What HR Leaders across sectors are telling us in 2026: Shared Challenges

If there’s one thing that has become really clear from our HR workshops this year, it’s this: while sectors might look very different on paper, the people challenges underneath are very similar.

We have spent time with HR professionals across construction, FM and M&E, water, professional bodies, housing, charities, healthcare, local authorities, Channel Islands organisations, consultancies, media, gaming and technology and more. And despite different funding models, labour markets and regulatory pressures, the same conversations keep resurfacing.

Yes, there are sector nuances. Construction worries about mobility allowances and engineering shortages. Water organisations are wrestling with standby arrangements and union sensitivity. Professional bodies are balancing affordability with competitiveness. Housing associations are managing policy change and ageing workforces. But the bigger picture? It’s remarkably aligned.

Organisations in general are under sustained cost pressure, yet at the same time investing heavily in structure, transparency and governance to prepare for future regulation, ongoing skills shortages and rising employee expectations.

Three themes in particular are cutting across almost every sector:

• Pay is stabilising around 3 per cent as the new normal
• Job architecture and grading frameworks are becoming foundational
• Benefits strategy is moving from ‘nice to have’ to genuinely retention-critical

Let’s unpack what we are hearing.

The 3 per cent pay rise is becoming the market holding pattern

Across almost every workshop, one figure kept appearing: 3 per cent.

The number may not excite anyone, but it’s clearly becoming the benchmark many organisations are working around. That doesn’t mean HR teams are thrilled about it. In fact, many openly described pay decisions as an exercise in balancing competing pressures: affordability, inflation, rising employment costs, pension commitments and National Insurance changes all sitting in tension with recruitment and retention realities.

There is very little appetite to ‘go back to the table’ for mid-year reviews or multiple in-year adjustments. Construction firms in particular, appear highly disciplined around annual cycles only. Public and quasi-public sectors, including water and professional bodies, sometimes have a bit more complexity because of union engagement and greater use of non-consolidated payments.

Meanwhile, Channel Islands employers showed slightly wider variation, although still mostly centred around that familiar 3 per cent. The reality is that pay strategies feel deliberately cautious right now.

Overall, there is a sense that organisations are ‘holding the line.’ That matters because when base pay flexibility becomes constrained, HR teams inevitably start looking elsewhere in the reward mix. Which brings us to perhaps the biggest workload priority of 2026.

Job architecture isn’t a HR project anymore - it’s business infrastructure

If there was one topic that dominated almost every conversation, it was job architecture. Honestly, the scale of activity organisations are undertaking here feels much bigger than in previous years. We are seeing businesses rebuild job families, grading structures, banding frameworks, competency models and career pathways - often at pace.

And importantly, this work is no longer being treated as a standalone reward exercise. It is increasingly viewed as essential organisational infrastructure.

Why now? Partly, it’s regulation. Even organisations operating only in the UK are proactively preparing for the impact of EU Pay Transparency requirements and the wider ripple effect of the Employee Rights Act.

Whether technically obligated or not, many HR teams are taking the view that waiting will cost more later. But regulation isn’t the only trigger. Internal equity concerns are growing. Wage compression is becoming harder to ignore, particularly in early careers populations. And many organisations are discovering that outdated role profiles simply can’t support fair pay decisions anymore.

We heard one variation of the same frustration several times: “We can’t progress people if we don’t know what the job actually is.” That sentiment showed up everywhere – from organisations updating role profiles more frequently, to businesses revisiting pay bandings, to others exploring AI-supported job evaluation tools.

Several sectors are increasingly using external job evaluation methodologies or technology-enabled approaches to improve consistency and speed. But there’s a catch. Almost everyone underestimated the effort involved. Poor-quality job descriptions, inconsistent manager capability and fragmented frameworks are slowing projects down. More than one HR leader admitted these programmes were taking far longer than expected. Which is exactly why robust job evaluation and grading support are becoming more important.

Without clear frameworks, it becomes incredibly difficult to benchmark pay properly, explain career progression or defend fairness decisions. And increasingly, organisations want everything aligned; pay, benefits, incentives and allowances linked to grade rather than role title alone. That level of consistency matters much more than it used to.

Benefits are quietly doing the heavy lifting

Five years ago, benefits conversations often sat in the ‘important but secondary’ category. That feels different now. Benefits are becoming a much more active retention lever. Probably because organisations know pay budgets are constrained.

If salary increases are capped around 3 per cent, HR leaders are asking a different question: How else do we improve the employee proposition? Private medical insurance came up repeatedly, though often with cost concerns attached. Organisations are increasingly comparing full PMI against lighter-touch alternatives, cash plans or tiered approaches for different populations.

Some organisations, for example, are actively exploring whether ‘PMI-lite’ options could bridge the gap between senior-only coverage and wider workforce provision. Construction and FM organisations continue to focus heavily on car allowances, mobility payments and working-away arrangements. Housing associations discussed fuel-related pressures and employee pushback around essential car user policies.

Elsewhere, organisations are reviewing benefits platforms entirely. Interestingly, innovation isn’t necessarily about offering more benefits. It’s increasingly about how benefits are delivered and communicated. We are hearing growing frustration with clunky systems, poor user experience and low engagement with legacy providers.

Employees expect easier access, clearer choices and better visibility of value. Some organisations are now exploring tools that allow employees to model different benefit scenarios themselves – which feels like a small thing, but can dramatically improve understanding and perceived value.

This is where reward and benefits consulting is becoming more strategic. Because benefits are no longer just supporting reward strategy; in many organisations, they are compensating for pay constraints. Or to put it simply, benefits are where organisations are competing and pay is where they are containing.

Everyone seems frustrated with HR systems

Another surprisingly universal theme? HRIS fatigue. It didn’t seem to matter whether organisations were in healthcare, professional bodies, housing, construction or charities – system frustration came up almost everywhere.

The same patterns emerged repeatedly: Too many systems. Poor integration. Implementation fatigue. Unclean data. Limited reporting capability. And perhaps most importantly, legacy systems struggling to support modern workforce requirements.

Pay transparency reporting, workforce analytics, grading frameworks and governance expectations all require better infrastructure than many organisations currently have. Yet confidence in providers feels mixed.

A lot of HR teams are market scanning, asking peers for recommendations and swapping implementation horror stories. There is definitely a growing appetite for systems that support structure and governance rather than simply processing HR admin. Because increasingly, HR technology is being viewed as an enabler of compliance and organisational clarity, not just operational efficiency.

Regulation is shaping decisions long before deadlines arrive

What’s interesting about 2026 is that organisations aren’t waiting for legislation anymore. They are preparing before they absolutely have to. Across sectors, we heard repeated references to pay transparency, gender pay, AI governance, probation process changes and the Employee Rights Act.

Some organisations are already shortening probation periods. Others are tightening policy documentation, reviewing manager capability or strengthening audit trails. Even businesses without direct EU obligations are aligning to European standards proactively. The thinking seems fairly straightforward: Waiting creates risk and preparation allows options.

The bigger story behind reward

Perhaps the most important insight from all these workshops is this: Reward isn’t being discussed in isolation anymore. The real conversations are about workforce sustainability. Technical skills shortages remain stubbornly difficult. Recruitment challenges persist in engineering, care, governance, surveying and specialist operational roles. Early careers pay compression is becoming a growing concern, particularly where National Living Wage increases are narrowing pay differentials. Retention worries are shifting too. Several organisations spoke about engagement fatigue following restructures, concerns around younger workforce expectations and barriers to internal mobility.

HR leaders increasingly seem to recognise something important: Reward is only one lever. An important one yes, but only part of a wider workforce system. And perhaps that explains why we are seeing greater investment in pay benchmarking, job evaluation, grading frameworks and reward and benefits strategy. These aren’t standalone projects anymore. They are becoming practical tools for navigating fairness, retention, affordability and future compliance - all at the same time. If 2026 has taught us anything so far, it’s that organisations aren’t looking for silver bullets, they are building stronger foundations.