A hiring freeze occurs when an employer pauses or cancels the hiring process for open positions, ceases to create new positions and stops accepting job applications. Hiring freezes can take different forms. For example, the employer may keep hiring only for essential roles and stop hiring for nonessential roles. Or the employer may stop hiring only for a specific department. Oftentimes, hiring freezes happen suddenly and are intended to be temporary.
The following are some of the most common reasons why employers implement hiring freezes:
- Financial distress. If the company is not doing well financially, the employer may decide to stop hiring for the time being.
- Economic slowdown. In times of economic uncertainty — such as the early days of the COVID-19 pandemic — employers may institute hiring freezes for the foreseeable future. During this time, the employer closely monitors the state of the economy and the company’s financial position.
- Budget shortfall. If the employer predicts that recruiting new people will put a hole in their budget, he or she may opt for a hiring freeze.
- Shifting market conditions. Changes in supply and demand within the employer’s industry may trigger a hiring freeze. For instance, decline in consumer demand for a given product can negatively impact companies within the supply chain, including the employer who sells that product.
- Disasters and national emergencies. Unforeseen natural or human-made disasters or national emergencies, such as pandemics, may cause employers to stop hiring until things improve.
- Company restructuring. The employer may stop hiring because he or she is reorganizing its management team, certain positions or a specific department.
Hiring freezes are usually a preferred alternative to layoffs. They minimize operational disruptions, allow you to keep your existing staff and help you remain cost-conscious during times of uncertainty. However, they may also lead to current employees having to take on additional work — which, if handled inappropriately, can adversely impact employee morale, productivity and turnover.
If you decide to adopt a hiring freeze, be sure to handle the situation in a positive way.
Best practices for managing hiring freezes:
- Promptly inform job candidates of the hiring freeze. If the freeze is temporary, let them know what to expect in the future. For example, will you reach out to them once the position reopens?
- Communicate the situation to your hiring managers in a timely manner. For example, send them a letter stating the start date of the hiring freeze, whom the freeze will impact, when you expect the freeze to end, why the freeze needs to happen and how the freeze can benefit the company.
- Nurture your existing employees. Keep providing benefits, perks, rewards, performance appraisals and pay raises. Approach increasing employees’ workload very carefully. Talk to employees about it first, and take an objective look at their current duties to see whether there’s room for more work.
Before you implement a hiring freeze, make sure it’s the best course of action for your business.