U.S. Government Shutdown: Planning Considerations for HR Leaders

U.S. Government Shutdown: Planning Considerations for HR Leaders
October 3, 2025 4 mins

U.S. Government Shutdown: Planning Considerations for HR Leaders

Government Shutdown: Planning Considerations for HR Leaders

The federal government shutdown on October 1 could have several impacts for employers. Learn which areas could be affected, and how HR leaders can help mitigate possible risks.

Impacts for All Employers:

  1. Loss of Federal Support and Oversight: During a government shutdown, plan sponsors cannot rely on federal agencies for assistance or guidance. Inquiries directed to agencies such as the Department of Labor’s Employee Benefits Security Administration (EBSA) or the IRS will go unanswered until normal operations resume. Enforcement actions are paused, providing temporary relief for some, but this also means unresolved compliance matters linger. Regulatory projects stall, affecting employers who are awaiting new rules or clarifications – for example, a delay in Mental Health Parity or Health Savings Account (HSA) guidance.
  2. Compliance Obligations will Remain: Despite the closure of federal agencies, all legal duties remain fully in effect for employers. Obligations such as offering coverage under the Affordable Care Act (ACA), depositing employee contributions, sending required notices and meeting filing deadlines must be met on schedule. There is no automatic extension due to agency closure. Employers should use their best judgment to comply, even in the absence of agency feedback. If meeting a deadline is truly impossible, consult legal counsel and maintain documentation showing how the shutdown affected compliance, in case leniency needs to be requested later.

Additional Impacts for Organizations Who Rely Heavily on the Federal Government for Funding:

Organizations that sell to the federal government or rely on federal grants – such as federal contractors, life sciences companies, and non-profits – face greater challenges during a shutdown. These include hiring freezes and onboarding slowdowns, which can disrupt project timelines and workforce planning. It is essential to develop contingency plans for critical roles affected by delayed recruitment, ensuring key positions remain supported.

Specific Impacts:

Talent Acquisition and Staffing
During a shutdown, organizations might experience hiring freezes and onboarding slowdowns, which can impact project timelines and overall workforce planning. Certain organizations will be more deeply affected, including federal contractors, life sciences companies and non-profits that depend on federal grants. It’s essential to develop contingency plans for critical roles that may be affected by delayed recruitment, ensuring that key positions remain supported. 

Compensation and Incentive Programs
Financial uncertainty necessitates a review of compensation structures. Executive and broad-based pay may need adjustments to align with revised budgets. Financials, stock price and other business impacts from a government shutdown could make in-flight incentive metrics for employee short and long-term incentive programs unachievable. Management teams and their boards need to be prepared to take action, whether it means exercising discretion, adjusting or modifying goals, or staying the course with existing designs and payouts. HR teams can prepare by establishing flexible frameworks for incentive goals and payouts to account for regulatory interruptions or shifting business targets. 

Benefits Administration
Employer-sponsored benefit plans for private employers – like health insurance, retirement savings plans and other workplace benefits – are not directly funded by the federal government, so they continue to operate in a shutdown. However, a shutdown could delay regulatory guidance affecting benefits plans and compliance obligations. Pension plan termination approvals may also be stalled. HR leaders should evaluate where regulatory uncertainty may impact open enrollment materials and prepare to make good faith compliance assessments in the absence of clear guidance from regulators.  

Regulatory Compliance and Reporting 
Staying informed about changes to regulatory requirements or submission deadlines is critical. Collaborate with legal and compliance teams to adapt internal processes and ensure ongoing adherence to federal regulations throughout the shutdown.

Employee Communications and Support
Transparent and timely communication is paramount. Keep employees updated on any changes to HR policies, benefits or compensation. Providing access to resources like Employee Assistance Programs (EAPs) can help staff manage the stress and uncertainty associated with a shutdown.
By addressing these considerations, HR leaders can effectively manage their organization’s human capital, fostering stability and maintaining employee engagement during challenging times.

General Disclaimer

This document is not intended to address any specific situation or to provide legal, regulatory, financial, or other advice. While care has been taken in the production of this document, Aon does not warrant, represent or guarantee the accuracy, adequacy, completeness or fitness for any purpose of the document or any part of it and can accept no liability for any loss incurred in any way by any person who may rely on it. Any recipient shall be responsible for the use to which it puts this document. This document has been compiled using information available to us up to its date of publication and is subject to any qualifications made in the document.

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