The impact of economic downturn on human resource policies in small businesses: the case of North Macedonia

Abstract

Globally, businesses struggle to survive amid the rising uncertainty, inflationary pressures and increased costs as well as disrupted supply chains, which deeply affects their performance. Such economic turmoil will inevitably result in cost cutting measures by businesses, thus affecting their human resource policies and practices. This raises issues related to the implications of the economic crisis on the human resource function and the challenges in terms of human resource policies that small businesses face. The main objective of this paper is to assess the immediate effects of the economic downturn on the performance and management activities of small businesses in the Republic of North Macedonia, as well as their response in terms of human resource management policies. The findings reveal that although small businesses consider increased costs of doing business to be their primary concern, most of the surveyed businesses did not and do not anticipate to decrease the pay levels or monetary rewards of their employees, nor do they plan major reductions of employee training and development opportunities. In fact, as a response to the growing inflation, many businesses have increased pay levels of their employees. In terms of staffing policy, the results show that the majority of businesses have already frozen their planned recruitments, but do not plan to implement layoffs. These findings are in line with the studies on firms’ human resource policy response conducted during previous economic crisis