How do recessions impact HR departments and people managers?

January 18, 2023
Joan Pettingill


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Although the United Kingdom isn’t yet in a recession, it is certainly going through a period of economic turbulence. Commentators seem to suggest that a recession may start this year. A recession is a period of temporary economic decline when activities tend to stall.

Employment law partner, Joan Pettingill has advised employers through times of economic turbulence for over 20 years.  She advises employers how to successfully pivot their people requirements in times of change and has experience of advising HR teams through several tough recessions. She is an expert in staff change. In this article, Joan provides a handy checklist for HR teams as we go into 2023.

During a recession, consumers tend to buy less and as a result, many companies slow down. Production can either drop or increase depending on how economic changes impact the business. But how do recessions impact HR departments and people managers? The role of HR has become much more important since the pandemic. So, what should HR chiefs and people leaders be considering when recession looks likely?

  • Recessions tend to bring more workplace disputes

During a recession there may be an increase in workplace disputes. This can lead to more employees asking employers to engage in off the record settlement conversations or ACAS Early Conciliation. More employees ask for compensation or a settlement agreement.

It becomes more important for employers and their people managers to stay the right side of employment laws in particular when handling discussions about staff exits. It also becomes key to know how to handle an off the record discussion, or protected conversation, with a staff member or their representative. In days gone by, HR managers would take a walk with a staff member round the car park. Nowadays, having a written agreement to enter into a protected conversation can be beneficial as well as having a script of what (not) to say.

  • More demands on people managers

During a recession there may be more demands on your managers. More staff under more stress can lead to more conflict between people.

Proactive employers may wish to consider providing people managers with up-to-date training or enable them to attend an in-house peer or support group. Upskilling your managers by training them in basic employment laws and HR practises can help them avoid saying the wrong thing to staff and to direct the issue to HR or a specialist adviser. For example, you may wish to ensure having a helpline in place to your specialist gunnercooke employment law adviser or expanding the number of managers able to access the facility.

  • Information security becomes more important

During a recession your business may be considering making roles redundant or reorganising staff.

Some employees may leave the business through redundancy or through agreed exits. Valuable business information including confidential information may risk being lost.

When planning a redundancy or reorganisation process, consider building in time for effective handovers of information. Remind leavers of their contractual obligations to keep information confidential and of their duties under data protection laws.

Capturing knowledge from key staff leaving the organisation is a way to make sure you don’t lose valuable information during such a critical time.

  • Whistleblowing reports increase

When staff come under increasing pressure the number of whistleblowing reports also tends to increase.

Check your staff handbooks and policies to ensure you have a well-documented and up to date whistleblowing policy.  Check that the mechanics of the whistleblowing policy works and that any reports will be acted upon promptly.

If a whistleblowing report is made, advice on any queries can be provided promptly. Our specialist investigations team can also help if an independent external investigator is needed to keep your in-house HR managers impartial and able to help support staff internally.

  • Compliance becomes more important

With increasing levels of workplace disputes it becomes more important for employers to have the right documents in place. This means checking your employment contracts have been issued and signed. It is important to review employment contracts and make sure that they actually reflect agreed terms as, often, they do not. Differences between what happens in practise and what the contract says can cause issues down the line. That also goes for HR policies and staff handbooks and procedural documents.

When businesses start to emerge from economic turbulence and recover, a backlog of queries and disputes about contract terms may hamper recovery.

It has never been more important to have employment contracts and handbooks reviewed and, if necessary, updated. 

  • Escalating costs

Raw materials costs, energy costs, wages costs all seem to increase in a recession. With more staff coming under costs of living pressures, we have already mentioned the increase in workplace disputes. The type of workplace dispute also can become more complex.

HR teams may wish to avoid “fee creep” by fixing legal costs retainers early. This will help ensure your specialist employment law adviser is retained through the year. Fixing fees takes some of the nervousness out of staff disputes and managers don’t need to feel nervous about incurring a charge to get in touch early. Early advice can often take the heat out of disputes or put your business into the best possible negotiating position.

Your HR checklist

  1. Ensure you have a “protected conversation” toolkit
  2. Consider training and coaching for your key HR or people managers
  3. Review business protection clauses such as confidentiality and “non-compete”
  4. Check you have an up-to-date whistleblowing policy and that it works
  5. Ensure you have external investigators available if required
  6. Avoid contractual disputes by reviewing and updating employment contracts and HR documentation
  7. Where possible, fix fees to avoid costs “creep”

Joan provides a monthly HR peer group where HR professionals and people managers can share best practise. Book your place here. If we can help, please don’t hesitate to get in touch with Joan Pettingill, [email protected].