ExtensisHR’s 2026 HR Trends Report: Key Takeaways for SMBs

Quick look: 2026 is shaping up to be the year when technology advancements, evolving workforce demands, and increased compliance considerations converge. ExtensisHR’s 2026 HR Trends Report equips small and midsized businesses (SMBs) with expert insights covering everything from using AI as a partner to integrating performance management into daily workflows. Below is a quick recap of the report, or you can download the full version using the button below.

Change has been brewing over the past few years, with artificial intelligence (AI) gaining traction, workforce demographics evolving, and employee expectations deepening. That means that in 2026, the future of work isn’t coming; it’s already here.

ExtensisHR’s latest HR Trends Report outlines the key developments that SMB leaders and human resources (HR) professionals need to understand to stay competitive, build resilient teams, and maintain compliance in an increasingly complex environment.

The report is guided by ExtensisHR’s Chief Human Resources Officer, David R. Pearson, with insights from several industry-leading HR experts:

• Anthony Onesto, Vice President of Platform and Product Marketing at 15Five
• Sandra DiNuzzo, Chief People Officer at CQ fluency
• Jennifer Davis, People Services Business Partner at J. Fletcher Creamer & Son, Inc.
• Chip Ross, Chief People Officer at MANA Products
• Kate Mistretta, Director of Corporate HR at ExtensisHR

Take a peek at the top HR trends for 2026 below, or download the complete report for more details and tips.

Trend 1: The Reluctant Embrace of AI in HR

AI has evolved from a trend into a practical part of daily work. From recruiting and onboarding to payroll, performance, and learning, AI now supports core HR functions, enhancing human effort rather than replacing it.

Key takeaways for SMBs:

• Always prioritize humans: While AI can handle routine tasks, mentoring, coaching, and decision-making still depend on human empathy, judgment, and experience. HR professionals don’t need deep technical expertise, but they must help leaders and employees use AI responsibly, with ongoing attention to compliance, pay equity, and fair hiring practices.
• Consider AI a partner: AI empowers HR teams and SMB leaders by taking on operational work such as scheduling interviews and analyzing workforce data. The result is greater strategic bandwidth, enabling a sharper focus on growth, employee engagement, and long-term retention.
• Use AI to improve the employee experience: By personalizing learning recommendations, simplifying benefits choices, and offering real-time support, AI can improve how employees interact with HR. At the same time, it enables teams to detect early warning signs of burnout, disengagement, and skills shortages.
• Unlock smarter hiring: AI helps teams to manage high volumes of candidates by automating communication and scheduling. While it can assist with resume screening and identifying strong matches, human judgment remains essential to ensure fairness and cultural alignment.

“By defining safety nets and accountability for AI-driven decisions, HR professionals can see that appropriate guardrails are in place, which often helps increase their comfort levels with the technology.” – Anthony Onesto

Trend 2: Talent Management and Staffing in a Tight Market

Attracting and keeping talent will remain major challenges for SMBs in 2026. Success will depend on growing talent from within, hiring thoughtfully from the outside, and consistently investing in development to retain high performers.

Key takeaways for SMBs:

• Sourcing from within: Internal mobility plays a vital role in retention and business continuity. Succession planning, development pathways, and upskilling initiatives help employees prepare to step into future roles.
• Address talent gaps: Certain roles are best filled externally, like specialized positions in accounting, IT, or niche technical areas. In some cases, global hiring is required, bringing added complexity around compliance, visas, and payroll.
• Recruit strategically: Talent management and recruiting go hand in hand. Hiring decisions should bolster business objectives, team dynamics, and long-term growth, rather than focusing solely on short-term needs.
• Focus on branding, networking, and social media: HR teams play a key role in shaping the company’s brand. A strong presence on LinkedIn and other channels can boost credibility and attract high-quality talent, while networking fosters connections for recruitment and mentorship opportunities.
• Put people first: Even with advanced tools and AI, employees are the foundation of HR. Long-term success depends on aligning hiring, internal development, and engagement efforts.

“Train managers to run structured stay interviews that surface motivators, friction points, and career aspirations before candidates become flight risks. Support them with career-pathing frameworks and access to internal opportunities so they can actually act on what they learn.” – Sandra DiNuzzo

Trend 3: Continuous and Connected Performance Management

Modern performance management is about real-time guidance and growth, not once-a-year reviews. Make it a continuous process that connects individual growth to business objectives, with managers providing regular feedback and HR ensuring fairness and effectiveness.

Key takeaways for SMBs:

• Practice two-way feedback: Performance is a shared responsibility between employees and managers. Consistent meetings, check-ins, and transparent dialogue make sure employees stay engaged and aware of expectations.
• Be mindful of generational differences: Feedback preferences vary across generations. Managers should tailor their approach to each employee, leveraging face-to-face, online, or digital communication to maximize impact.
• Clearly coach and course-correct: To maintain professionalism and consistency, managers need HR’s support for structured, well-documented discussions. Transparent processes and training help uphold standards across the organization.
• Conduct exit and stay interviews: Collecting feedback isn’t just for when employees leave. Exit interviews uncover areas for improvement, while stay interviews reveal what keeps staff engaged and motivated.

“To keep the momentum throughout the year, leadership has to find ways to make feedback natural, motivating, and continuous. Instead of a review, think of it as a conversation. Make time for short regular one-on-ones.” – Jennifer Davis

Trend 4: Defining, Measuring, and Growing Company Culture

Culture isn’t just a buzzword, it shapes how employees engage and grow. Leaders should articulate it clearly, measure its effectiveness, and actively involve staff in nurturing it, driving its evolution with intention.

Key takeaways for SMBs:

• Spell it out: Be specific about the qualities of your ideal culture (teamwork, creativity, drive, etc.) to draw in employees who will thrive. Additionally, avoid vague language that can unintentionally reinforce bias.
• Measure and maintain: Monitor metrics such as engagement surveys, net promoter score (NPS), turnover, and participation in recognition programs. Day-to-day culture is strengthened through consistent check-ins and performance management.
• Balance expectations and reality: Employees value flexibility, benefits, and perks, but SMBs need to balance these with operational constraints. Honest discussions about compromises strengthen trust and engagement.

“The feedback process is only step one—the data needs to be analyzed, broken down, questioned, and sometimes, more feedback needs to be gathered based on the initial data set gathered. It’s all about input, assessment and ultimately action planning and execution, and the ongoing cycle that this feedback loop creates based on constant, valid input, data, and metrics.” – Chip Ross

Trend 5: The Rules and Risks of Compliance and Employee Relations

In 2026, regulatory requirements will continue to evolve. SMBs must keep pace with shifting state and federal rules while minimizing risk. HR teams will be responsible for tracking changes, maintaining clear policies, and educating staff, a process that transforms compliance into a proactive business strength.

Key takeaways for SMBs:

• Remember AI’s compliance considerations: Automated recruiting, performance tracking, and analytics create new responsibilities. Implementing safeguards, policies, and training encourages ethical, legal, and effective use of AI.
• Keep a pulse on paid leave and compensation: As state laws around paid leave and pay transparency evolve, HR must adapt. This includes updating systems, clearly sharing policies, and auditing compensation and benefits to maintain compliance and fairness.
• Pay attention to upcoming regulatory changes: Upcoming changes such as minimum wage increases, cybersecurity and data privacy rules, Form I-9 updates, and possible overtime revisions require HR to stay well-informed.
• Leverage HR as a strategic partner: Compliance isn’t just about avoiding penalties, it’s a tool to build trust, protect employees, and integrate HR practices with your company’s objectives.

“The combination of clear expectations and thoughtful flexibility helps employees feel respected, supported, and confident that policies are applied in a principled, people-centered way.” – Kate Mistretta

Trend 6: Partnering with a PEO for 2026 and Beyond

Running a business is more complicated than ever. This is where professional employer organizations (PEOs) can provide significant value by helping SMBs navigate staffing, compliance, and other HR challenges.

Through co-employment, PEOs take on key HR responsibilities, including payroll, benefits, recruiting, and compliance. This enables SMB leaders to concentrate on growing their business while upholding high HR standards.

Why ExtensisHR?

Choosing the right PEO can be tricky with hundreds of options available. Boutique PEOs like ExtensisHR often stand out by delivering personalized service and enterprise-level expertise, including:

• Dedicated service: Each customer receives an Account Manager, HR Business Partner, Payroll Specialist, and Implementation Manager.
• Complimentary recruiting: Full-scale expertise to help you hire the best, at no additional cost.
• Ultra-responsive employee support: Our Employee Solution Center answers the phone in 15 seconds or less.
• Benefits designed for your workforce: Access to Fortune 500-level plans that grow and change to fit your needs.
• Industry-leading accreditations: Including IRS Certified PEO (CPEO), Certification Institute (CI), and Employer Services Assurance Corporation (ESAC), a combination just 1% of PEOs achieve.

Setting up for HR success

2026 will be an important year for HR. SMB leaders and HR professionals who focus on goal-setting, leverage technology, align talent strategies with culture, and maintain compliance will be well-prepared to navigate a rapidly changing work environment.

Want more insights on how to take your workplace to the next level? Download “The 2026 HR Outlook: Key Trends Shaping the Next Era” or take our quiz to see if PEO could be the right fit for your business.

Download the 2026 HR Trends Report

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