As the year winds down, it's natural to start thinking about an end-of-year checklist and HR planning for 2026: performance reviews, compensation adjustments, and policy updates. These tasks matter, but they often miss a bigger opportunity.
The end of 2025 isn’t just about closing the books; it’s your launchpad for building a stronger, future-ready workforce in 2026. By taking a few intentional, practical steps now, you can align your people strategy with your business goals, build resilience, and create the kind of workplace that attracts top talent and keeps employees motivated.
Let's explore how to transform your year-end HR process from a reactive checklist into a proactive launchpad for the new year, with some HR planning tips for small and mid-sized businesses in 2026.
Performance Reviews: Continuous, Development-Focused Feedback
Moving from the traditional annual review to a continuous feedback model is not a new concept, but it is one that many companies still need to master. Consider these steps for a stronger approach:
- Keep Pace with Modern Feedback Training: Outdated approaches like the "feedback sandwich" don't work as well in today's environment. Instead, managers should focus on brief check-ins throughout the year built around specificity, actionable dialogue, and collaborative improvement. This approach keeps employees engaged and aligned with your 2026 business goals.
- Integrate Technology: The range of AI tools for HR is growing daily, so experiment with technology that can help you facilitate real-time feedback. This is especially important in a hybrid work environment where managers can't give casual feedback to in-person employees.
- Connect Development to Strategy: Ensure employee development areas relate to your overall business strategy. Learning opportunities can then be aligned with achieving business goals and employee growth can be tied directly to revenue-driving priorities.
Compensation Planning: From Benchmarking to Strategic Pay
Traditional compensation strategies rely on standard annual raises and external benchmarking, but that's no longer enough to compete for talent. Your 2026 compensation planning guide should focus on flexibility and transparency. Some steps might include:
- Anticipate Market Shifts: A proactive pay structure helps you remain competitive, so stay ahead of labor market trends, including minimum wage updates and evolving benefits expectations. While predictive pay models and pay transparency legislation may not be top of mind for smaller businesses, it is essential to be aware of these trends.
- Focus on Flexibility: Instead of fixed, one-size-fits-all benefits, try piloting flexible perks that employees can help shape. Think about wellness stipends, rotating perks, or low-cost programs tailored to what your team values most.
- Link to Retention: Integrate your pay strategy with your broader retention goals. Thoughtful compensation packages show employees that they are valued, which can reduce turnover and directly impact the bottom line. This is one of the most effective employee retention strategies for 2026.
Workforce Planning: Preparing for the Future of Work
Forecasting headcount is standard practice, but workforce planning for 2026 can be more effective. Some key considerations include:
- Optimize Your Workforce: Assess your needs for contractors versus full-time employees. Many small or mid-sized businesses don't need a full-time VP of HR but do need access to senior-level expertise. Fractional HR bridges that gap, giving companies strategic depth without the overhead.
- Build Resilience: Use workforce analytics to anticipate talent needs before they become a problem. Create a clear, lean organizational chart that lets your business scale efficiently while staying adaptable to market shifts and opportunities.
- Focus on Leadership and Succession: Don't leave knowledge transfer to chance. Identify key talent, pair employees with mentors, and create apprenticeship opportunities. Cross-train teams and document succession plans in simple tools like the 9-box grid.
Compliance: From Risk Mitigation to a Living Strategy
Updating your employee handbook once a year is a reactive way to handle compliance. A more strategic approach involves creating a "living" compliance strategy integrated directly into your company culture. To keep your compliance approach fresh, think about how to:
- Anticipate Regulatory Trends: Look ahead to expected HR compliance changes in 2026, such as those in family and medical leave rules, and start preparing now.
- Create a Living Strategy: Your compliance framework should be dynamic, evolving with your business and the regulatory landscape. Create policies only as needed and batch handbook changes annually while issuing separately throughout the year. Then think about continuous monitoring, regular training, and leveraging technology to help streamline compliance requirements and reporting.
- Embed Compliance into Your Culture: Employees want clarity on benefits, holidays, and policy updates, and communication gaps create confusion that drains productivity and fuels disengagement. Compliance needs to be communicated as part of your core value set. Many employers create or post policies, but then forget to reinforce them. Keep compliance visible through periodic reminders and user-friendly resources, linking key benefits and updates to other employee communications throughout the year.
Culture and Engagement: Building a Workplace People Choose
Employee engagement is often seen as a "soft and fuzzy" concept, but it directly impacts productivity, retention, and the bottom line. Consider:
- Creating Actionable Insights: While your annual engagement survey provides a snapshot, you need to leverage pulse checks and continuous feedback loops to keep a finger on the pulse of your organization in real-time. Then use the results to drive specific culture initiatives and remind your team that new programs or changes are based on their feedback. By using even infrequent feedback frequently, you strengthen trust and show that employee input truly shapes your culture.
- Prioritizing a Welcoming Workplace: Your culture is a competitive differentiator. Investing in opportunities to reinforce respect and inclusion makes your firm a place where people want to work and stay. Embedding civility and respect will be a key differentiator in 2026’s competitive talent market. Even seasoned professionals may need support in maintaining civility under stress or during conflict. Brief, impactful training sessions can help teams strengthen communication and consistently deliver on your organization’s cultural aspirations.
- Investing in Leadership: Your culture is only as strong as your leadership. By taking a structured approach to developing your managers, you ensure your values are sustained and reinforced through every level of the organization.
Conclusion: Aspiration, Alignment, and Readiness
Your end-of-year checklist should be about more than just checking boxes. If considered strategically, it can provide the blueprint for your HR strategy for 2026. By asking key questions and keeping your processes lightweight and actionable, you can align HR with business growth and resilience, build a culture that attracts and retains talent, and prepare your workforce to thrive.
If your HR planning feels stuck in the past, consider how fractional HR can help you take a more future-ready approach. NorthstarPMO brings the expertise of a full HR department to your team, without the overhead, so you can stop reacting and start building.
Schedule a discovery call to see how fractional HR can help you take a more strategic, future-ready approach in 2026.
Frequently Asked Questions
Performance reviews, compensation planning, workforce strategy, compliance updates, and culture initiatives should be included and tied directly to 2026 business goals.
It creates alignment between people, strategy, and business goals while reducing risk.
Strategic HR planning goes beyond a simple checklist. By taking a proactive approach now, you can align your people strategy with your business goals, build resilience, and create a workplace that attracts and retains top talent.
Focus on lightweight, practical steps like micro check-ins, pulse surveys, and flexible perks that have an outsized impact on engagement and retention.
Fractional HR gives you access to senior HR expertise without the cost of a full-time hire, It helps small and medium-sized businesses gain strategic depth, optimize their workforce, and prepare for future challenges.