing consistent policies that balance productivity, collaboration, and fairness.

Some companies are thriving with hybrid structures. Others are still experimenting.

What remains clear is that rigid workplace models limit access to talent.

Challenge #5: Demographic Shifts and Workforce Participation

Aging populations and changing career patterns are reshaping labor supply.

Retirement waves are removing experienced professionals faster than replacements can be trained. Meanwhile, younger workers are pursuing nonlinear career paths, side projects, and entrepreneurial ventures.

Participation trends also vary by region and industry. Declining participation rates reduce available labor even when unemployment appears stable.

Organizations must also adapt to multi-generational teams with different communication styles, learning preferences, and career expectations.

It’s no longer a single workforce.

It’s several overlapping ones.

Challenge #6: Rising Employee Expectations and Retention Pressure

Hiring and retention are now deeply connected.

Employees want more than compensation. They evaluate:

• Growth opportunities
• Meaningful work
• Flexibility
• Psychological safety
• Skill development support

When those elements are missing, turnover follows. Elevated quits rates highlighted in labor data show that workers remain willing to switch roles for better alignment with personal goals.

Retention challenges feed hiring challenges, creating a cycle that strains recruiting teams.

Leaders must view hiring and employee experience as part of the same strategy.

Business Impact: Why These Challenges Matter

Hiring friction affects more than recruitment metrics. It influences organizational performance in several ways:

Slower Growth

Unfilled roles delay product launches, customer service capacity, and expansion plans.

Increased Labor Costs

Competition for scarce skills drives salary inflation, counteroffers, and hiring incentives.

Productivity Gaps

Teams stretched thin may experience burnout, reduced quality, and slower innovation.

Cultural Strain

High turnover disrupts collaboration, knowledge transfer, and leadership development pipelines.

Insights from Kelly Services hiring challenges 2026 reinforce the idea that organizations must rethink sourcing strategies, workforce planning, and talent development to remain competitive.

The message is clear.

Hiring strategy is business strategy.

Proactive Steps Leaders Can Take Now

Preparation matters. Waiting until hiring pressure peaks leaves little room for experimentation.

Here are practical steps executives and HR leaders can implement.

1. Expand Talent Pipelines

Look beyond traditional recruiting channels.

• Partner with educational institutions
• Invest in apprenticeship programs
• Consider career switchers and early-career candidates
• Build global remote hiring strategies

Broader pipelines reduce dependency on narrow talent pools.

2. Invest in Continuous Learning

Internal development reduces reliance on external hiring.

Organizations can:

• Create structured reskilling programs
• Offer micro-learning opportunities
• Support certifications and career mobility
• Encourage peer learning and mentoring

Skill development strengthens retention while improving hiring flexibility.

3. Redesign Job Descriptions Around Capabilities

Rigid experience requirements can eliminate strong candidates.

Instead:

• Prioritize transferable skills
• Highlight growth opportunities
• Clarify learning expectations
• Use skill assessments rather than degree filters

This approach aligns hiring with evolving role requirements.

4. Build a Flexible Work Strategy

Flexibility must be intentional.

Leaders should define:

• Clear hybrid guidelines
• Communication norms
• Performance expectations
• Career progression pathways for remote employees

Consistency builds trust and improves candidate confidence.

5. Strengthen Employer Branding Through Authenticity

Candidates evaluate culture before applying.

Organizations can improve perception by:

• Showcasing employee stories
• Sharing learning and growth initiatives
• Demonstrating leadership transparency
• Highlighting flexibility and inclusion practices

Authenticity resonates more than polished messaging.

6. Use Data to Improve Hiring Decisions

Workforce analytics can reveal bottlenecks and opportunities.

Track:

• Time-to-hire trends
• Candidate drop-off points
• Skill shortages across teams
• Retention patterns after hiring

Data-driven hiring enables faster adjustments and smarter investments.

Conclusion

Hiring in 2026 will challenge organizations in new ways, but the underlying themes are clear.

Talent shortages remain widespread. Automation is reshaping job design. Skill requirements are shifting faster than traditional training models. Flexibility expectations are permanent. Demographic trends are tightening labor supply. And employees are more selective about where they work and why.

For executives and HR leaders, success will depend on adaptability, long-term workforce planning, and a willingness to rethink outdated hiring assumptions.

The organizations that thrive won’t be those with the largest recruiting budgets.

They’ll be the ones that broaden talent pipelines, invest in learning, design flexible work structures, and align hiring strategies with employee expectations.

Hiring isn’t becoming easier.

But with thoughtful preparation, it can become smarter.