- « Previous blog
December 8, 2022
- Next blog »
You might be worried about how a hiring freeze would affect you and your employer if the company where you work declares one. To know what to do in this scenario, it’s crucial to understand what a hiring freeze is and why businesses use it. You can better comprehend the advantages of a hiring freeze by learning why businesses adopt them.
What is a hiring freeze, why organizations use them, how they affect current employees, how to see them positively, and answers to frequently asked concerns regarding this procedural adjustment are all covered in this article.
What is a hiring freeze?
When an employer temporarily forbids the employment of non-core personnel in an effort to cut costs through expense guidance, this is known as a hiring freeze. This usually happens when a business is having financial issues or is being cautious with its spending. In times of recession or other economic or market pressure that could lead to the company realizing output overcapacity, where a company produces more than the demand for a good or service, management may also impose a hiring freeze. The early aggressive growth projections may have contributed to this overproduction when predicting their revenue growth for the year based on their strategy.
Long-term or short-term hiring freezes are possible, but the main goal is often to avoid firing current staff. Hiring freezes can be established when no new roles are created, and vacated positions are not filled with workers who would have left the organization. Both failed, and successful organizations that are experiencing unforeseen financial problems may implement hiring freezes. Management could decide that cutting expenses is the best short-term solution in the wake of a rapid economic downturn, catastrophic event, product failure, unexpected cost, or cost increase.
Employers can reduce or eliminate non-essential staff thanks to hiring freezes, which effectively stop the growth of payroll expenditures. Hiring freezes might let management combine key employees and reorganize workgroups, which would boost the productivity of producing vital products and services for clients. A company must take all reasonable steps to increase revenue, even with a hiring freeze.
What are the reasons for hiring freezes in companies?
Every company is operated to guarantee its long-term survival, especially in difficult situations. Typically, this is in line with the priorities of the business. The main objective is to preserve capital to keep operations afloat when a firm experiences substantial cash flow issues due to poor market circumstances or a considerable decline in revenue. In some situations, a company’s management may decide to impose a hiring freeze. All positions deemed required to carry out the duties of the corporation may be exempted from the hiring freeze by the head of any executive department, but none of the non-essential positions may be filled until the hiring freeze is lifted. Here are several scenarios when a business would think about implementing a hiring freeze:
- Excessive salary budget for the quarter
- There is a decline in liquid assets
- Waiting for new hires after layoffs
- Changes in the market conditions
- Global economic crisis
Advantages of Hiring Freezes
- Reestablishing financial stability
A hiring halt would reveal and stop superfluous actions. Reducing these expenses can result in the return of financial stability.
- Boost Performance
With hiring freezes, management may be able to reorganize workgroups and combine staff to increase productivity in providing customers with the needed products and services.
- Enhance teamwork
The management would need to work on the current team by concentrating on training and reward programs as the team is constrained from growing. This may foster a sense of loyalty and empowerment in them, which would directly increase output. Employees aid in problem-solving by using the many communication channels that have been opened up.
- Reconsider your business
It provides an opportunity for the company to review its growth plans and operational procedures. The company might reevaluate its business plans to reflect current market changes. This aids the company in reviewing and revising its operating procedures and policies and implementing improvements. By doing this, the business is able to better position itself for the future in the cutthroat business environment.
- Reducing to an appropriate size
The goal of downsizing is to make the operations and size of the department more manageable. Because the problem is under control, the company is better positioned to serve clients. The profit is good when the problem is managed.
- Security for current employees
A hiring freeze may not always be detrimental to employees, despite the fact that it typically implies financial issues inside a company. Instead, it might tell staff members that although no new hiring would be made, existing jobs are secure.
Disadvantages of Hiring Freezes
- Employee leaves
Some of the roles may be combined to increase efficiency because the main goal is to reduce headcount. Some employees may lose their jobs if roles and responsibilities are integrated.
- Negative publicity
Since employment freezes are typically related to financial hardship, certain businesses, especially creditors, may become hesitant to do business with such a company. Even if financial problems were not the cause of the hiring block, the company’s overall reputation and brand would probably suffer.
- Affects financial prosperity
A hiring freeze may not have the anticipated impact on the company’s profitability, even if the goal is often to cut costs. Productivity is unlikely to rise significantly, and a company’s profitability is frequently affected when the business environment is getting worse.
- Less development-oriented possibilities
Employees may perceive that there is no opportunity for promotion if there is a hiring freeze. This is because if one employee is promoted, the business might not be able to find a replacement since they cannot hire new workers. This might be a deal-breaker for employees who are driven to advance in their careers and may look for a way out of the organization.
- Burdensome Responsibilities
The corporation would place additional demands on its workers that were meant to fall under the purview of the new personnel. Due to the added job obligations brought on by the vacant roles, this undesirable circumstance may cause employees to become anxious and/or disengaged.
A hiring freeze by top companies
Uber implemented a hiring freeze in May 2020 as a cost-cutting strategy in response to the Covid-19 pandemic that had decimated economies. When it came to communicating with its staff, Uber was highly active. Nikki Krishnamurthy, Uber’s Chief People Officer, wrote the following in an email to the company’s staff:
“ELT has spent a lot of work over the past few days creating plans for this challenging time for Uber and the entire world as the COVID-19 problem escalates quickly. In order to do that, we must foresee probable effects on our business and take difficult but decisive action now to prepare for them. We have chosen to halt net new hiring across the board until May 31. Following that, we will reassess and either stick with our current course of action or start recruiting again.”
According to CNBC, Google instituted hiring freezes and reduced its marketing budget by as much as 50% for the remainder of 2020 in April. The business has informed its marketing staff that it is cutting spending and has implemented a hiring freeze for both full-time and contract workers. A worldwide director wrote a note to staff members saying, “There are budget cuts and hiring freezes happening across marketing and across Google,” according to CNBC. We were told to slash our budget for H2 by around half, along with the rest of the marketing.
Google shares decreased by almost 2% in response to the hiring freeze news, confirming the impact of public opinion in light of the hiring freeze intentions. The 2% decline in share price indicates a shift in investor sentiment and a rise in the level of uncertainty attached to Google shares.
A Google representative said that the business was delaying hiring but clarified that there was no company-wide hiring freeze. This demonstrates how hiring freezes can be applied to a particular division or region.
How to Take a Positive View of the Hiring Freeze
Here are a few enlightened perspectives on using refrigerators at work-
- Your employer is cost-conscious.
- Your company benefits from having you.
- Your chances of being given leadership opportunities are higher.
- Team building
The bottom line
It is not shameful to implement a hiring freeze, and doing so does not indicate failure on your part. It is a band-aid solution to keep your most important and valued staff on board while still ensuring the success of the company.
Also Read – 10 Perfect Ideas for Improving Employee Engagement
Join 20,000+ Subscribers
Get exclusive access to new tips, articles, guides, updates, and more.