HOW INFLATION EFFECT ON HUMAN RESOURSE MANAGEMENT

 

HOW INFLATION EFFECT ON HUMAN RESOURSE MANAGEMENT

Introduction


Inflation is rising, retention is declining, and employees are scarce. Businesses are now facing difficult challenges, and HR departments throughout the world are seeking for methods to handle growing consumer expenses while keeping employees and recruiting fresh talent. Inflation is a periodic economic phenomenon; in a globalized world, inflation is impacted by shared economic issues such as global oil prices, entrance and exit barriers to economies, food grain supply, and so on. The present inflation trend is cost-push inflation, which is driven mostly by increases in the prices of necessities such as food and services. It even leads to salary increases that outstrip any advances in labor productivity, resulting in higher unit costs of production and, as a result, more price spiraling (Bhattarai, 2011).

In general, when inflation is more demand driven (the overall demand for goods and services in an economy exceeds the available supply), output of products and services rises. This means more job possibilities and a higher need for skilled labor. If supply does not meet demand for skilled and highly skilled labor, salaries rise, and attrition rises in organizations where demand for labor is higher. In the event of cost-push inflation, demand for labor does not necessarily increase; on the other hand, firms search for methods to cut costs and eliminate redundant work force as the cost of services and maintaining a nonproductive staff rises. Cost-push inflation also leads to a need for greater compensation to cover rising expenditures, and firms have the twin task of managing both external and internal cost pressures. This frequently results in a wage price spiral, which indicates that increases in salaries drive up the cost of products and services (Bhattarai, 2011).

Ways of HRM Deal with inflation

  • ·         Leadership on decision making- Don't forget the role of the ear piece of senior leadership in your organization, HR has to come up with relevant findings and metrics which helps the organization meet challenges better.
  • ·         Review the compensation and benefits applicable - The pay structure is influenced by changes in the economic context; too much market uncertainty means that the variable and bonus components of workers must be linked with marked reality.
  • ·         Improving productivity - Initiate ways to enhance productivity per employee, to have better retention programs to engage the high performers.
  • ·         Hiring the best talent-To ensure that the value added is more than the cost
  • ·         Communicate effectively and timely - In such an economic environment, it is vital that the proper information reaches employees at the right time. Even if the choice is likely to have a negative impact on the employee's salary or benefits, it is vital that the justification for change and how it will assist the firm and its workforce manage the challenges is properly explained by leadership and HR teams.

Conclusion

Companies have been subjected to significant volatility during the epidemic, but as we reach year three, they face a new challenge: navigating the candidate-driven market during an inflationary environment. While employees already have significant negotiation power, corporations aren't always willing to give in to calls for increased compensation.

References

 

Comments

  1. Niluke SirimannaMay 8, 2022 at 8:13 AM

    When inflation is high, businesses must increase production, which requires additional resources. Existing personnel may not be sufficient to meet demand, necessitating the hiring of new employees. HR must decide whether to hire or manage with existing resources in order to maintain productivity levels.

    ReplyDelete
  2. ChamindaMay 8, 2022 at 8:52 AM

    Thank you for sharing the article, related to the inflation and how its effectiveness

    ReplyDelete
  3. RasikaMay 8, 2022 at 8:53 AM

    Thank you for sharing the document for reference. You have clearly mentioned all these thing in a well order

    ReplyDelete
  4. SanjeewaMay 8, 2022 at 8:53 AM

    HR will have an direct impact as its connected with sallary & Inflation

    ReplyDelete
  5. Mahinda HerathMay 8, 2022 at 8:54 AM

    Inflation is timely topic in Sri Lanka and with current situation in the country HR will have direct impact on it.

    ReplyDelete
  6. Dharshana HR MBAMay 8, 2022 at 8:55 AM

    Inflation is a contemporary subject in Sri Lanka, and given the present circumstances in the nation, HR will have a direct influence on it owing to demand for employment, salary increases, and cost saving by firm management.

    ReplyDelete

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