With a potential economic recession on the horizon, companies are faced with a unique situation. Typically, during a recession, companies will lay off workers. Then once business ramps up again, they will hire to build up their staff.
But current labour market conditions are causing many employers to think twice before they make the decision to lay off workers. Finding good talent is one of the biggest challenges companies face today. If they were to lay off some of their people, they could find themselves in a very challenging position once they are ready to hire once again.
For this reason, many companies are engaging in “labour hoarding.” Below, we’ll define this relevant practice today.
What Is Labour Hoarding?
We all know what hoarding is – when people keep an excess number of items they don’t otherwise need.
Labour hoarding follows the same principle; it just applies to a company’s employees. It’s the practice where a company chooses to keep employees during a recession, rather than lay them off. They do this even if it will affect profits and may not make sense financially in the short term. Rather, it’s a long-term strategy used to avoid the costs of having to re-hire people once the economy takes an upswing.
As Johnathon Small from Entrepreneur.com correctly puts it, labour hoarding is strictly an economic decision:
“To be clear—the reason companies are hoarding employees in bad times is not because of the goodness of their hearts. These companies realize it’s more costly to hire and train new workers when the economy improves than just hanging on to the current staff.”
What Are the Benefits of Labour Hoarding?
Even though companies will need to carry employees’ salaries, there are benefits to this approach:
- Employees keep their jobs
- Minimal disruption
- Eliminate re-hiring and training costs in the future
- Eliminating hiring challenges when the economy improves
Why Is Labour Hoarding Relevant Right Now?
Labour hoarding is relevant today because the current conditions make it an ideal time for companies to consider this practice. With the current unemployment rate and the ongoing challenges companies are having to find good people to hire, it’s clear some organizations are already making the decision to hold onto their people and try to weather the potential recession in the coming months.
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