The skills shortage kickstarted by the great resignation in 2021 is starting to moderate. But now that inflation is rising, a new challenge for businesses and their hiring strategies has presented itself.
Economists predict the U.S. is set for a recession in 2023. In response, the U.S. central bank has raised its benchmark policy rate by 0.75% to try and contain the highest inflation the U.S. has seen in 40 years.
Needless to say, how businesses approach hiring during the impending recession matters. So, in this article, we’ll discuss tips for how to recession-proof your business’ hiring strategy.
Avoid Freezing Hiring Altogether
While job openings were still high at 372,000 in June, with an unemployment rate of 3.6%, job vacancies are predicted to go down to around 200,000 - 300,000 as businesses curb their openings instead of laying off staff.
But, although freezing hiring altogether may seem like a simple way to save money and take care of existing staff, this can cause more long-term harm than good.
Not least because:
- Without the right human resources, you're less likely or slower to continue expanding your business
- Without adding the staff needed, current employees might face burnout
- You're more likely to offer inferior customer service with a skeleton staff.
That's why instead of abandoning your hiring strategy altogether, we suggest planning ahead so that you and your HR team know how you'll approach recruitment during the recession.
Here are some tips to help you start doing exactly that:
Evaluate Your Current Workforce
During a recession, it's more important than ever to focus on hires that bring the most value to your company. The only way to successfully achieve this is to analyze the state of your current workforce.
First, map your current employees and their skills to see which staff members might benefit from up- or re-skilling. Then, instead of bringing in a new person, you might save money and meet your demands by offering training to existing employees.
An awareness of your current labor force will also help you identify areas where you lack an extra pair of hands, making it much easier to spot where new employees will add the most value.
Pro Tip: If cash flow is especially tight, perhaps consider working with freelancers to meet your short-term skill requirements. This often presents a cheaper, more practical alternative than hiring a full-time employee.
Understand Impending Job Market Changes
With the current labor market being so tight, everything is candidate-driven.
However, once the recession hits, it’s expected that unemployment will rise and job security will plummet. As a result, fewer employees will be willing to leave their positions or take financial risks. This was the case during the last recession in 2008; during this time, we learned that businesses should focus on retaining staff and maintaining employee engagement and morale.
In light of that, we think it's wise to plan ahead not just for hiring but also for how you'll improve employee retention. For example, here are a few things you can do to get the ball rolling with that:
- Provide employee training
- Offer staff recognition and appreciation
- Seek feedback from employees and make improvements accordingly
- Offer secure, liveable salaries
- Invest in an attractive benefits package
Prepare for a Wave of Applications
Thanks to the uncertainty that comes with recessions, you can expect job applications to increase rapidly as newly unemployed professionals look for more secure opportunities.
You can prepare for this by ensuring you have the right tech stack to handle high-volume applications. The right tools will help you quickly compare candidates and keep job seekers informed throughout the process. In addition, they'll help you to root out inadvertent bias by comparing applicants based on data rather than subjective opinions.
Another way to cope with the influx of applications is to build a talent pool ahead of time. That way, you'll have a resource you can dip into to find suitable talent when the need arises.
Factor in Compensation Planning
While preparing for the likely recession in 2023, don’t forget to consider employee compensation. It might be tempting to cut salary growth during a bad economy. However, rewarding high-performing employees is essential. This is especially true for relatively new hires working hard to prove themselves and looking for recognition.
While your business may have to save money, don’t cut corners in the wrong places.
The best tip for compensation management during a recession is to take a more of a performance-based approach rather than solely offering a fixed-pay salary structure. After all, when rewards are linked to concrete performance, you'll encourage productivity and ambition while offering strategic pay raises.
Remember, it's in your interest to retain talent during a recession. As such, fair compensation should remain a top priority. So, keep an eye on compensation trends in your industry so you can adjust as you go and plan compensation packages for new hires accordingly.
With compensation analysis software, you can access custom salary reports anytime. Data and insights help you benchmark salaries against one another and according to local employment conditions. Recommendations are based on which skills and qualifications your employees bring to the table, which makes creating a pay structure based on merit and experience more manageable.
Keep Your Cool in The Face of a Recession
The looming prediction of a 2023 recession is cause for concern for businesses and employees alike. However, you don’t have to idly wait for the economy to worsen. Instead, you can take proactive action by preparing a robust hiring and compensation strategy that considers the inevitable influx of applications and uncertainty next year will bring.