As the global economic downturn continues to deepen, many technology companies are reacting to fears of an incoming recession by putting the brakes on hiring.
While lowering payroll costs might seem like an easy way to reduce spending right now, the job landscape remains in a state of flux, with research showing that workers are just as pessimistic about the economic climate as their employers.
As a result, 60% of US job seekers say they feel more urgency to find a job now, before market conditions change for the worse. This could leave companies that have decided to stop hiring with a talent drain they are unable to plug.
Where are the tech hiring freezes happening?
Google and Microsoft were among the first companies to announce a pause in hiring, quickly followed by Meta, Apple, and many more.
As reported by The Verge, Google sent out a memo to staff in July stating that the company would be “slowing down the pace of hiring for the rest of the year.” Just over a week later, The Information reported that Prabhakar Raghavan, Google’s senior vice president, sent out an email to inform workers that no new staff would be hired during the following two weeks. The freeze reportedly won’t affect existing job offers, but no new offers will be extended to anyone with applications still pending.
Microsoft has also announced that it would be taking down all of its open job advertisements and implementing a hiring slowdown for the foreseeable future. The hiring slowdown will predominantly affect the company’s cloud and security units, according to a report from Bloomberg. The announcement comes two months after Microsoft said it planned to slow hiring in its Windows, Office, and Teams software groups.
Google and Microsoft are not the only tech companies that have started to take a more cautious approach to hiring. Earlier this year, Twitter initially issued a hiring freeze, then laid off 30% of its talent acquisition team earlier this month.
At the end of June, Meta CEO Mark Zuckerberg was hostile on a call with employees, saying that “realistically, there are probably a bunch of people at the company who shouldn’t be here.” A month later, the company’s Q2 2022 financial results showed its first ever decline in revenue, with Zuckerberg telling investors that the economic climate looked even graver than it did the previous quarter.
Around the same time, Apple also announced that, while the company will continue to invest in product development, it will no longer increase headcount in some departments next year.
An uncertain hiring landscape
These moves come against backdrop of uncertainties in the geopolitical and economic landscape which has seen most organizations have to adjust their financial outlooks. A layoff aggregator from TrueUp estimates that since the start of 2022, 487 tech companies have announced layoffs, impacting 86,166 employees.
Jack Kelly, founder and CEO of The Compliance Search Group and Wecruiter.io, said that businesses are always going to take steps to mitigate poor economic conditions, with cutting costs within the workforce often an easy go-to option.
“The sad part is companies almost always immediately look to cut costs of the working people,” he said. “It's never the CEO saying to the board of directors: ‘Hey, let's all take a big cut.’ That should happen, but instead companies end up cutting salaries and benefits instead. I think we’re going to see the job market become very soft, making it difficult for a lot of people to find jobs.”
How might the workplace respond?
Kelly said companies are also likely to become more careful about how they hire and, where hiring freezes turn into layoffs, we could see a reversal in some of the flexible working practices that were borne out of the pandemic, as employees fear being labelled as “coasters” or “low performers”.
“I wouldn't be surprised if a lot more people go back to the office because, honestly, I would,” Kelly said. “I’d be scared that if I'm at home and they decide to fire people, if they haven’t seen me or they don't remember who I am, it'll be easier to get rid of me then someone that’s in the office every day,” he added. This issue of proximity bias remains a cause for concern amongst organizations looking to successfully implement hybrid working models.
However, Sean Farrington, executive vice president of EMEA at training software company Pluralsight, doesn’t believe that slamming the door on potential new recruits is necessarily the most sensible solution during tough times.
Although the economy in Europe isn’t any healthier, Farrington said the European companies with large technology teams that he’s spoken to are instead evaluating the talent they’ve already got and are looking for opportunities to upskill and retrain existing employees.
Farringdon doesn’t see workforce cuts as the most sensible approach to cost savings. “Especially given the backdrop of an increasing skills gap in technically qualified individuals and the wider political dialogue around how we reinvent the economy for a digital world,” he said.
Research shows that employees want to be regularly offered training and the chance to develop new skills and are more likely to stay at a company if given those opportunities. The Great Resignation was a major topic of conversation in the first half of this year and, for companies that are no longer hiring, losing more employees is not an option.
“If a person leaves your organization, you've got a gap, and therefore you can’t be as efficient and productive as you were,” Farringdon said. “The first thing you should do is be careful with your human capital and make sure that you don't unintentionally lose people by not showing a commitment to your employees, or failing to show that you value them in some way,” he said.
Although the job market has largely bounced back after the pandemic, the looming recession is likely to bring with it a whole new set of challenges for job seekers. While the hiring freezes at tech companies have yet to turn into mass layoffs, those currently employed will still find themselves battling stagnant salaries, below inflation pay rises, and increased commuting costs linked to spiraling gas prices, as the boom times look to be coming to an end.