How does a Country's Economy Impact an Organization's HR Department?

Before we can move ahead to understand the topic in-depth, let me give you two examples.

Example - 1

Imagine a student who is determined to secure the highest score for a particular semester. Although he is determined about his goal, don’t you think there are other determinants that either enforce or distract him? It may include the parents, teachers, the syllabus, important television programs, friends, and so on… But still, it’s his determination that matters the most despite the other influencing factors and the way the goal is achieved. 

Example - 2

Similarly, when we consider an organization’s example, almost every business begins with the motive of earning more profits (unless they are Non-Governmental Organizations). Well, any statement seems much easier and pleasing to ears when we mention profits. Isn’t it? But then, again, is it as easy as said? Definitely not. Organizations, too, have other factors that influence the company’s functioning and making decisions.  

Now, coming to the point, it is important to understand that there will always be certain factors that play an influencing role. However, the impact might vary either positively or negatively depending on the situation and one’s ability. That’s where preparing the businesses strategically and potentially is quite necessary in order to withstand any circumstance. And when we talk of companies, generally, the following are the few external factors that affect its functioning - 

  • Economic Factors
  • Political Factors
  • Social And Cultural Factors
  • Technological Factors

Well, today, we shall discuss one of these factors a little in-depth - i.e., “Economic Factors.” Change is one aspect that has always remained to be without changing. And while we experience changes appearing and disappearing each day in our lives, the economy of the country is no exception. And the constant change in the economy has been influencing business practices widely. 

But then, what are they? How do they impact? - these are quite common questions that pop up concerning the topic. Well, now let us discuss the various aspects of the economic factors that affects the business.   

The Influencing Aspects of the Country’s Economy on the Organization's HR Department

man in black suit jacket sitting beside woman in brown long sleeve shirt

Being one of the important external and uncontrollable factors affecting the organization, it’s quite essential to understand how. And as we are discussing the impact on the human resource department, the realization is mandatory. The effect of the country’s economy is not just limited to the functions related to the talent pool but is also slowly emerging to influence the organization’s HR department’s ability to recruit anyone at all. 

As a matter of fact, the HR department has already entered into a new phase where its scope and operations are redefining itself along with the technology’s contribution. But then that alone shouldn’t be the concern. The awareness and the willingness to be prepared for the impact that we, as an HR department, are or will be faced with is inevitable. And in this regard, let us discuss a few most significant economic aspects of the country that have a major impact on the company’s human resource department.  

Workforce Demographics

Although a known phenomenon, I would like to emphasize that - human resource deals with “the people.” Undoubtedly, the population of any country has all the potential for the required workforce to be generated. But then, the concern is that there is a rotation of the workforce that exists, whether we agree to it or not. You are already facing the scenario where one generation of the workforce retires, the other begins. 

There are two important aspects that cannot be missed to discern. Firstly, as said, the population is indeed large, and the availability of the resource is good enough, but that doesn’t mean that the entire available population is fit for your organization. If properly analyzed, the eligible candidates are significantly less compared to what is expected. Thus, identifying the right ones is a major concern.

Following the first, where the eligible candidates are identified, how to attract them to your organization, wherein you are definitely not the only one looking for the right ones, leads to your second concern. However, there is hardly any control you have over it, but then, you can prepare and build up strategies for the demanding circumstances. 

Monetary Policies

Talking about monetary policy, it is one of the aspects that undergoes constant changes according to the occurring and recurring situations of the economy. It is often referred to as controlling and limiting the movement of money. However, the target is to promote the stability and the growth of that particular economy through a rate of interest. 

Apart from this, monetary policies also focus on establishing the stability of the prices and gradual rise in employment opportunities. This is where a company’s human resource comes into the picture, that many don’t realize. The employment opportunity that’s brought forth by the monetary policies is to be wisely acted upon. The manager has to play a key role in acquiring talent, discerning the pay, and effective cost management of the company that’s spent on the human factor.


The integration of the different countries in the world is known as globalization. This integration is attained by eradicating the hindrances that occur due to the culture, language, etc., for the ultimate motive of increasing the collaboration among the countries. It is essential because, as a study by also mentions that better collaboration with strong skills can generate the required output. Therefore, once the collaboration is achieved, it no doubt paves the way for businesses to join hands. Well, when we say the business’s collaboration, it also includes the sharing of human resources or manpower. 

And because of this growing integration among the businesses, the human resource manager is expected to take up a challenging role in creating a competitive edge for the organization. The volatility in the nature of businesses has led managers to constantly rethink and strategize their functions, especially when it comes to the critical business aspects that contribute to healthy competition.

The ultimate goal here is to multiply the wealth, services, products, etc., with the shared workforce that the inter-countries relationship contributes to. Basically, four prominent types of shared capital have led to globalization. And no doubt, it includes human capital as well. The other three are Resource, Finance, and Power. 

Employment Condition

You can consider that there is a market that analyzes and reveals the necessity and availability of the candidates. In other words, the demand and supply that exists in the market concerning the employable candidates. It has a great impact on the company’s HR management. Because, according to the availability, the recruitment practices and strategies need to be redefined. 

It’s impossible to expect development in the practices without at least a few required changes. What was is so very different from what is. And there are 3 other factors that determine your decision concerning recruitment. They are - 

  • Work profile - it includes required qualifications and abilities.
  • Geographical factor - concerns the willingness of the employees either to migrate or to commute.
  • Competitors - whose organizations fall under a similar domain as yours and looking for the similar candidates 

National Income

One of the significant parts of economic factors is the national income. It has a major impact on the per capita income of the employees. Especially when it comes to the salary or wages, it affects its structure at the macro level. And thus, it results in the differentiation of the payments when they are assigned to the employees.   

The impact is not limited to the domestic circle alone but also among the countries. We know that the currency and its value differ from country to country. And when there are companies from different countries entering into businesses, there arises a major concern until they agree upon a common ground. 

However, the difference is definitely in the government’s hands. Still, then, the human resource managers are to be aware and accordingly determine the salaries for their employees, which is a challenging task. Ultimately, no organization can function without considering and adhering to the regulations put forth by the government.

Inflationary Pressures

We have already discussed the effects of the national income. But along with that, the pressures that arise due to inflation have the ability to influence the payment made to the employees hugely. 

The salaries of the employees are in a way or the other twinned with the cost of living. And as mentioned earlier, even in this case, there is a difference among the countries. At times, the difference can be observed within the country as well. It differs from place to place, and city to city, according to its development. The human resource manager is expected to figure out the right pay concerning all these factors. 

It is quite challenging because, as we are talking about inflation, as and when the country experiences inflation, there is a need to increase the payment of the employees in order to meet the expenses.  


Reaching the end of this writing, hopefully, the organization’s human resource department understands the need to encourage and strengthen them in being agile to the rising circumstances. The department handling the key resources called “people” is indeed the backbone of any organization. 

But it’s even important to make sure that they are aware and prepared to face the uncontrollable economic factors. Because, in today’s business-oriented scenario, anyone can start a business, but it is only by possessing an agile personality you will prosper.