Top 8 Hiring Challenges of 2026 (And How Your Organization Can Prepare)

By Carla McKelvey, Vice President and Market Leader Northern US & Canada at Kelly

An employer is staring down a backlog of open roles and can't find the people they need. Their most experienced workers are beginning to retire, and their younger workforce needs more development before they're ready to step into leadership. Add in the pressure to figure out how to integrate AI into their operations, and it's easy to see why so many organizations feel overwhelmed.

These challenges aren't happening in isolation but accelerating at once, creating a hiring environment that demands new approaches. Drawing from the latest Kelly Global Re:work Report—our survey of 6,000 executives and workers on the future of work—and over 30 years of personal experience, here are the key challenges employers need to prepare for in the coming year and how to tackle them.

1. Making AI work for your team

The challenge:

AI is reshaping jobs, creating new ones, and changing how work gets done. This creates two major hiring challenges:

First, organizations are struggling to figure out which roles AI will change, eliminate, or create entirely. Our Re:work survey found 64% of business professional and industrial executives are already planning to reduce headcount due to AI or automation. But from what I've seen, many are making these decisions without fully understanding which functions actually need human oversight.

The lack of ROI proves this point: Amid $30–40 billion in enterprise investment in generative AI, 95% of corporate AI initiatives show no return, according to MIT's Media Lab.

Second, figuring out how to use AI in the hiring process itself is overwhelming. Recruiters tell me there are so many AI recruiting platforms promising different solutions, they're unsure which ones actually deliver results. Some help with resume screening, others with interview scheduling, and still others claim to predict candidate success—but separating signal from noise is challenging.

What to do:

Both challenges require the same approach: keep people in the conversation.

For workforce planning, executives shouldn't make AI adoption decisions in isolation. Instead, create forums where employees can help identify which parts of their jobs could benefit from automation and which require human judgment.

For hiring, use AI to handle repetitive tasks like filtering applications, but maintain human oversight for final decisions. In my experience, you hire from your gut once you have everything in front of you—and poor hiring decisions will be made if there's not a human element somewhere in the process.

2. Getting leaders and workers on the same page

The challenge:

There's a disconnect between what executives think is happening and what employees actually experience. Kelly's Re:work Report shows that 42% of global executives say worker satisfaction is improving, but only 27% of global workers agree.

I often see this gap widen when leadership assumes their team knows how valued they are, but employees aren't feeling seen. According to a Gallup-Workhuman study, employees who receive regular, meaningful recognition are far more likely to stay: well-recognized employees were 45% less likely to leave their organization after two years (2022–2024 data).

What to do:

One solution I've implemented is what I call "crush it calls." Every week, we select individuals who have done something that really drives the business forward, and the leadership team calls to thank them specifically. The reaction is usually one of three things: they're speechless, they laugh, or they have tears in their eyes because someone took the time to acknowledge their impact.

Recognition doesn't require grand gestures. Sometimes it's as simple as acknowledging great work and being specific about the difference someone is making. If employees don't feel valued, hiring won't solve the problem because people won't stay.

3. Backfilling roles as Boomers retire in waves

The challenge:

Baby Boomer retirements are accelerating, and many organizations are underprepared. A recent survey of frontline industries (like manufacturing and retail) found 59% of workers over age 55 plan to retire within five years, and 72% of managers in those sectors fear that a mass retirement wave will strip their companies of critical knowledge and skills.

According to Re:work, nearly 40% of global executives say they're worried retirements will deepen skill shortages. But I believe employers are missing an opportunity.

Too often, someone in their 60s is overlooked for a role because leaders assume they won't stay long enough. But hiring someone for three to eight great years can be a gift—it buys time for succession planning and knowledge transfer. Not everybody's ready to retire at 65 or 70.

What to do:

Some organizations are getting creative about keeping internal expertise accessible. One insurance company built a database of 700+ qualified retirees who can be deployed within hours when claims surge during natural disasters—saving $2 million annually while avoiding the scramble to hire inexperienced staff. The expertise you've invested in training doesn't have to walk out the door forever when someone retires.

In general, start having conversations with your baby boomer population about flexible roles for as long as they might be interested. Create mentoring programs, coaching programs, and knowledge transfer sessions. Use job sharing and flexible schedules. Instead of being paralyzed that this population is going out the door, think through all the opportunities you still have to take advantage of that knowledge.

4. Filling specialized roles with new demands

The challenge:

Some of the hardest roles to hire for now blend old and new skill sets. A machine operator today also needs digital fluency. A technician now troubleshoots through software. The Re:work Report found 46% of business professional and industrial executives expect additive manufacturing skills to be in high demand, yet few can find candidates ready for it.

In manufacturing specifically, we're talking about maintenance technicians and machine operators—positions that can be trained if a person has some technical knowledge, but companies just can't find those individuals. These jobs may have been viewed in the past as undesirable, but that's not the case anymore. These are often six-figure paying jobs.

These hybrid requirements will only grow in 2026. Employers need to recognize the shortage now and start training pipelines that develop both the technical and digital sides of these jobs.

What to do:

Partner within your communities to find existing training programs. In Michigan, Automation Alley in Troy works with companies providing 3D printers and additive manufacturing training to keep young talent in the state. Those programs exist—it's just about awareness of what's available and who has the knowledge.

Companies like Kelly can help be the roadmap, but you can actively seek out partnerships with community colleges, technical schools, and organizations that are already developing these hybrid skill sets. Find people with some technical foundation and then build digital literacy on top of that.

5. Building job-ready skills in the next generation

The challenge:

Not every student is going to college, and that's not a bad thing. According to U.S. Bureau of Labor Statistics data, about 62-63% of recent high school graduates enroll in college immediately after graduation. That means roughly 37%—over a third of young Americans—enter the labor market right away, and they need support to become job-ready.

Our Re:work Report shows that more than half (56%) of global executives say recent graduates lack workplace professionalism, and 43% indicate they struggle with the practical application of concepts. And the National Association of Colleges and Employers finds 53.5% of employers rate recent graduates as proficient in communication skills, compared to 78% of students who rate themselves as proficient.

It's not just soft skills either. In business professional and industrial sectors specifically, 47% of workers identify technology proficiency as one of the most in-demand skills right now, while 49% of executives are having difficulty recruiting talent with technology proficiency. Many young people today simply haven't had structured opportunities to practice workplace interactions or develop technical skills outside of traditional academic settings.

What to do:

Companies should meet students earlier and invest in both sides of the equation. Partner with high schools and community organizations to provide workplace readiness training—how to interview, communicate professionally, and understand workplace expectations.

At the same time, create curriculum within your facility that builds both technical and interpersonal skills. Provide coaching and mentorship that develops soft skills alongside technical training. Shift hiring from credential-based to skills-based, opening doors for vocational and technical career paths. As AI handles more routine tasks, these uniquely human skills become an even bigger factor in business success.

6. Managing mass applications generated by AI

The challenge:

With AI tools making it easier for candidates to apply for jobs, employers are drowning in applications but struggling to identify genuine, qualified candidates. According to Kelly's (Dis)honest Job Search survey, 79% of job seekers now use AI tools in their applications, while 66% of hiring managers use AI-detection software to screen resumes.

I understand why we use AI when there's such a high response volume—you can't get to all those candidates manually, and it becomes a black hole.

Interestingly, both sides seem to have reached an understanding about this: 63% of job seekers say it's ethical to use AI to enhance their applications, and 67% of hiring managers agree with this approach, our (Dis)honest Job Search survey found. Most people view AI as just another tool—like spell check or grammar software—that helps put your best foot forward.

What to do:

The key is building AI into your process so people at least know you've received their application, and if they aren't qualified, they should hear back that they're not a match for this particular role. But I also think there needs to be transparency—if you're using AI for interviews, candidates should know and have the option to request human interaction instead.

On the flip side, how do we know that the individual applying is truly that individual and not AI or someone else? This is why there needs to be a human element somewhere in the process, especially for final decisions.

7. Creating clear paths for career growth

The challenge:

According to Re:work Report data, only 58% of global workers say their current career path aligns with their long-term goals. In STEM sectors, the top frustration for talent is the lack of advancement and upskilling opportunities, with 40% citing this as a major concern.

The disconnect is high in financial services as well, where 44% of workers cite no growth opportunities, 32% feel unheard, and 32% say they're underpaid. Yet 87% of professional and industrial executives say their organization clearly communicates promotion requirements, and 85% of business professional and industrial workers say they know what it takes to earn a promotion.

A 2024 ADP Research Institute study found less than half of workers globally feel their employer is investing in the skills they need for their future career—highlighting a "confidence gap" in whether companies truly care about employees' growth. Yet when companies do invest in people, the results pay off. Organizations with high engagement and motivation significantly outperform peers in revenue growth.

What to do:

Companies need to view upskilling and internal mobility as a source of skills, not just an expense. Create clear development paths with specific timelines and milestones. Provide training opportunities that employees can actually access—not just announce them.

Give people chances to apply newly learned skills in real projects or stretch assignments. Most importantly, have regular career conversations that go beyond performance reviews. Ask employees where they want to go and help them build a roadmap to get there. When people see you're genuinely invested in their growth, they'll invest their energy in your success.

8. Maximizing the value of outsourcing

The challenge:

According to the Re:work Report, 40% of business professional and industrial executives say their organization is outsourcing or considering outsourcing parts of its workforce to attract top talent, while another 37% are using it to supplement their existing workforce. Meanwhile, 40% of business professional and industrial workers believe their organization would outsource primarily to lower overhead costs.

This suggests employees see outsourcing as cost-cutting rather than strategic workforce planning. Companies need to communicate clearly about why they're using external partners—whether it's to access specialized skills, manage peak workloads, or supplement their existing team during growth phases.

When done strategically, partnering with workforce solutions providers can help organizations access skills and capabilities they can't develop internally, while maintaining focus on core business functions.

What to do:

Be transparent about your outsourcing strategy with your internal team. Explain how external partners complement rather than replace your workforce—whether you're bringing in specialized expertise for a project, covering seasonal demands, or accessing skills that would take too long to develop internally.

Involve your employees in determining what should stay in-house versus what makes sense to outsource. Choose partners who understand your culture and can integrate smoothly with your existing team. Most importantly, use outsourcing to strengthen your organization's capabilities, not just to cut costs. When employees see external partners as extensions of the team rather than threats to job security, the whole arrangement works better.

Keep your people at the center.

These hiring challenges aren't going away anytime soon—if anything, they'll intensify as AI adoption accelerates, more boomers retire, and employees continue to expect transparency and growth opportunities. But amid all the technological and structural change, one truth remains: people are the lifeline of any organization. Employees want a voice. They want to be asked for their opinion. They want meaningful work.

While external forces like the economy or policy are beyond our control, how we treat our workforce is entirely within it. Your brand is your people—their satisfaction, their engagement, their commitment to your mission. As much as we move toward AI and outsource various functions, you still need people to compete, and those people need to feel valued.

Hiring in 2026 won't be solved by technology alone. Success will come from keeping employees at the heart of your strategy—because when you can do that, people stay, they grow, and they carry the business forward.