Finding the right people has become more difficult and expensive for HR leaders. You want a specific skill set, but there aren't enough qualified individuals. You have a capped budget, but wages for prized talent keep rising. And like many, you're up against other companies that can offer what you cannot. This is the situation that HR is facing today.
Labor market trends in 2026 highlight a growing need for adaptability. Economic pressures are tightening budgets. The growing skills shortage in essential fields like AI, engineering, and data science is driving up the cost of talent in major cities. Yet companies are expected to do more with less.
Consequently, hiring strategies are changing. According to a survey by Pebl, 86% of HR and finance leaders intend to increase hiring abroad, with the majority anticipating international hires to account for over half of their personnel by 2027. "Companies that don't build borderless teams will fall behind. It's as simple as that," comments Pebl CEO Francoise Brougher. "The smart ones are looking for talent worldwide."
Four momentous shifts are catalyzing next year's developments in the labor market:
- AI is transforming the recruitment and management of people.
- Remote and hybrid work isn't an experiment anymore, it's the new normal.
- The hiring model is shifting from local recruitment to global recruitment with an emphasis on skills rather than credentials.
- Incorporating employer of record (EOR) services for cross-border hiring.
Let's get into it.
AI will reshape HR and the labor market
The adoption of AI in HR is no longer just a theory or a far-off idea. A recent CNBC survey found that 89% of HR leaders anticipate that AI will transform jobs by 2026. The question is no longer whether to incorporate AI, but the speed at which we can pivot and build the structure to embed AI into routine business practices.
According to Brougher at Pebl, "Wage inflation, AI skill scarcity, and regulatory complexity—from rising H1–B visa costs to compliance hurdles—are all making it difficult for companies to hit their growth goals." So how are companies responding? Pebl's research points to two main strategies around AI.
Fifty-two percent of companies are re-skilling their current employees to fulfill jobs stemming from and related to AI. And 51% are expanding their global workforce to find talent trained in AI. For instance, companies in the U.S. are employing engineers and data analysts from Latin America and Southeast Asia because the specialized skills there align with cheaper and more affordable costs.
AI is also changing how HR professionals hire in the first place. Frameworks based on skills are replacing traditional job titles. Organizations are no longer looking for simply a degree and years of experience, but are on the lookout for digital fluency, flexibility, and the ability to collaborate with AI systems. Work is being structured differently to incorporate AI and highly variable roles.
For HR, this requires developing new systems for recruitment and onboarding. It starts with a taxonomy of skills that maps to actual work, then integrating that framework into hiring, performance reviews, and learning programs. You're no longer managing job descriptions; you're managing capabilities. And this shift calls for new systems and a new mindset.
Remote/hybrid work is the new default, enabling global reach
Hybrid working arrangements are no longer a nice-to-have, but rather a prerequisite. Nearly 88% of U.S. employers have incorporated some sort of hybrid working arrangement, and the U.K. market is no different. Eighty-five percent of job listings in the U.K. offer remote working in some capacity. In turn, job candidates expect such arrangements to be non-negotiable. If your company requires five days in the office, you're competing with one hand tied behind your back.
However, the biggest advantage of hybrid and remote work is accessing a global talent pool. Once you remove location as a hiring constraint, you can recruit across all time zones as opposed to just your city. This is also reflected in the data from Pebl, which indicates a "global by default" hiring approach for many companies. The remote work model is what makes this approach feasible. Yet, some challenges arise with hiring employees across borders.
The most common hurdles include setting up entities, which gets expensive fast, and navigating local regulations. Hiring contractors adds another layer of complexity, with its own set of compliance requirements. These challenges eat up time and money. And in many countries, particularly across the EMEA, government-mandated benefits are already strong, so employees may not value additional perks the way U.S. workers do.
According to Pebl research, these challenges, combined with high costs and local regulations, pressure companies to hire cross-border to reduce operating costs. The costs can be reduced, but there are a large number of complex regulations that need to be followed in all the jurisdictions where your employees work.
The new hiring playbook is skill-based, candidate-centric
The traditional hiring checklist is becoming obsolete. What candidates can do far outweighs the value of degrees and years of experience. Skills-based hiring has become the default, and 90% of firms report fewer hiring mistakes. When companies focus on skills over credentials, they make better hiring decisions, and suddenly discover talented people they would have overlooked before.
Global hiring forces you to rethink every part of your talent strategy: global mobility, employer brand, talent acquisition, and competition for talent in untapped geographies. This is echoed in Pebl's findings, where 87% of leaders agreed that global hiring is an economic imperative.
Cross-Border hiring and the rise of the Employer of Record (EOR)
Previously considered an exception, global workforce hiring has become the norm. According to Pebl, 57% of organizations expect to increase their international recruitment in the upcoming year. The driving force for this trend is a combination of necessity and economics.
In major economic centers, domestic salaries continue to escalate. The cost of visas and regulatory challenges in countries like the U.S. is increasing. Furthermore, in-demand, specialized skills are located in a few, globally dispersed regions. You have to go where the talent is, or you will lose the race.
This is where the Employer of Record (EOR) comes in. Setting up your own entity means serious investment: $20K or more in upfront legal, tax, and consulting costs. Six months or longer navigating paperwork and legal hurdles. Ongoing payroll, benefits, and compliance expenses that can top $200K. And if you make even a small misstep? Potential fines and penalties of $100K or more. An EOR lets you skip all of that.
The use cases are clear. Rapid entry into new markets. Specialized hires in standalone countries. Remote specialists embedded in global teams. Compare this to building an entity, which takes months and significant legal costs, or hiring contractors, which brings misclassification risk. EORs offer speed, lower risk, and economic sense in a market where cost pressures and talent scarcity are forcing strategic decisions.
What HR leaders should do now to prepare for 2026
Start by auditing your HR tech stack. Do your systems allow for global hiring? For managing remotely? For AI-assisted analytics? Twenty-five percent of HR teams will be focusing on tech infrastructure in 2026.
Next, invest in skills-based workforce strategies, mapping the capabilities the organization needs, then build hiring, learning, and workforce strategies based on skills, not titles. This opens up global talent pools and prepares your workforce to work alongside AI.
Finally, develop policies and infrastructure for a global, hybrid workforce. Consider partnering with an EOR or global HR provider like Pebl to scale internationally without the cost and complexity of setting up local entities. The companies treating global hiring as core infrastructure will have a clear advantage in 2026.
