HR Implications of the COVID-19 Recession

By Casey Sword

News flash: There is no debate over the possibility of an impending recession. It’s soon to be the reality—that is, if it isn’t already.

A recession is classified by two quarters of negative growth in GDP. Right now, the Bureau of Economic Analysis’ advance estimates for the first quarter of real GDP show a decrease at an annual rate of 4.8 percent.

What’s more, the International Monetary Fund is projecting that the American economy will contract by about 6 percent in 2020. These indicators are coupled with grim realities for U.S. businesses and employees alike: US employers cut 20.5 million jobs from mid-March to mid-April, first-time jobless filings now total a staggering 33 million, and the nation’s unemployment rate has risen to nearly 15 percent. This is a stark contrast from the record lows in unemployment and record highs in expansions enjoyed just before COVID-19 hit U.S. shores. That’s what happens when 316 million people are ordered to stay at home.

All things considered, the US economy is not going to come out of this unscathed.  

However, not all recessions look the same. While this recession has similar characteristics to others, it was not caused by a steady decline in economic growth. It is unique in that it was caused by COVID-19, leading to rapid changes in demand as states were placed on lockdown.

Now the biggest concern is how everything will pan out. Federal Reserve Chairman Jerome Powell, once optimistic about a short recovery, stated in mid-May that we could witness a “prolonged recession and weak recovery.”

So, what now? Can we just go shopping?

Although many are eager to get things back up and running, others are unwilling to take any risks in what’s considered a tradeoff between saving lives and saving livelihoods. With stay-at-home orders slowly being lifted, it is unlikely that we will see flocks of people rushing to hair salons right away. The COVID-19 haircut might be here to stay.

Ready or not, employees will eventually return to work and worksites (if they haven’t already). SHRM Research found that more than half of US employers expect furloughed salaried workers to be recalled within three months. And while many remote employees will start trickling back into their offices, others may choose to stay fully or partially remote long after COVID-19 is gone.

The reabsorption of employees back into the workplace will not be an easy feat, and HR will be at the forefront of these efforts. Staying up to speed in such a volatile environment will be a tremendous but necessary requirement for a successful transition back to work. What follows is by no means an exhaustive list but things to consider as we maneuver our way out of this.

Let’s start with the shifting legal landscape. Government policies are changing as employers decide when and how to bring their employees back to work. It’s therefore unsurprising that more than 55 percent of employers report challenges in understanding new regulatory changes and how those changes impact their organizations. While employers are looking for guidance, legislators are still figuring out what to do. For instance, legislators are currently split on whether to provide employers with immunity from coronavirus-related lawsuits when they reopen their worksites. Simultaneously keeping employees safe, adhering to federal and state laws and guidelines, and running a profitable business will be difficult. A frequently changing landscape such as this demands a swift response from HR.

Another concern for HR is a potential increase in employment discrimination lawsuits and EEOC actions. HR should be prepared to answer questions like: Who should we phase in first? What about employees recovering from positive diagnoses of COVID-19, or employees caring for family members who have tested positive? Are we doing everything we can keep our employees and customers safe?

Additionally, HR professionals are being thrust right in the middle of important business decisions—some of which may not be well-received by employees being called back to the worksite. Consider this: On May 13, Tesla warned the company’s California employees that if they are called back to work but choose to stay at home due to COVID-19 concerns, they could risk losing their unemployment benefits.  This leaves many employees feeling as if they must choose between their health and their paycheck. Employers and the HR profession need to take care when deciding and communicating return-to-work policies and include internal and/or external counsel when planning decisions and communications.

Rather than enforce policies that may not be inclusive, consider accommodating employees’ needs case-by-case where at all possible. If not, be prepared for a backlog of discrimination claims.

While 68 percent of U.S. employers have no plans or expectations for further layoffs, this could very well change in a sustained recession. Employers will have to reassess their cost-saving mechanisms to keep their businesses afloat. Many will see no option but resorting to job elimination. Be mindful that employees will not forget how they were treated during this time. Already, morale is low: 2 in 3 employers say that maintaining employee morale has been a challenge at their organizations. HR needs to consider all the cost-savings tactics available to them, and balance supporting employees with the needs of the business. What benefits are essential versus expendable? Where can funds be recovered in personnel management, engagement, or productivity-focused changes?

Just because we might see a decline in hiring doesn’t mean HR should give up the fight. Attracting and—possibly most importantly—retaining talent will always be a business imperative. Now is a crucial time for reskilling and upskilling when preparing organizations to respond to future shocks. We’ve heard it all before: The future of work will be characterized by automation and AI, and there is a desperate need for more technical skills. Workers who do not lose their jobs will likely take on extra duties that require different skillsets. Those who lose their jobs should be equipped with the skills needed to hit the ground running. It would be a disservice to discontinue initiatives that serve to upskill employees—particularly during an economic downturn when they might need it the most.

And finally, COVID-19 has put stress not only on the economy, but on employees’ mental health. SHRM Research shows that between 22 and 35 percent of employees report experiencing symptoms of depression often, and as many as 2 in 3 are experiencing depressive symptoms at least sometimes. Nearly 40 percent of employees haven’t done anything to cope with these symptoms. It will be important to prioritize mental health in benefits packages and remind employees of these offerings. One third of employers have experienced a notable increase in request for information about Employee Assistance Programs (EAPs). Consider retaining any enhanced EAP offerings put in place during stay-at-home orders. In addition, offer mental health resources such as licensed counselors on call, meditation platforms, and virtual education programs.

Long story short: HR doesn’t have time to ponder whether or not there will be a recession because in many ways, it’s already here. It’s time to stop focusing on the COVID-19 pandemic alone and begin to prepare for the economic hardship that follows. This is an opportunity for HR to step up and prove their worth to their organization as stewards of their business, particularly as the economic recovery from COVID-19 continues to impact work long after the virus is contained.