The impact of increased tariffs on workforce planning: strategies for adaptation 

The influence of tariffs on production locations is significant and multifaceted. Companies looking to take advantage of the new tariff environment may consider relocating operations to countries or regions with lower tariffs or more favourable trade agreements. This trend is particularly evident in sectors like manufacturing, which often rely on global supply chains, including industries such as automotive, fast-moving consumer goods, and technology hardware.

As companies move operations, they face the dual challenge of finding qualified talent in new locations while managing the potential displacement of existing employees. A report by the International Labour Organisation (ILO) emphasises the importance of understanding local labour market dynamics to effectively plan for workforce needs (ILO, 2024). This understanding is crucial for identifying potential talent pools and assessing the skills available in new regions.

To navigate these challenges, organisations can conduct rigorous external labour market analyses, which provide valuable insights into local labour conditions. Such analyses help companies make informed decisions about where to locate operations and how to structure their workforce. Data often covers labour availability and associated skills, labour costs, labour relations trends, infrastructure, business climate, attractiveness, and risks.

Once organisations have identified potential new locations, attracting and retaining talent becomes a strategic imperative. This process begins with assessing local labour market supply and demand, which involves understanding not only the availability of workers with the desired skills but also trends in skill supply and demand over time, along with associated costs.

Labour costs vary significantly by region, impacting compensation strategies. In markets with lower labour costs, organisations may find it easier to offer competitive compensation packages; however, they must also consider the overall cost of living and the expectations of local workers. Understanding trends in labour costs is essential for effective multi-year strategic workforce planning.

Drawing on compensation survey data can inform compensation strategies, promoting competitiveness in the market. Additionally, incorporating non-monetary benefits, such as flexible work arrangements and career development opportunities, can enhance talent attraction efforts. Furthermore, fostering positive labour relations through ongoing dialogue with employee representative bodies can help balance the needs of the business with those of the workforce. This has the added benefit of enhancing an organisations’ unique employee value proposition.

In this era of change, data analytics plays a crucial role in assessing local talent supply and demand. Leading organisations draw on analytics on both internal and external labour market data to gain insights into workforce trends and their associated business impact. Predictive analytics, which employs machine learning techniques to forecast future labour market needs, can further enhance workforce planning.

To illustrate potential insights from data, our survey sampling of client organisations in the semiconductor industry shows their employees are largely concentrated in, Southeast Asia and Pacific (Mercer | Comptryx, February 2025). Any movement of work location across countries presents both opportunities and challenges. While competition for labour may be more limited in certain countries for specific types of work, the downside is that skilled labour may be in short supply and require training by the organisation.

As companies adapt to new production locations, skills-based development becomes increasingly important. Upskilling and reskilling initiatives align workforce capabilities with business needs. Organizations that invest in employee development are better positioned to navigate economic uncertainties (ILO, 2024). By fostering a culture of continuous upskilling, companies can ensure that their workforce remains agile and capable of meeting evolving demands, especially given the fluid tariff environment.

Assessing current workforce skills and identifying gaps is essential for effective workforce planning. Tools such as skills assessments and skills taxonomies—structured frameworks that categorise and define the skills required for various roles—guide organisations in this process. By understanding the skills available within their workforce, companies can tailor their training and development programmes to address specific needs. Utilising skills libraries as a starting point greatly accelerates this essential process.

Work redesign is a critical strategy that enables organisations to enhance operational efficiency and adapt to changing labour market conditions. This process involves re-evaluating and restructuring job roles, processes, and workflows to better align with organisational goals and employee needs. By clearly defining job responsibilities, optimising task allocation, and streamlining workflows, organisations can improve productivity while fostering employee satisfaction and engagement.

As businesses face challenges from increased tariffs and evolving market dynamics, work redesign becomes essential for enhancing agility and responsiveness. By modifying work processes, organisations can quickly adapt to external pressures and operational demands. Additionally, engaging employees in the redesign process allows them to express their needs and preferences, leading to greater job satisfaction and a more motivated workforce (Global Talent Trends, 2024-2025).

A well-designed work environment that prioritises flexibility and employee well-being is crucial for attracting and retaining top talent. In a competitive labour market, organisations that create fulfilling roles and a positive work culture are more likely to succeed. Furthermore, aligning tasks with employee strengths not only boosts productivity but also enhances job satisfaction, which is vital for maintaining competitiveness in industries facing labour shortages.

Increased tariffs are putting prime focus on the need to align talent strategies with business needs. The complexities of workforce planning require a proactive approach, leveraging robust internal and external labour market analytics, skills-based development, employee research, and work redesign. Organisations must adapt their workforce planning strategies by:

1. Conducting comprehensive Labour Market Analyses: Regularly assess local labour market conditions to inform location decisions.
2. Investing in skills-powered planning: Implement upskilling and reskilling programmes to align workforce capabilities with business needs.
3. Embracing flexible work models: Explore flexible work, and redesign jobs to attract a broader talent pool.

By embracing adaptability and continuous transformation, companies can navigate the challenges posed by tariffs and emerge stronger in an ever-changing economic landscape. We encourage readers to share their experiences or strategies in adapting to tariff changes, fostering a sense of community and discussion.