Why Hiring Freezes And Attrition Are More Favorable Than Layoffs


Compared to downsizing, a hiring freeze is viewed as a better option for cutting costs in an uncertain environment. A hiring freeze is a policy to temporarily stop recruiting and hiring new personnel. The goal is to wait out the situation and consider hiring again when the situation improves. Companies such as Goldman Sachs, Meta, Amazon, Salesforce, and Microsoft have announced layoffs due to overhiring in recent years to combat the effects of inflation and a possible recession. A hiring freeze is not as disruptive as a layoff announcement and can be seen as a positive, as it shows the company's optimism for its long-term outlook. Exceptions are made for roles that are deemed too important, such as compliance, legal, risk, and audit professionals. A hiring freeze can benefit the remaining staff as it creates less disruption and gives them less anxiety about the future of their roles.

 Bank of America and Tesla both implemented hiring freezes at the end of 2020, and other tech firms, such as Google, Amazon, Microsoft, and Apple, have followed suit. Uber has also said that it will need to be "hardcore about costs." As an alternative to layoffs, businesses might pursue attrition, which is when employees leave of their own volition. Companies can do this by issuing ultimatums, offering buyouts or severance packages, and encouraging low performers to leave. While this can be effective in cutting costs, it can also lead to a brain drain as the most talented and skilled people are likely to take their talents elsewhere.

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