Should my business implement a hiring freeze in 2022?

By Alex Hattingh, above, Chief People Officer at Employment Hero

As the world watches infamous tech giants such as Google, Tesla and Meta implement hiring freezes, small businesses are left wondering if they should follow suit, but what are the benefits and what should you consider? You aren’t wrong if you’re concerned about the impact a hiring freeze might have on your team morale or employee productivity – it’s only natural they might be nervous about their workload with a smaller team.

What is a hiring freeze?

True to its name, a hiring freeze is when a business stops hiring new employees to fill company positions. It often happens when there is uncertainty about the future. Things that can cause uncertainty could include: economic downturn, stock price, inflation, and bleak forecasts. The decision to make a hiring freeze is usually down to the company owner and/or board of directors. It impacts employee turnover and salary budget. A hiring freeze can mean many different things depending on the company implementing it.

How long does a hiring freeze last?

There isn’t a one-answer-fits-all timeframe for this. Hiring freezes can last any length of time and it varies company to company.

Why are hiring freezes happening?

This flip might feel a bit like whiplash given the hiring spree we saw not long ago after The Great Resignation. But with recent world events, many believe hiring freezes to be a domino effect off the back of the ongoing Ukraine war and the global rise in inflation driving up costs affecting our daily lives: from the cost of living, to the cost of running a business.

Does a hiring freeze mean layoffs?

When companies implement hiring freezes, often it means a pause on hiring for new positions. Though in this case, it is uncertainty that is playing a key role in the decision to lay off staff. To understand this, it’s best to unpack why hiring happens. One of the biggest motivators for any company to hire aggressively is when management believes that the economy and events align so that their business will profit and prosper. While demand is high, growth is natural in order to meet this demand.

On the other hand, if management is concerned about the future, especially with falling stock prices and the rising cost of inflation, this is when they’re likely to pull the plug on hiring plans. Pressing pause on your hiring strategy is a good place to start – you’ll be able to get some time back for your recruitment team to review what their immediate needs are, and how they see the wider company evolving so that you can start preparing for your future recruitment rounds.

You may also want to use this time to revisit your employee value proposition (EVP). Which is exactly why now is the time to consider offering remote work benefits, flexible work and more – to really give you a competitive edge in the modern workplace.

What to do after you implement hiring freezes

If you do decide to implement a hiring freeze for your small business, there are a couple of things you can focus on to minimise turnover and look after your team’s wellbeing.
1. Recognise hard work – It’s more important than ever to make sure you recognise your team’s hard work.
2. Focus on minimising staff turnover – Staff turnover is the measurement of the number of employees who leave your business during a specified timeframe (which is usually a year). You’ll want to focus on minimising this figure because training new staff can be expensive for both time and money reasons.
3. Don’t forget about team bonding – Having breaks and bonding as a team leads to an increase in productivity and can help foster a stronger sense of rapport amongst team members.

What should your hiring managers do during a hiring freeze?

One of the biggest challenges hiring managers will have to face is conveying the news of a hiring freeze, which will be disappointing for those on the receiving end, and nerve-racking for those who are delivering. After all, we’re only human. There’s also a race against time to pause any open roles to prevent new applications from rolling in so that you can focus on reaching out to current candidates and update them. Equally challenging will be the need to rescind any offers already made and ensure that the process adheres to that country’s employment law and may need a legal review before it is actioned.

One of the biggest risks you should consider if you choose to go down this path is known as its legal term ‘promissory estoppel’. This is a legal doctrine that supports a harmed party in enforcing promises made, and is the most obvious claim for damages that a rejected candidate can pursue. Of course, there are other conditions where rescinding job offers can prompt legal consequences that hiring managers will need to be aware of. Whilst these vary from country to country, general ones include misrepresentation, discrimination and breach of contract. All the more reason to make sure those offer letters are reviewed.

My company is growing fast, is now a good time to recruit?

Yes, if you are able to hire or even if you are pausing all recruitment efforts, now is a great time to look for talent. You will of course need the best talent to continue your growth journey and deliver plans.

With some of the larger corporate businesses losing talent for various reasons, now is a good time for SMEs to snap up these experienced individuals. Meet with hiring managers and team leaders to talk about what their current needs are and how they would like their teams to evolve in the future. Start conversations with people who you think would be a good fit for a role and who meets the needs of your business now and in the future – channels such as LinkedIn are good for getting the conversation going.