Changing Role of HR in Global Recession

Changing Role of HR in Global Recession
HR must pair the staffing needs of the business with the necessity of maintaining lean overhead and operating costs.

Recession times are tough for organizations and employees. The role of Human Resources during an economic downturn is challenging because it must prepare the company for potential cost-cutting while at the same time not allowing the HR department to jeopardize growth opportunities.

Recession encourages companies to take more risks and it is also an opportunity to get ahead of the competition. During recessionary times, budgets are tight, and the role of HR becomes critical to keep a company on fiscal track. HR must pair the staffing needs of the business with the necessity of maintaining lean overhead and operating costs. Some of the key areas that HR needs to focus during recession are listed below.

Smart Hiring

Recruitment during recession must be cautious, but at the same time, it is not wise to declare a general recruitment freeze. Such a freeze can undermine business continuity and a company’s ability to grow. Even during recession, businesses need to hire employees for critical roles.

When hiring during an economic downturn, it’s important that HR recruits, screens, and hires individuals who are highly qualified in their field and can bring a significant amount of potential to the business. While interviewing candidates it’s vital to ensure each new hire is qualified for the position and is not likely to leave any time soon. Fast turnover in employee ranks is costly to a business that then must reinvest in recruitment and rehiring.

Human resources must also select employees who are agile learners, can pick up multiple skills quickly, and come up to speed to ensure a short learning curve. New employees who take a significant amount of time to become acclimated to the work environment have the potential to slow productivity and decrease earnings.


Layoffs and downsizing are often an inevitable part of business operations during recessionary times. It is good to have a downsizing plan in place, even if you may not need to use it. In a close working group, the HR and Leadership Team must help identify several options based on the percentage of staffing reduction of the new ideal organizational structure. This entire process must be kept confidential, otherwise, all the employees will become nervous and expect only the worst.

HR managers must evaluate current employees and their responsibilities and make decisions about which positions are expendable and combinable. This can mean reallocating employees and financial resources to areas of the company that are core to the business. 

The above graph from The Hamilton Project shows that in the United States, during the past recessions the time taken to bridge the job gap has significantly increased. This is a testing time for affected employees and HR must strive to be as humane as possible.

As part of the rationalization process, HR may have to determine severance packages and provide the necessary support to impacted employees. Other support options can include, rehire opportunities once the business situation improves, continue insurance support for certain amount of time, relocation support for employees who have moved for the job, providing job placement/referral assistance, and so on.

Employee Productivity and Evaluations

HR is often involved in conducting employee evaluations. During a recessionary period, it is vital to ensure all employees are performing at optimum levels. An evaluation process usually involves salary adjustments and raises based on performance.

This is something that must be carefully taken under advisement based on the company’s available budget. HR may need to discuss a freeze on raises as well as potentially renegotiate the terms of some employee contracts to ensure the business remains financially viable. 

Change and Transformation Management

Change management is another important area for HR to focus on during recession. If a company does change quickly in a crisis, it will weaken. HR Managers must actively act as Change Agents and support managers and employees in finding new ways of working.

HR must be an active part of the team looking for new opportunities for growth. The market will evolve and change during and after recession; customers will have different expectations and preferences. Employees may need to be reskilled or upskilled to deliver on these expectations. HR should prepare employees for the new conditions and work on developing their skills and competencies.

Strategic HR Planning

HR managers should be involved in short and long-term strategic planning when it comes to payroll expenditures, particularly as it relates to looking for ways to decrease overhead operating expenses.

Some strategies can include reducing full-time positions to part-time positions to save on health care and other benefits; moving some positions from salary or hourly payroll jobs to independent consultant or gig contracting positions; and introducing job sharing or work-from-home telecommuting positions, which can reduce some overhead and operating expenses.


The role of Human Resources does not change dramatically during a recession, HR must closely work with the business and look for means to optimize while keeping employees at the forefront. It must be acknowledged that during recessionary times, most employees are concerned about their future.

Communication and transparency are good business practices in good times and bad. If you are communicating in an open and transparent manner with your employees, you don’t burn any bridges. HR professionals should keep a watch out for and respond to disgruntled laid-off workers who could tarnish the organization’s image among future hires when the economy revs up again.

Supporting employee morale is very important in a difficult situation.HR needs to look at ways to provide employees with the support they need to get the whole organisation through the recession with as little damage as possible.

Though recession affects the whole business, human resource is an area that is probably most severely affected. However, if it is managed effectively from an HR perspective, it can turn out to be an opportunity for the organization in the long run.


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