Managing in a recession

Now the UK has a new Prime Minister, we can expect to hear more over the coming weeks about the Government’s response to the cost of living crisis, following the announcement of Liz Truss’ emergency plan with the energy prices.

We already have indications as to what other steps Liz Truss may take because of the pledges she made as part of her leadership campaign. One of which is to reverse the national insurance increase which was created back in April as part of the creation of a new health and social care levy.

This levy resulted in employees and employers paying an additional 1.25% each in national insurance contributions and the requirement for payroll teams to specifically list the levy as a separate entity on the pay slip.

The second pledge was to pull the forthcoming increase in corporation tax. At present, corporation tax is due to increase from 19% to 25% from April 2023.

Whether or not the government proceeds with this, we won’t know for a few more days yet.

What’s more, back in August, the Bank of England warned that the UK would fall into a recession in the last three months of 2022 as the economy is forecast to shrink in the last three months of the year and expected to continue shrinking into 2023.

How the government manage its economic policies not just to deal with the cost-of-living crisis but in responding to a recession, will impact how businesses can operate and directly impact human resource planning and policy development.

The next few months will be important to all businesses, especially leading up to setting budgets for the 2023/2024 financial year and when they start to think about their strategic business plans going into 2023.

Your 10-point plan

We have created a 10-point plan to help employers plan for managing in a recession:

1 | HR strategy

A HR strategy is key to delivering on business goals. Employers need their employees to fulfil their potential to maximise their contribution and therefore creating a profitable business. At a time of unprecedented uncertainty and significant economic conditions, having a HR strategy and creating a people plan aligned to the business strategy will be key for driving forward the business.

If your business doesn’t already have a HR strategy and people plan, now is the time to develop one specific to your business. If you do, then it would be beneficial to carry out a review of it, to ensure it remains relevant and re-prioritise or adjust timescales where necessary to take account of the latest social and economic conditions.

2| Workforce planning/Organizational structure

Workforce planning when there is a risk of entering a recession is fundamental to the business and how it responds to the recession and throughout. The analysis is a process in which you look at the resources you have now, what is needed in the future in the context of delivering on the business goals and objectives. Where there are gaps, it is understanding how these can be filled; or should there be too much resource, or resource not in the right areas, then it is a prompt for reviewing the organisational structure and design.

It may be through workforce planning and reviewing the organisation structure, that you identify a business need to restructure, or consider using 3rd party providers to fulfil resource requirements, such as the use of outsourcing, or self-employed contractors. It will depend on the nature of the business needs at this point.

3 | Cost cutting

It is perhaps obvious that at a time of recession, that cost cutting becomes priority. However, there can be a fine line as to which area of spend you put a freeze on costs.
For example, you may initially think that training costs should be frozen; but have you considered that investment in training and development may help the business to grow and benefit.

Or you may assume that putting a recruitment freeze on all roles is necessary, but is there a particular role that is vacant that it is essential that you have filled?
These questions and your thoughts on these all become clear as you work through creating your HR strategy and people plan.

4 | Workplace culture

During a recession, your workplace culture will be key for motivating your employees to avoid low morale, and to maintain good employee relations. A culture therefore that is inclusive, transparent, and engaging is vital for providing a working environment that prevents workplace grievances or conduct issues, employees feeling unsettled and potentially seeking new employment.

Using the HR strategy to find ways in which you can improve your workplace culture and maintaining it throughout difficult times will be necessary to support your employees.

5 | Engagement

Employee engagement links closely with having a positive workplace culture. Finding out how engaged your workforce is and in what areas can help the business to put targeted initiatives in place to make improvements. We recommend understanding how engaged your workforce are in the following areas:

  • How employees feel about their leaders
  • How they feel about their managers
  • How they feel about colleagues
  • How they feel about the company
  • Whether they believe that the organisation has a positive effect on society
  • Opportunities for personal growth
  • How the organisation supports health and well-being
  • Satisfaction levels with pay and benefits.

Employees need to clearly understand their job roles, why they are important and how their contribution impacts the rest of the organisation, be properly trained, be given credit for good performance, and be given encouragement to do even better. All these points relate to the ability to lead and manage a workforce effectively.

6 | Recruitment and selection policies

Ensuring your recruitment and selection policies are effective is vital. When recruiting, you need to ensure you recruit the best candidate for the role, and with the best fit to the organisational culture. This will help to prevent in incorrect recruitment decisions leading to either performance issues, or short tenure, disengaged new employees and costly recruitment practices.

7 | Employee development

As indicated previously, investment in training and development can help a business to prosper rather than be seen as a huge costly investment that has no place during a recession when it is all about saving money.

The training and development of your employees leads to better individual performance which translates to success for the business. Training and development is also a significant contributing factor in employee retention, which is vital during a recession, especially when the UK has already experienced significant recruitment challenges.

8 | Recognition

Employees want to be recognised for the work they do. Being recognised contributes to their happiness, which in turn leads to greater productivity. It can also improve employee retention by enhancing loyalty and it provides employees with greater job satisfaction and a feeling of job excellence.

With recruitment challenges as they are, and a looming recession, now is the time to consider your businesses approach to how it recognises its workforce. Consider recognition and how you can achieve this when undertaking your HR strategy and in creating a people plan.

9 | Pay and compensation

The cost-of-living crisis presents risk to any business as it is presenting an opportunity for employees to seek out new employment to increase their income. How employers compensate has evolved because of COVID-19.

We are seeing the needs of employees change in terms of how they wish to be rewarded from employment, and we are seeing employers re-think how they reward employees on the back of the recruitment challenges, but also now, as we look to enter a recession.

Your HR strategy should consider to how you pay and compensate employees in order to mitigate against the risk of staff attrition, but also to help in overcoming the recruitment challenges we continue to observe.

10 | Flexibility and hybrid working

Flexible working, including ‘hybrid working’ – the blended approach between traditional working from home and office-based working, brings many benefits to an organisation. At a time when businesses continue to re-build post COVID-19, respond to a challenging recruitment market and now in responding to a recession, it is more important than ever to demonstrate flexibility.
We know from years of research on the subject, that flexible working can lead to:

  • Increased morale and employee engagement
  • Aid employee retention
  • Improve productivity
  • Improve the ability to recruit the best talent
  • Allow the business to change their operating hours to help respond to changing needs
  • Provide greater diversity and inclusion by enabling employers to access talent pools that may not have previously been available.

Your People Strategy in a day – how to transform your organisation

On 27 September 2022, we ran a practical one-day workshop to help business owners create their own strategic people plan based on the needs of their business. The aims of the workshop were:

  • To provide an overview as to why creating a people plan is a necessity for any business;
  • To work on identifying a business’s key challenges and risks;
  • To provide practical guidance on how to create a strategically focussed people plan

From this workshop, we developed a People Plan template to assist businesses with creating their own detailed version, in line with their business plan.

If you would like to create your own people plan for 2023, you can do so with our free, helpful template, here.

We are here to help

HR Solutions are here to help through our team of qualified HR professionals. If you would like our help in supporting you navigate through the challenges all businesses face, then please contact us.




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