In times of uncertainty, we tend to cling to the things that make us feel safe and resilient.
For companies in the modern era, holding onto employees has become their comfort blanket. The antithesis of mass layoffs, companies have begun “labor hoarding” their workforce in an effort to maintain some semblance of normalcy as the economy enters a period of instability.
“As the cost of losing people to layoffs and firings has grown, the number of layoffs and firings has fallen,” said Julia Pollak, chief economist at ZipRecruiter. “Labor market dynamics have fundamentally changed: time-to-hire, recruiting costs, and hiring costs have all grown substantially.”
In short, instead of facing the hefty expenses of laying off employees and training new ones, organizations are turning to higher payrolls for current workers. But despite the layoff rate falling, employee quit rates continue to climb.
According to the Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey, layoff growths have yet to see a significant uptick, but there remains two job openings for every job seeker.
In the years following the pandemic’s wrath, companies are more concerned with mitigating costs than they are hiring new team members. Simultaneously, employees are eager to find new perks and benefits with other employers.
While many companies do not have the resources to study the costs of laying off and retaining companies, large organizations utilize the compensation, accessions, and personnel management (CAPM) model to identify the value each employee brings to the table.
However, smaller companies typically don’t rely on this methodology as usually one person (or a small group of people) is performing each task.
So what can companies do to better understand how layoffs may impact their overall expenses?
According to Pollak, analyzing how long it takes for a worker to be productive in their role can help pinpoint what potential losses or gains could come from layoffs.