How to Know If Your Company Needs a Hiring Freeze

Between recruiting costs and total compensation, spending money on employees is just a fact of doing business. But if you’re staring down the barrel of an economic downturn or an internal financial crisis, you may be forced to take a long, hard look at your budget.

Hiring freezes can cut immediate employee costs, though teams with existing vacancies will need to reallocate work to existing staff instead.

For HR departments, it can impact workforce planning, talent acquisition, and employee morale. Hiring freezes require HR to balance operational needs while navigating and managing the existing personnel effectively.

Read on for advice on how to navigate these issues and implement a hiring freeze.

Key Takeaways for Hiring Freezes

A hiring freeze is when an organization stops taking on new staff. This is usually temporary but can be indefinite. You may implement a hiring freeze because of an economic downturn, a recession, inflation, or organizational restructuring.

The goal behind pausing recruitment is to reduce operational costs without resorting to more drastic measures like lay-offs. Remember, you can always come back to taking on new employees later.

There are full hiring freezes and partial ones.

• Partial: This hiring freeze only applies to non-essential roles, with key ones still being filled. This may continue until things get back on track again.
• Full: This is a complete halt to the hiring process where no new hires are taken on at all.

What Is the Difference Between Hiring Freeze and Attrition?

A hiring freeze is a temporary, deliberate halt on taking on new staff. Attrition is often part of a hiring freeze and describes a gradual reduction of employees as they leave of their own accord. Attrition may occur due to retirements or voluntary departures that aren’t replaced, for example.

How Do Hiring Freezes Benefit Businesses?

It’s not an easy decision to put a halt on taking new personnel in, but there are benefits in doing so. These include:

• Cost Savings: Reduces costs in the short-term. This is because you’re limiting cash outflow as you don’t have to pay new wages or recruiting costs. However, there are many long term costs and inefficiencies, particularly with turnove and lost productivity.
• Protects Employees from Redundancies: Protects existing personnel from mass layoffs. This means your budget is better protected, making it easier to pay existing employees.
• Can Create Internal Job Opportunities: Redistributes work,‌ giving rise to new role or reskilling opportunities, as existing employees take on additional responsibilities previously handled by other roles.
• Strategic Planning: Requires HR and business leaders to reevaluate talent needs and long-term goals to help align future hires with new objectives.

Why Should You Implement a Hiring Freeze?

We’ve dealt with the what and the how, but why would an organization stop hiring new staff? Let’s have a look in more detail:

Budget Concerns

This can help with the financial records and end-of-year analysis, which can help to balance the books and set next year’s budget.

Organizational Restructuring

With less going on, you can concentrate on moving things around as HR teams will have more time to spend on internal restructuring rather than recruiting.. If there’s an increase in workload, you should redistribute it to the existing workforce.

But be careful to avoid overloading your employees, as this can lead to burnout and low morale. This could in turn cause them to leave—so be careful when taking this approach.

Mergers and Acquisitions

If your company is going through a merger or acquisition, the new company may have its own policies and procedures. Halting the hiring process can give time for both parties to get on the same page. Doing this helps both parties to gel together and ensure a smooth coming together.

Pros and Cons of Hiring Freezes

Thinking of halting the uptake of new staff we’re going to look at the pros and cons to help you decide if it’s the right thing to do in your organization.

Pros of Hiring Freezes

• Reduces company expenses
• Allows you to focus on restructuring and company organization
• Can protect existing employees from redundancy
• Offers short-term flexibility

Cons of Hiring Freezes

• Focusing on cost per hire doesn’t account for broader labor costs, e.g., overtime, engagement, individual and company performance, and absenteeism
• Higher turnover due to anxiety over company’s future
• Skill gaps as key positions remain unfilled
• Significant negative impact on morale
• Burnout due to an increase in current employees’ workload

10 Steps to Introduce a Hiring Freeze in Your Workplace

A hiring freeze might sound simple in theory, but it’s easier said than done. To make it simple for you, we’ve condensed the key steps, so you can apply them if needed.

1. Communicate Clearly. Inform all stakeholders involved about the decision and the reasons for it. Be transparent and start with a communication plan for all employees. Avoid using vague terms and be clear, direct, and to the point.
2. Allow employees to ask questions. Encourage dialogue with employees—avoid making it a one-way monologue. This way everyone will feel involved in the process, and this sense of inclusion can put their mind at ease and encourage them to stay with the company.
3. Focus on the outcomes. Concentrate on forming a narrative of the hiring pause’s purpose and how it will be advantageous to the company in the long run.
4. Define the scope. Determine whether the hiring freeze will be company-wide, or specific to certain departments. Clarify whether it’s short-term or indefinite.
5. Halt current job requisitions. Stop all ongoing job requisitions in the pipeline. Inform all HR managers to stop recruiting new staff and stop looking for new candidates.
6. Review existing offers. Assess all ongoing hiring and determine whether it is worthwhile continuing with them.
7. Manage internal movement. Address internal transfers or promotions that may be affected by the decision. Reassess current staffing needs and adjust workloads or redistribute responsibilities if needed.
8. Monitor and evaluate. Keep a close eye on company morale; what’s the mood? Use surveys to get a sense of how employees are feeling.
9. Plan for the future. Plan for what to do once the hiring freeze is over, with strategies to implement the recruitment phase again when appropriate.
10. Document the process. Keep detailed records of decisions, communications, and adjustments.