A hiring freeze is a valuable indicator of a country’s market and can provide valuable insights into its economic conditions. According to CNBC, 20% of companies in Asia Pacific implemented hiring freezes in 2022, with 40% of them only recruiting for essential positions.

In this guide, we will explore the reasons and impacts of hiring freezes. We also provide strategies to help HR leaders navigate them, ensuring your business remains stable and financially secure.

What is a Hiring Freeze?

Hiring freezes are periods where companies refrain from hiring new workers. These freezes, which can be temporary or indefinite, are typically implemented to reduce costs. During a hiring freeze, companies do not fill vacancies left by departing employees and do not create new positions.

It’s worth noting that a hiring freeze usually impacts non-essential positions. In other words, companies may still hire employees for essential roles, work with freelancers, or hire part-time workers if it is cost effective.

By doing so, the critical business functions such as research, development, production, and sales can continue uninterrupted. Disrupting these core operations could lead to a decrease in revenue, which goes against the purpose of implementing a hiring freeze. 

So, the question is – why would companies resort to such measures?

Hiring freezes are often announced in response to financial difficulties, as a proactive measure to prevent financial strain, or as a response to economic slowdowns, recessions, overcapacity, and other market circumstances.

By minimizing operational and payroll costs during times of financial hardship, companies can avoid a more drastic measure for cutting costs such as layoffs and mass firings. 

Reasons for Companies to Implement Hiring Freeze

As an employer, understanding the reasons for hiring freezes helps you decide when to impose and lift them.

Market changes

Market conditions may change, decreasing revenue and limiting profitability. As such, they might drive even the most successful businesses to cut costs via hiring freezes. Companies may choose to implement a hiring freeze if they anticipate an industry shift or in response to unexpected changes in market conditions. 

For instance, a significant increase in paper costs could impact the publishing industry, forcing a publishing house to implement a temporary hiring freeze due to financial constraints. 

Global crisis

A global crisis can have repercussions on businesses worldwide, leading even successful companies to implement hiring freezes. During these times, companies might halt non-essential recruitment globally while monitoring global trends, maintaining this measure until an effective crisis response plan is in place. 

For example, consider the impact of disease outbreaks, such as the COVID 19 pandemic, which significantly minimized domestic consumption and purchasing power. Coupled with containment measures, this resulted in a worldwide crisis.

Many governments and organizations, including the Philippines government, with its  ‘Bayanihan to Heal as One Act’, implemented crisis response plans. However, despite these efforts, many are still facing challenges. As a result, it is unsurprising that many companies implemented hiring freezes. 

According to the Business Inquirer survey, over 60% of responses in the Philippines anticipated negative business impacts from the pandemic, with half reporting that they have already implemented hiring freezes.

Budget concerns

Suppose you notice that your company’s budget is insufficient to cover additional salaries, benefits, and recruitment costs, and other hidden costs. In that case, you may decide to temporarily halt recruitment until the company achieves better financial stability. 

Implementing a hiring freeze allows companies to avoid laying off current employees and prevents budget deficits or overspending issues. To exemplify, you might find that the total cost of the hiring process exceeds your quarterly employee salary budget, it may be beneficial to impose a hiring freeze until the start of the new quarter or until the balance sheet is balanced.

Read more: The Cost of Recruitment: HR’s Guide to Creating, Tracking and Implementing a Salary Budget

Potential liquidity concerns

Liquid assets are assets easily convertible to cash, including cash, marketable securities, and market instruments. These assets are crucial for meeting short-term obligations such as wages and vendor bills.

If you’re worried about insufficient liquid assets, review your company’s liquidity ratios for clarity. If the ratios confirm your concerns, consider allocating a portion of your salary budget to finance your current assets. Implementing hiring freezes can also serve as effective short-term solutions, but this should be viewed as a last resort.

Impending layoffs

As mentioned previously, implementing hiring freezes can help avoid drastic measures such as layoffs due to financial constraints. This approach is a key strategy for maintaining your company’s stability, providing much needed job security for your current employees during a challenging time. 

Picture this: your company faces some financial turmoil, leading to widespread anxiety among employees who fear potential job losses. By communicating that no layoffs will occur and that the freeze only applies to non-essential roles, you can ease their concerns. This approach is likely to increase their willingness to adapt to necessary structural changes, enhance their loyalty to the company, and reduce attrition rates.

Hiring Freeze Impacts

Understanding the impact of hiring freezes provides a multidimensional understanding of the situation and helps you prepare a robust change management strategy. Implementing hiring freezes have dual impacts, affecting both employees and companies.

Impact on employees

Upon announcement, hiring freezes provide employees with the job security they seek. Despite the company’s financial challenges, employees feel reassured knowing the company’s commitment to retaining them, thereby enhancing company loyalty. 

However, during a hiring freeze, some business responsibilities may be left unaddressed due to departing employees, with no plans to replace them. Instead, the additional workload is distributed among existing employees, potentially requiring them to work longer hours, which could lead to employee burnout. 

This increased workload underscores the importance of viewing hiring freezes as a temporary measure. It’s crucial to ensure that tasks allocated to employees are manageable and that they are fairly compensated based on their performance and efforts. 

Keeping the hiring freeze temporary is especially important considering the trend of job hopping among Gen Z and millennials, known as the “Great Reshuffle”. By keeping the freeze short-term, you can avoid decreases in employee performance, morale, and satisfaction, as well as increasing retention rates. Meanwhile, it’s essential to develop a more sustainable, long-term budgeting strategy. 

Impact on companies

As mentioned previously, prolonged hiring freezes can negatively impact overall performance and profitability, leading to increased turnover rates.

Additionally, a hiring freeze can signal financial difficulties to creditors and other companies, potentially impacting the company’s reputation and partnerships. 

During hiring freezes, managers may hesitate to address performance issues, fearing that employees will quit and not be replaced, further worsening the problem. Alternatives such as freelancing and outsourcing can be beneficial in the short-term but will be costly and counterproductive when trying to reduce operational costs. 

Temporary hiring freezes can help mitigate these consequences and even offer benefits. Firstly, they provide financial stability by reducing costs associated with salaries, onboarding process, benefits, and training, aiding in restoring financial stability. 

Secondly, a hiring freeze can enhance efficiency by encouraging management to restructure, train, and invest in current employees, optimizing internal talent and boosting morale. They also save time and energy by streamlining processes without the need for onboarding and welcoming new employees.

Lastly, temporary freezes allow for reflection on business goals and operations, as managers have the opportunity to assess current strategies and identify growth opportunities. This period of reflection can lead to revised plans, policies, and procedures, ultimately improving the company’s long-term outlook. 

3 Ways HR Can Respond and Handle Hiring Freeze

1. Be proactive and transparent

Ensuring clear communication of the hiring freeze to your employees is crucial. Emphasize that their jobs are secure and that additional tasks are temporary. Utilize open communication channels, and 1-on-1 meetings to encourage cooperation. 

Prepare strategies to mitigate potential increase in performance gaps and decrease in employee engagement during the freeze. Stay interviews can be valuable tools. 

While questions asked during exit interviews help you understand why an employee is leaving, stay interviews tend to be more proactive. They involve speaking with current employees to understand why they choose to remain with the company. This insight into their values, perspectives, and priorities can inform the development of a targeted retention strategy. 

Finally, inform any promising candidates who were in the interview process about the freeze. Maintaining contact and providing regular updates can help nurture these relationships and can be beneficial for when the freeze is lifted. 

2. Support internal transfers

Internal job transfers occur when existing employees take on new roles within the company. Compared to external hiring, they require less time for hiring, onboarding, and training, making them a more cost effective option. 

Furthermore, internal transfers boost employee motivation by highlighting the opportunities for growth within the company. This aids in retaining high quality employees during hiring freezes. 

Most importantly, internal transfers allow you to streamline business processes and utilize employees’ skills and talents effectively. This minimizes stress and additional tasks for employees during the hiring freeze, preventing employee burnout. 

3. Maintain employee engagement

Given that hiring freezes can increase the workload of existing employees, there is a risk of reduced moral and employee engagement. Therefore, it is crucial to invest in employee engagement during a hiring freeze using various strategies. 

Need some inspiration? Download our 2024 HR Calendar for engagement ideas!

According to Josephine Lanzarone, vice president of marketing, Asia Pacific, Pluralsight, “If there is no incentive for employees to remain in an organization, employers will be hard-tasked to sell-in roles to prospective talent in the first place—leaving or expanding gaps in teams and compounding the challenges they are tasked with addressing.”

She adds, “Much of what drives employee satisfaction, and therefore retention, benefits the organization itself. For example, 65% of all skilled professionals rate learning and developing new skills as the most important priority for them.”

Providing current employees with resources, coaching, and training, such as cross-training, which is cost effective, can help them handle their additional responsibilities. It is unwise to assume that employees will leave the organization after upskilling. By investing in their future, employees are more likely to feel engaged and remain with the organization. 

Another effective method of maintaining engagement levels during a hiring freeze is through active listening. Making employees feel heard through employee satisfaction surveys and performance conversations and promptly addressing their concerns demonstrates your commitment to their satisfaction.

Learn more: 20 Strategic Employee Engagement Survey Questions

Finally, employee recognition and acknowledgement are essential, particularly when employees are putting in extra effort during hiring freezes. Utilize group channels, recognition walls, and weekly meetings to acknowledge outstanding individuals. Promote deserving employees and highlight the significance of the company’s work to help employees understand their role in the bigger picture and recognize the value of their contributions. 

Strategic Workforce Management with Omni 

While hiring freezes present challenges such as increased workload and potential morale issues, they also offer benefits like cost savings and the opportunity to optimize current talent. 

HR professionals play a crucial role in navigating these challenges, ensuring effective communication, employee engagement, and support for employees. Omni makes it easy for People leaders to manage workforce dynamics during hiring freezes through one, automated platform.

With Omni, HR professionals can leverage automation and expert created templates to build seamless processes to support each stage of the employee lifecycle, and manage each function in a centralized, easy-to-use platform. Omni’s data analysis and smart-reports allow you to derive real-time, actionable insights on your employee experience so you can build an award winning culture of growth, innovation, and engagement even during periods of hiring freeze.

Book a demo with our team today to learn more about how Omni can help uncover the insights you need to build a highly engaged workforce.

Recruitment comes with a price tag, especially when partnering with agencies or headhunting firms. However, not all recruitment fees are created equal, and there are different structures depending on the type of service you decide to go with.

As such, HR teams and recruiters have to carefully manage these costs, considering the ROI and value that they bring to the organization. This doesn’t mean that you should always opt for the lowest cost option, but rather understand the different structures and determine which one is most suitable for your organization’s needs. 

If you’re not sure where to begin, or how to make sense of the various recruitment fees available, read on to learn more about the various types of recruitment fee structures you can expect.

What Are Recruitment Fees?

Recruitment fees are costs that organizations pay to recruitment agencies or headhunting firms for their services in finding and hiring potential candidates for employment. These services can include sourcing, screening, interviewing, and presenting suitable job candidates to organizations.

Recruitment fees can be either a one-time fee or an ongoing payment, depending on the type of structure that has been agreed upon between your organization and the recruitment agency.

Recruitment Fees: Types of Structures

Since the different recruitment fee structures inform service expectations, it’s worthwhile to be familiar with the most common pricing models in the industry. These include:

1. Contingency Fee Structure

The contingency fee structure is the most common type of recruitment fee. In this model, your organization only pays a recruiting agency if they successfully place a candidate for your open position.

Typically, the fee is a percentage of the new employee’s first-year salary, ranging from 15-25%. For example, a contingency fee of 20% for an employee with a starting salary of $100,000 would result in a recruitment fee of $20,000.

This structure is best for organizations that are regularly recruiting with a steady stream of open positions and want to minimize their financial risk.

Pros:

• No upfront costs for the organization
• Encourages the recruitment agency to find quality candidates quickly

Cons:

• May result in lower-quality candidates being presented as the agency is focused on filling positions quickly
• Higher percentage fees can be costly for organizations with high salaries

2. Retainer Fee Structure

In a retainer fee structure, your organization pays an agreed-upon amount to “retain” the services of a recruitment agency for a specific period. A percentage of the total amount is paid upfront, while the remainder is delivered in milestones that align with the agency’s progress in filling the position.

It’s worth noting that the total percentage is similar to that of a contingency fee in that it’s also a percentage of the employee’s first-year salary. However, it tends to be higher since this structure is mostly used for hard-to-fill or executive-level positions.

Pros:

• Higher level of commitment from the recruitment agency
• More personalized and in-depth search for candidates
• Minimal risk of losing top candidates to competitors

Cons:

• Upfront costs for the organization, regardless of whether the position is filled or not
• Longer recruitment process due to more thorough candidate search and evaluation
• Higher fees can be costly for organizations with limited budgets.

3. Flat Fee Structure

As the name suggests, a flat fee structure is when the recruitment agency charges a fixed amount for their services. This can either be a one-time payment or split into milestones throughout the recruitment process.

Although not as common as percentage-fee structures, some agencies do offer a flat free structure. However, because the fees involved are lower than contingency or retainer fees, agencies may request an exclusivity agreement, where the organization agrees to only work with them for a certain period.

This structure is best used for entry-level or high-volume hiring, where the workload and level of effort required are relatively consistent. It also works for companies with a high turnover, since they can save on fees by using a flat fee for multiple hires.

Pros:

• Cost-efficient for organizations with high-volume or frequent hiring needs
• Clear and predictable costs throughout the recruitment process

Cons:

• May not attract top-level candidates due to lower fees
• Exclusivity agreement may limit options for the organization

4. Hourly Rate Fee Structure

With an hourly rate fee structure, the recruitment agency charges a set hourly rate for their services. The longer the recruitment process, the higher the fees will be.

This model is often used for specialized or executive-level positions where a more extensive search and evaluation process is necessary. It can also be beneficial for organizations that require ongoing support from the agency for recruiting top talent but don’t want to spend a large sum in the process.

Pros:

• Transparent billing based on actual time spent on the recruitment process
• More control over costs for the organization since costs don’t increase or decrease based on the candidate’s salary

Cons:

• Can become expensive if the recruitment process takes longer than expected
• Potential for conflict of interest if the agency is incentivized to prolong the process to increase fees

5. Hybrid Fee Structure

Finally, a hybrid fee structure combines elements of different fee models, such as a flat fee for initial services and an hourly rate for ongoing support. Or, it could involve a combination of flat fees and a percentage of the candidate’s salary upon successful placement.

For instance, an agency might charge a flat fee for sourcing and initial screening of candidates, followed by an hourly rate for interviews and negotiations with the top candidates. Once a candidate is hired, the organization pays a percentage of their salary as a placement fee. 

This structure is a good match for organizations that want a balance between the transparency of flat fees and the flexibility of hourly rates. It’s also suitable for organizations that aren’t sure how long the recruitment process will take and want some cost control but are willing to invest more for the right candidate.

Pros:

• Allows for flexibility in choosing which services to pay for on a flat fee basis or hourly rate
• Can provide cost control for organizations while also offering incentives for the agency to find the best candidate

Cons:

• Requires careful negotiation and communication between the organization and agency to determine fair pricing
• Can be complex and difficult to track expenses if not managed properly

Factors Influencing Recruitment Fee Structures

With that said, the decision to choose a specific recruitment fee structure is ultimately dependent on various factors unique to each organization.  Some of the key factors that can influence this decision include:

Industry and Job Type

Depending on the industry and specific job type, recruitment processes can vary greatly in terms of time and resources required.

For example, recruiting for a high-level executive position in an industry with high competition for top talent, such as the finance industry, may involve extensive background checks and multiple rounds of interviews, while hiring for an entry-level retail position may require less intensive screening.

As a result, recruitment fee structures may need to be adjusted accordingly to account for the differences in time and effort required.

Candidate Demand and Availability

The level of demand and availability for certain types of candidates can also impact fee negotiations. Think of this as a supply and demand scenario.

When there’s a high demand for a specific skill set or job type, recruitment agencies may charge higher fees due to the scarcity of qualified candidates. On the other hand, if there’s an abundance of candidates with similar qualifications, agencies may be more willing to negotiate lower fees to secure the business.

Recruitment Agency Expertise and Reputation

When you’re choosing a recruitment agency to partner with, their expertise and reputation in your industry should also be taken into consideration. Agencies with specialized knowledge or experience in a particular field may command higher fees due to their added value and ability to source top-tier candidates.

At the same time, an agency’s reputation can also impact fees. If an agency has a track record of successfully placing qualified candidates and delivering results for their clients, they may be able to justify higher fees due to their proven track record of success.

Geographical Location

Finally, regional differences in recruitment fees can also play a role in negotiations. Local market prices for recruitment services can vary widely, with certain areas having higher or lower average fees based on factors such as the cost of living and competition within the industry.

When considering potential agencies to work with, it’s important to research the average fees in your specific region and take that into account when negotiating fee structures. Working with an agency that’s familiar with the local market can also be beneficial, as they may have a better understanding of what fees are considered reasonable and competitive in your area.

Assessing Cost-Benefit Analysis of Recruitment Fees

At the end of the day, it isn’t just about how much you’re paying in recruitment fees, but also the return on investment (ROI) that you’ll receive from those fees. To truly assess the cost-effectiveness of different fee structures, it’s important to conduct a thorough cost-benefit analysis.

This analysis should take into account not only the immediate cost of the recruitment fees, but also factors such as the quality and fit of the candidates provided, the time and resources saved by outsourcing recruitment, and the long-term impact on your company’s bottom line.

Below is a general formula for calculating ROI for recruitment fees:

Recruitment ROI= (Total revenue generated from recruited hires – Total cost of recruitment fees and expenses) / Total cost of recruitment fees and expenses

To put this into perspective, let’s say you pay $10,000 in recruitment fees and expenses to hire 3 employees. Those 3 employees generate a total of $100,000 in revenue for your company within the first year. Your ROI for those recruitment fees would be:

($100,000 – $10,000) / $10,000 = $9 or 900%

This means that for every $1 you spent on recruitment fees, you received a return of $9. 

This simplified example illustrates the importance of considering ROI when evaluating different fee structures to determine which structure is best for your organization’s needs.

Build Highly-Skilled Teams With Automated Recruitment

Working with recruitment agencies isn’t always the right fit for an organization. Aside from costly recruitment fees, agencies present additional drawbacks such as lack of visibility on the talent pool, longer recruitment times, and conflicts of interest.

Taking recruitment into your own hands can also be time-consuming for HR teams and present bottlenecks in your People strategy, which is where automation can offer a practical and cost-effective solution to help you build your team on your own terms.

Omni’s recruitment partners make building and advertising your talent search easy, sourcing and attracting talent to fit your company’s unique needs with well crafted job descriptions that fit your team’s needs and seamless integration capabilities, your shortlisted and hired talent are automatically uploaded into your HR system, taking the administrative burden and manual entry errors out of the recruitment process. Helping you to source, evaluate, screen, and hire teams without the headache of manual processes.

Learn more about how Omni’s automated system can streamline your entire employee lifecycle—from recruitment to onboarding and beyond.

Want to begin improving your onboarding experience today while you source the perfect candidates?

Our comprehensive Onboarding Kit has all the tools you’ll need to deepen engagement and provide a world-class company culture from day one.

The recruitment process is an essential part of a functioning HR program. As the first step in the employee lifecycle, recruitment helps build well-qualified teams to drive your business goals. Yet the process has become somewhat of a burden for HR professionals, taking up significant time and resources that could otherwise be spent on more strategic initiatives.

According to a capital advisory firm Josh Bersin’s Time-to-Hire Factbook, “The 2023 projections show a significant increase in the longest hiring times for 3 out of 4 regions, suggesting that hiring in APAC, EMEA, and LATAM (Latin America) will be increasingly difficult and volatile this year.”

Additionally, a Robert Half study reveals that 62% and 77% of applicants lose interest in a job if they don’t hear back in 2 weeks (10 business days) or 3 weeks from the initial interview, respectively.

These alarming statistics are all the more reason to make your hiring process as efficient as possible. A screening interview, when done right, can save you valuable time and effort by revealing key insights before you invest any more effort into your candidate search. 

What Is a Screening Interview?

A screening interview is typically the first conversation you have with a candidate during the recruitment process and is a part of the first hiring round—or the pre-employment screening process. A screening interview may be an in-person, video, or phone interview— also known as a phone screen—or in some instances a questionnaire.

Screening interviews follow resume evaluations, after you’ve shortlisted a group of applicants that meet the minimum experience and education requirements for the position.

The goal of the screening interview is to determine which applicants possess the required qualifications for the role you are hiring for. It enables recruiters to decide which candidates will move to the next hiring round.

Aside from assessing applicants to see if they have the needed qualifications, a screening interview is a chance for the recruiter to further explain the position and company to the candidate. They can also ask about an applicants’ salary expectations and availability to work and answer any questions they may have about the position, company, or hiring process.

Benefits of a Screening Interview

The main function of a screening interview is to determine how fit a candidate is for the job by comparing their qualifications to the job requirements. Screening interviews help to rule out unfit applicants early on in the recruitment process, saving recruiters time and improving the pool of candidates as you move forward in the hiring process.

By reducing the number of candidates for later hiring rounds, HR can conduct fewer interviews, save on recruitment costs, and shorten the time to hire (especially with phone screens).

As a result, you can fill empty positions faster, maintain your team’s productivity level, and avoid reviewing applications and assignments from under qualified candidates.

Tips for Conducting an Effective Screening Interview

Screening interviews can reveal a significant amount of information about candidates when conducted strategically. 

Set appropriate hiring criteria

Setting hiring criteria that reflect the job requirements is a must, as it enables you to evaluate how suitable a candidate is for a position. Be sure to write clear and comprehensive job descriptions, and use this information to inform your questions.

Learn more: 5 Onboarding Specialist Job Description Examples

Come prepared

Use the criteria you’ve outlined in your job description to prepare your interview questions ahead of time. Think through the technical need for the position and which skills are essential versus nice to have. Be sure to ask each candidate the same standard questions to avoid bias.

Omni tip: Ask open-ended questions, as they give you more details about the applicants.

Take notes

You may think you’ll remember everything you discuss in your screening interview, but it’s best to take notes during and after the interview to refer back to. This ensures that nothing gets forgotten or overlooked, and helps you decipher each applicant after conducting several interviews.

5 Important Screening Interview Questions

These 5 screening interview questions help tap into the essential information you need to quickly assess the viability of your candidates. Use these examples as a guiding principle in your next screening interview.

1. Can you briefly describe your relevant experience and qualifications for this role?

This question allows you to quickly gauge if the candidate possesses the necessary qualifications and experience for the position. It helps filter out unqualified applicants early in the process, saving time and effort.

2. What motivated you to apply for this position and our company?

This question assesses the candidate’s genuine interest and alignment with your company and the role. It helps identify candidates who are a good cultural fit and genuinely enthusiastic about the opportunity, which can lead to higher retention rates and better job satisfaction.

3. Can you describe a recent challenge you faced in a similar role and how you overcame it?

This question evaluates the candidate’s problem-solving skills, resilience, and practical experience in the role. It provides insight into their ability to handle real work-related challenges, making it easier to identify those with relevant experience.

4. What are your salary expectations for this position?

Asking about salary expectations early in the process helps prevent wasting time on candidates whose salary expectations are misaligned with the company’s budget. It also allows you to assess if the candidate’s expectations are within the acceptable range for the role.

5. Are there any geographic or schedule-related restrictions that might affect your ability to work in this position?

This question addresses practical considerations, such as the candidate’s location, commuting preferences, and availability. It helps ensure that the candidate can meet the job’s logistical requirements, saving time that might be wasted on candidates who cannot.

These screening interview questions help efficiently identify candidates who are not only qualified but also a good fit for the company and position. By addressing qualifications, motivation, problem-solving skills, salary expectations, and logistical constraints early in the process, you can streamline your efforts and focus on the most promising candidates, ultimately saving time and resources.

Read next: 10 Google Interview Questions to Inspire Your Hiring Process

Automate Your Way to Highly-Skilled Teams

Omni helps you streamline and automate your recruitment workflows, enabling you to attract, screen, and hire the best talent. Our platform allows you to sync all candidate applications in one place and easily collaborate with hiring managers to schedule screening interviews, send impactful communications, and analyze interview feedback.

With Omni’s recruitment workflows, you can send offers or rejections with just a few clicks, coordinate candidate interviews, share candidate feedback among management, and swiftly transition successful candidates into the onboarding process to ensure top performance and engagement.

Omni manages and automates time-consuming manual tasks to allow you and your recruitment team to focus on what’s really important: crafting impactful screening interview questions, establishing parameters to interpret candidates viability, and ultimately hiring award-winning talent.

Book a demo with our team today to learn more about how Omni can help revolutionize your employee management.