📉 Labour Hoarding 👨🏾💻
Hoarding is seen as a taboo word. When applied to the labour market, how is it defined?
Labour hoarding is a corporate practice where a company retains employees rather than laying them off during an economic downturn. Employers will hold on to their talent tightly during a soft recession if they feel the economy will soon rebound.
As a recruiter, I am currently seeing labour hoarding in the Canadian marketplace. Candidates are staying in their roles and not job hopping. They are seeing the surrounding tech layoffs and riding this soft economic wave. They keep their jobs, keep their paycheques, keep a roof over their heads, keep food on the table and keep heating their homes. This makes it even more difficult for recruiters to find top talent with a limited talent pool. Also, hiring companies are cost-conscious during a recession, and we cannot entice candidates with higher salaries and excellent benefits to change companies. Candidates will remain loyal to their current employers.
Why do companies Hoard Labour?
Companies focusing on retaining their employees will do their best to contribute to their employee’s career growth. In-house career development is beneficial to both the company and to the employees.
If an employer lays off an employee, it takes 6-9 months of salary to replace them once you consider the recruiting and training costs.
The “war of talent” makes finding new employees for a position difficult.
70% of small business owners fear conducting layoffs because of inflation regarding rehiring talent. We saw this in 2022 after the mass layoffs in 2020-2021 due to the pandemic. In 2022, the labour market was hot, and candidates demanded a 10-30% rate/salary increase. It was a bidding war, and you were fortunate to make placements because candidates received 5+ offers. They would take the highest offer, which came with exceptional benefits and was often 100% remote work.
Companies will retain their employees if they foresee a short and shallow recession. Employers will ride out the economic uncertainty with higher payrolls to avoid the long-term costs of hiring and training when the economy rebounds.
What are the Benefits of Labour Hoarding?
The primary benefit of labour hoarding is the employees’ concerns about their job security.
Once the economy recovers, employers will have their talent in place to take advantage of the bounce back. There will be no loss of productivity with the current staff. You will have an advantage over your competitors, who are forced to rebuild their talent pool.
During a recession, 75%+ of employees want to stay with their current company and keep their jobs due to risks associated with economic uncertainty.
Companies will continue to invest in their people.
Companies may re-skill, re-purpose and re-utilize their current employees in a slow market if they accept these temporary job duties.
Companies will communicate their plans to retain employees during the slow economy. This instills trust and loyalty between the employer and the employee.
Overall, this methodology can contribute to a faster economic recovery. Employees with job security are more likely to continue spending.
What are the Downfalls of Labour Hoarding?
Talented employees will not leave their jobs.
Unemployment could last longer for job seekers as companies retain their current employees and have hiring freezes. It will take longer to find another job compared to the placement speed during the recovery of the pandemic.
During this economic downturn, employees are not likely to see raises, and any promotions that are available will be extremely competitive.
Employees may not have enough work to do and will feel disengaged. They may feel that they are not adding value, which generates doubt in their job security.