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As hiring markets stabilise and AI continues to reshape ways of working, the biggest risks for organisations in 2026 may not be immediately obvious. Capability gaps are emerging quietly across skills, leadership, culture, and talent strategy. And salary alone won’t close them.
Informed by expert insights and our latest survey data of over 1,200 professionals, we’ve identified some key gaps that will matter more than ever this year.
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Confidence in the job market remains low. A Talent survey found more than half (55%) of 1,288 workers say they aren’t confident they could find a new role in today’s market. This sentiment is reflected in declining job mobility and the emergence of “job hugging”.
Cost-of-living pressures (20%), job security concerns (21%), and the risks of a highly competitive hiring market (27%) are driving many professionals to stay put for safety rather than growth or job satisfaction. In fact, within an increasingly candidate-saturated market, a third of workers say their main reason for staying in their current role is simply waiting for the job market to improve.
At the same time, confidence in employers is fragile. Nearly three-quarters (72%) of workers don’t believe their employer would fight to keep them if they resigned. This disconnect suggest that while people may be staying, many don’t feel valued, invested in, or secure — a warning sign for engagement and culture.
“We’re seeing a lot of organisations mistake stability for loyalty. People aren’t moving, but that doesn’t mean they’re engaged or confident about staying long term. In NSW, many candidates are sitting tight because the market still feels risky — not because they’re fulfilled. That creates a real blind spot for employers who assume low attrition means low risk.”
— Matthew Munson, Managing Director at Talent Sydney
For employers, this creates a false sense of security. What appears to be high retention and low turnover may actually be masking rising disengagement and pent-up movement risk. As confidence returns and conditions improve, organisations that haven’t addressed gaps in employee experience, development, or expectations may see attrition rise quickly and unexpectedly.
AI and LLMs have been embraced with enthusiasm by the workforce — improving efficiency, reducing administrative load, and freeing people up for higher-value work. But as adoption accelerates, a more nuanced challenge is emerging: productivity gains don’t always translate into capability growth.
Emerging research from MIT and Microsoft are raising important long-term questions. Studies suggest that the reduced cognitive effort when using AI tools can impair memory recall and weaken critical thinking over time. In a work landscape where Talent survey data tells us 79% of professionals feel confident their skills are keeping with technological and industry change, it’s worth examining whether confidence and efficiency alone are enough to build the depth of capability organisations will need long term.
Early-career AI-usage may come at the cost of the leadership and problem-solving capability of tomorrow. Without guidance or emphasis on judgement, problem-solving, and independent thinking, organisations risk creating a future leadership gap where technical fluency exists, but discernment, creativity, and strategic thinking lag behind.
For employers, this becomes a capability question rather than a technology one. The organisations best positioned are those that invest in “hybrid intelligence”: encouraging employees to use AI as a support, not a substitute; training people to question and validate AI outputs; and designing roles and learning pathways that still require deep thinking, decision-making, and human judgement.
Closing this readiness gap means thinking beyond the broad trend of “AI adoption”, and being far more intentional about how your people will learn, grow, and lead alongside it as AI will continue to reshape roles.
Leadership capability has quietly become one of the most overlooked and consequential elements of workforce planning.
In response to cost pressure and organisational complexity, a third of organisations have reduced layers of management or flattened structures over the past year. But fewer managers don’t automatically mean better leadership, particularly when capability development hasn’t kept pace. Trust in leadership is low, with 61% of workers reporting low to no trust in senior leaders, and uncertainty around career progression continues to grow.
What’s becoming clear is that leadership capability is emerging as a hidden constraint in many talent strategies. Organisations may invest heavily in skills, technology, and new operating models, but execution often falters when leaders aren’t equipped to navigate ambiguity, workforce change, and rapid capability shifts.
“We’re seeing organisations invest heavily in skills, technology and new operating models, but leadership capability is often the missing link. Many of the challenges being attributed to AI — slow adoption, resistance, underwhelming outcomes — are actually leadership issues. Leading in an AI-enabled environment requires different judgement, decision-making and accountability, and that capability needs to be built deliberately rather than treated as an afterthought.”
— Sarah Blanchard, Head of Talent Advisory at Solve by Talent
AI adoption has exposed this gap. Today’s leaders are largely equipped to lead people in stable environments, not necessarily to lead AI-enabled work. As technology reshapes roles and blurs traditional job boundaries, leaders are increasingly responsible for managing blended teams of people and technology, making decisions around accountability, risk, and judgement that don’t sit neatly within traditional role definitions. And as titles become less useful indicators of value, understanding of capability becomes much more critical.
At the same time, entry-level hiring has been scaled back, with Talent placement data showing a 19% decrease compared to two years ago. While often framed as a short-term cost decision, this creates long-term risk. Cutting pipelines today widens capability gaps tomorrow, forcing organisations to buy experience at a premium later.
“It might feel like a short-term cost saving, but it comes with long-term consequences. Cutting entry-level hiring weakens future talent pipelines and increases dependency on more experienced and more expensive hires to fill capability gaps down the track.”
— Simon Yeung, Managing Director at Talent Melbourne
Importantly, the narrative that “no one wants to lead” doesn’t hold up. 73% of professionals still aspire to leadership, but with conditions. Workload and burnout, not people management itself, are the deterrents.
As workforce expectations around flexibility, learning, and purpose continue to shift, leadership capability now directly influences retention and engagement. This year, future-ready talent strategies will treat leadership as a core capability, embedded alongside skills, workforce mix, and technology.
Workplace culture is eroding, and the impacts are showing upwell before people resign.
A Talent survey found that only 1 in 8 corporate workers describe themselves as genuinely happy at work. Nearly two-thirds (68%) say they feel burnt out, stuck, or unhappy, often driven by financial pressure, a difficult market, or both. As one respondent put it: “I fake happiness for a paycheque.”
Rather than passive and quiet dissatisfaction, it’s a widespread shared sentiment as 80% of workers saying they’ve felt close to burnout in the past six months. Culture, for many, also feels fragile, with 31% perceiving their workplace as toxic, 26% say it’s declining, and only 15% believe their culture is thriving.
What’s notable is how early these warning signs appear. When workers talk about cultural decline, they point first to high turnover and low morale. Long before people resign, burnout begins to suppress performance, engagement and productivity, turning culture from a people issue into a measurable business risk.
Worker behaviour reinforces this picture. 7 in 10 say they would leave their role if they could, and 65% report staying put due to financially constraints .Among the small group who are happy, that happiness consistently comes with conditions: flexibility, supportive managers, autonomy, or working for themselves. It’s no coincidence that across ANZ, LinkedIn data shows a 43%increase in self-employment — a pattern historically linked to periods of market uncertainty and constrained job mobility.
The implication for employers is clear: Engagement isn’t missing because people want more perks or recognition programs. Closing the happiness gap in 2026 will require sustained investment in leadership behaviour, workload sustainability, and genuine trust, particularly in the context of AI-enabled efficiency.
“There’s often a lot of focus on fixing talent acquisition when engagement drops, but that usually just exposes the real issue. In many cases, it comes back to leadership capability and whether organisations are genuinely invested in learning, internal mobility, and long-term career growth. The harder work is building those foundations, but it’s often easier to blame hiring quality than address what’s happening after people join.”
— Tom Mackintosh, Managing Director at Solve by Talent
These gaps point to a deeper challenge facing organisations: misalignment. Between confidence and capability. Between leadership intent and execution. Between culture as it’s described and culture as it’s experienced. People are staying, but not necessarily engaged. Skills are evolving, but not always deepening. Leaders are accountable for outcomes in an AI-enabled world but aren’t always equipped to deliver them.
And while salary still matters, it’s rarely the factor closing these gaps. In the year ahead, instead of reacting to each issue in isolation, the organisations that gain an edge will be the ones aligning their talent strategy leadership capability, and employee experience around how the way work is actually changing.
“History tells us we’re heading into another cycle of talent shortages, and in a market like New Zealand, these cycles can expose weaknesses very quickly. We’re seeing that confidence, leadership, skills and culture are deeply connected — and when one is misaligned, the impact is felt across the business. The organisations that come out ahead aren’t scrambling when the market tightens. They’re the ones that have treated capability and employee experience as an always-on strategy, regardless of economic conditions.”
— Kara Smith, Managing Director – New Zealand
