Digital Transformation In Human Resource Management: Its Impact On Employee Performance In The Industry 5.0 Era

Abstract

The transition from Industry 4.0 toward Industry 5.0 has repositioned the human workforce from a peripheral component of automated production systems to the central, value-defining element of organisational strategy, placing renewed emphasis on human-centricity, sustainability, and resilience alongside continued technological advancement. Within this shift, human resource management has itself undergone substantial digital transformation, encompassing the adoption of artificial intelligence in recruitment and selection, data analytics in performance management, cloud-based human resource information systems, and digital learning platforms for continuous employee development. This article examines how digital transformation in human resource management affects employee performance specifically within the human-centric context that Industry 5.0 introduces, addressing the theoretical and practical tension between technology-driven efficiency and the renewed organisational commitment to employee wellbeing and human agency. Using a systematic narrative literature review method that synthesises recent academic literature on digital human resource management, Industry 5.0, and employee performance, together with current industry evidence on human resource technology adoption, this study finds that digitally transformed human resource practices, including AI-assisted talent acquisition, digital learning and development platforms, data-driven performance management, and employee self-service systems, are positively associated with employee performance through mediating mechanisms of engagement, perceived organisational support, and psychological empowerment. The review further finds that this positive relationship is contingent upon Industry 5.0-consistent implementation conditions, including human oversight of algorithmic decisions, transparent and explainable use of employee data, continued investment in reskilling and upskilling, and preservation of meaningful human interaction within otherwise automated human resource processes. Where digital human resource management is implemented in a purely efficiency-maximising manner without these human-centric safeguards, the review identifies a documented risk of diminished trust, algorithmic aversion, and disengagement that can offset or reverse the performance gains technology adoption is intended to produce. The article concludes with an integrative framework distinguishing human-centric from purely efficiency-driven digital human resource management, and offers implications for organisations seeking to realise the performance benefits of digital transformation while remaining aligned with the human-centric imperative of Industry 5.0.