Given the current labor shortage and high demand for qualified workers, it might seem strange for anyone to bring up hiring freezes as an important topic to discuss during hard economic times. Yet, hiring freezes are still happening in the United States. In fact, employment experts have seen an increase in hiring freezes over the last month in the retail and tech industries and expect more to come across all industries as inflation, decreasing consumer demand and rumors of a future economic slowdown are prompting many companies to re-evaluate their hiring efforts.
What Is a Hiring Freeze?
When a person freezes water, they halt its movement until they choose to expose it to a higher temperature to return it to its previous physical state. Economists, employment and labor experts, and others apply this same idea to hiring processes. The phrase "hiring freeze" describes when a company decides to temporarily stop the continuing or forward movement of most of its hiring processes for open positions created by active growth measures or employee resignations, including candidate searches, job fairs and recruiting, remote and in-person interviews and employment offer discussions.
During a hiring freeze, a company typically halts the hiring of at least full-time employees. If the company still needs workers, management focuses on hiring part-time, temp agency, freelance and independent contract workers who can perform the tasks needed on a temporary basis. They might also task members of their current workforce with additional job responsibilities.
How Long Does a Hiring Freeze Last?
The length of a hiring freeze depends entirely on the needs of the company that initiates it. As already noted, companies freeze hiring as a current crisis or preemptive cost-cutting measure. Inflation coupled with job seeker and worker demands for higher wages can prompt companies to pause hiring while they evaluate how best to handle the growing cost of doing business. As a preemptive measure, a hiring freeze can help a company prevent future layoffs. If a company anticipates a future slowdown of the economy and decrease in revenues that might make it more difficult to pay wages to existing employees, a hiring freeze allows them to save money. They can later use that money to help them both pay workers and stay afloat.
Some companies freeze hiring processes because of financial difficulties related to major manmade or natural events that adversely impact their finances or productivity. They also halt hiring because of raw material access and supply chain disruptions, brand reputation downturn after a product failure or social issue and cashflow problems. Additionally, a company that hired a lot of employees or exceeded their production expectations might pause hiring processes while they re-evaluate their worker needs. For example, many companies increased their hiring efforts during the worst parts of the pandemic to offset absences caused by COVID-19, which resulted in overstaffing once full-time employees started to return from leave.
Lastly, they might freeze hiring because they're faced with a job seeker's rather than employer's market. With the former, job seekers and potential candidates are better positioned to make demands for higher wages and extra benefits because more jobs exist than workers seeking employment. Since many companies can't afford to pay more, they must freeze hiring until the market shifts in their direction. Also, when companies must compete for talent, they might issue a hiring freeze after losing too much money to hiring processes. In a job seeker's market, a worker is more likely to cost a company money by ghosting an interviewer after finding a position at another company or quiting their new position shortly after accepting a job and receiving expensive training.
What Happens to New Hires?
Many job seekers wonder if an employer can withdraw an offer of employment after they accept it. A company typically rescinds an accepted offer because of something negative about the candidate's history that pops up during a background check. Since most employers don't want to receive a bad reputation for rescinding job offers, they won't rescind an offer for other reasons unless something drastic occurs in the market and they're forced to initiate a hiring freeze to stop hemorrhaging money or save the jobs of their current full-time employees.
That said, it's important to note that companies can rescind offers for any reason. Although a company might face legal ramifications depending on a variety of factors, the United States doesn't have a federal standard that require employers to keep their promises to new hires. Several states also have "at-will" employment laws that allow employers to dismiss workers and rescind job offers for any reason. Some exceptions do exist: For example, an employer might face legal troubles if the contract a candidate signed stipulated that they couldn't rescind the offer without "just cause" or the worker is involved with a union that has previously arranged a similar protection.