HR Leaders Brace for Shutdown Impact

With the federal fiscal year ending Sept. 30, SHRM has been examining the potential consequences of Congress failing to pass an appropriations or stopgap funding bill. If they fail to do so, or if any temporary stopgap measure expires, the Antideficiency Act requires federal agencies to halt all but essential services, creating significant challenges for many HR professionals.

During a shutdown, most federal employees are furloughed without pay, while excepted employees — those in critical roles — continue working but are also unpaid until appropriations resume. Retroactive pay is typical but not guaranteed until Congress acts. Some employees may qualify for unemployment compensation, which must be repaid if backpay is later received. Health coverage and seniority remain intact, and furloughs do not break service.

The impact of a shutdown extends beyond federal employees. Federal contractors face paused contracts and financial losses, often without back pay. Grant administration stops, disrupting payments and services at the state and local levels. Businesses relying on federal services — such as permitting, licensing, and loan processing — experience delays. For example, the E-Verify system becomes unavailable, requiring employers to complete Form I-9s and resume E-Verify queries when service returns. Regulatory agencies such as the Equal Employment Opportunity Commission and National Labor Relations Board furlough most staff and suspend nearly all operations except for essential functions. Investigations and case processing are delayed, and the Occupational Safety and Health Administration halts nonemergency activities.

To address these challenges, SHRM Government Affairs and SHRM Thought Leadership have launched and completed a rapid response study to assess the impact of the shutdown on organizations, workers, and communities. Findings will be shared with policymakers to inform decisions and encourage a timely resolution.

A government shutdown would have immediate and far-reaching effects on workers and their families. With 37% of the non-USPS federal workforce — up to 860,000 employees per day — facing the risk of being furloughed, many households would face sudden income loss and uncertainty about meeting basic needs such as housing and food. Working caregivers are especially vulnerable, with 59% concerned or very concerned about finances, 51% about job stability, 49% about food security, and 47% about mental health — all significantly higher than noncaregivers.

Even a brief shutdown of 1-3 days could disrupt the daily operations of 25% of organizations and hinder the ability of 23% to meet yearly financial goals, while a shutdown lasting more than a week would affect 64% of organizations’ operations and 49% of their financial objectives. Eighty percent of workers anticipate a negative impact on their level of stress, 76% on their morale at work, and 75% on their ability to focus and remain productive, making it harder for families to maintain stability.

Many organizations are unprepared, with 47% of HR professionals saying their workplaces are minimally or not at all prepared, and 14% having no plan in place. This leaves employees with little support as hiring freezes, project delays, and layoffs become likely.

The shutdown’s consequences extend beyond individual families, threatening local economies and community services — 89% of workers believe their communities would be affected. Most workers see the crisis as a sign of government dysfunction, with 80% attributing it to a lack of civility among officials and 77% saying it would weaken their trust in the federal government. Ultimately, a shutdown would jeopardize financial security and emotional well-being for millions, leaving families to navigate uncertainty with limited resources.

HR professionals should review agency contingency plans, identify essential roles, and update internal policies for furloughs, leave, and communication. Clear, timely updates to employees about work status, pay, and benefits are vital. Monitoring legislative developments is also important, as congressional action determines retroactive pay and resumption of operations. For those relying on federal contracts or grants, reviewing contract terms and communicating with federal partners can help mitigate risks.

While the duration and scope of a shutdown remain uncertain, HR leaders who plan ahead, communicate effectively, and support their workforce will be best positioned to manage the disruption. SHRM will continue to provide updates and share insights from its rapid response study as results become available.