There have been various reasons for layoffs and hiring freezes in the tech industry in 2022. Executives such as Google’s Sundar Pichai cite an “uncertain global economic outlook” as a reason for the hiring slowdown. Meanwhile, Forbes sees the previous over-hiring during the “Great Resignation” as a possible cause of the reversal.
In this article, we look at what’s happening with layoffs and how the labor market is responding and discuss a plan of action for technology companies that are looking for new talent but are worried about the current state of the industry.
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Layoffs and Hiring Freezes in 2022
Turbulent market conditions, such as inflation at a new 40-year high, accompanied by a broad crypto market crash and decline in trading activity, have resulted in many tech companies slowing down staffing or announcing layoffs. News about companies cutting their staff comes out every week. Even tech giants such as Apple, Meta, Microsoft, and Google are hitting the brakes on hiring.
However, startups have been most affected. It all started in May 2022 when Y Combinator suggested that startup companies cut costs and extend their runway over the next 30 days. Between May and July 2022, they laid off 49,000 employees, according to Layoffs Tracker. Furthermore, in August, Y Combinator shrunk the number of startups within its accelerator for the Summer 2022 batch, down 40% from the previous cohort. It cited the economic downturn and changes to the venture funding environment.
While U.S. tech companies’ concerns about the health of the economy were growing, the software developer job market, on the other hand, remained well above pre-pandemic levels.
Meanwhile, the Job Market Remains Hot
The labor market strengthened more than expected in July as employers added 528,000 jobs. This staggering figure shows that the economy has recovered well from the pandemic and casts doubt on fears that a recession may be imminent.
Recent Indeed research showed that software development job postings in July remained at 107.3% above their pre-pandemic baseline. Yet they fell 13% from June to July 2022, but the reason may be the drop in summer hiring when many companies go on vacation. Finally, the same study ranked software engineer as the 7th most wanted job title in 2022. The ranking was based on employer demand, salary, and consistent growth in the number of Indeed job postings from 2019 to 2022.
In times of uncertainty, companies should be careful about spending and team morale. However, there are concrete steps managers can take to keep up the momentum and help the company achieve its goals despite the complicated hiring situation. Below we’ve compiled a list of relevant, cost-effective, and flexible solutions worth considering.
What Steps Companies Can Take During Uncertain Times
Companies can use the downtime to retain employees, facilitate team interactions, boost developer skills, and refine the hiring process. Also, a hiring freeze does not necessarily mean that all hiring has stopped. Employers can still nurture long-term relationships with potential candidates, optimize hiring, and focus on candidates with less experience but the same skill set. Here are steps companies that have decided to be careful about adding new employees can take:
Closing or Reducing Currently Open, Non-essential Positions
When companies decide to close all currently open positions they consider non-essential, they should politely inform all candidates who have already passed certain interview stages that their applications are on hold or suspended. To avoid losing promising candidates, talent acquisition managers should let applicants know they are a good fit and that the hiring pause is a strategic business decision.
Companies can also choose to hire fewer but more qualified programmers. If it’s too expensive for an employer to fill, say, five jobs, they may be able to hire three candidates whose skills will cover the project’s needs. This strategy will save on hiring costs.
Building a Talent Bench
Employers freeze hiring if they want to reduce payroll expenses and preserve the integrity of the team. However, when hiring reopens, it will be more expensive and time-consuming to kickstart the talent pipeline.
The window of opportunity for hiring a talented developer is quite small. If tech companies wait until the last minute to fill a position, they run the risk of hiring people who are good enough for now, but don’t have the necessary skills to drive the company forward.
To prevent this, hiring managers create a talent bench by understanding the various roles critical to achieving organizational goals. By finding networks of people in the industry or searching through LinkedIn profiles and social media, they can identify passive candidates who are interested in the job but are not actively seeking to join a new company.
For remote work positions, employers can also compile a list of vetted software development agencies and independent contractors ready to work on-demand.
Stop Looking for Ideal Candidates
Companies can focus on what their candidates are capable of instead of asking about what they have achieved in the past. A programmer may have less real work experience, but if they have the right skill set and know how to persevere under the threat of failure, they may be a great fit for a tech company willing to grow. For startups, Entrepreneur advises paying special attention to what risks a candidate has already run — it takes a special kind of person who is familiar with failure to succeed in the startup environment.
For example, if a company is only looking for a senior developer, why not search out a middle developer who meets most of the requirements? It is often easier to hire and train a candidate willing to learn additional technologies instead of looking for the perfect developer with absolutely all the necessary skills.
Challenging the Team to Think About Increasing Revenue
Software development teams can no longer rely solely on their tech expertise, but they should also understand the strategic impact of technology decisions on the business.
Scott Lenet, the president of Touchdown Ventures, suggests that besides cutting expenses, companies should challenge their teams to think about increasing revenue. Just because the economy is down doesn’t mean it is impossible. Companies can catch a tailwind the way video conferencing software producers, food delivery services, and video game companies did during the pandemic.
Here are some ideas on how development teams can improve their company’s development process and increase revenue:
- Learn about the company’s business, its customers, how the product is sold, and its competition. Competitors may also have good ideas about features that developers can implement.
- Automate business processes to refocus the company’s human resources on more meaningful, pressing tasks.
- Take leadership, build team spirit and help others improve.
Advanced Training or Reskilling of Existing Employees
Companies can prioritize developing and training current employees to close skills gaps without hiring. Additionally, tech talent may stay at companies longer if businesses actively invest in their careers. Forbes suggests that the only way to stop the “Great Resignation” is to transform it into the “Reskilling Revolution”.
Management can set organization-wide goals and then develop a training strategy that is compatible with their team’s existing professional development efforts. It’s worth noting that such a strategy is best developed and discussed with the team beforehand, not just when hiring is already on hold or recruiters have failed to fill a position. Managers should listen to the individual career development preferences of team members, combine them with the company’s overall strategy, and discuss upskilling in advance. By doing so, this additional training won’t come as a surprise to employees who suddenly have to learn new technologies or disciplines. Employers can adhere to the following plan for advanced training:
- Identify skill gaps, considering positions that have been placed on hold
- Communicate why upskilling or reskilling is needed
- Enroll employees in courses or training programs or utilize internal mentors
- Monitor the progress of the training strategy
Increasing Developer Productivity
Often teams simply need to adopt the Agile methodology to stay highly productive because it helps them focus on completing one task at a time. If engineers try to do too many things at once, the work can become overwhelming and disorganized.
To maximize developer productivity, teams should schedule short daily meetings to communicate important information and ensure that everyone understands each day’s goals and objectives. Development teams may also need to organize a backlog refinement meeting to reassess low-priority work and a planning session to reschedule strategic milestones and goals.
However, companies should also be aware that long and frequent meetings take developers away from the keyboard and create a culture of micromanagement, which is the antithesis of developer productivity.
Different Hiring Solutions During Uncertain Times
Some companies have the capacity and budget to hire developers but are concerned about long-term commitments at this point. However, they may still need to fill key specialized positions.
Therefore, managers may attract freelancers or hire part-time or contract specialists with lower costs and risks than hiring a full-time permanent employee.
In many cases, these can be remote positions. First, hiring remote developers in other states or countries lets companies tap into a huge talent pool of skilled candidates, many of whom they would never have found by conducting a local search. Second, while talking specifically about hiring in other countries, it may reduce expenses because developer salaries and rates, for example, in Europe or Latin America, are much lower than in the United States.
Hiring Temporary Workers
While in-house hiring is probably the best option to fully integrate developers into the company culture, it is also the most expensive hiring solution. It requires extensive resources and more time to recruit, onboard, and train a new employee — and if an engineer departs, the process begins again. Top professionals also expect benefits such as health insurance and 401(k) plans, which can be costly.
In addition, сompanies take on risk by hiring a permanent in-house employee because if the economic situation worsens, they will have to fire them and pay compensation. They also can’t lay off a professional without advance notice, as this could violate federal law and result in a lawsuit.
Instead, businesses can hire temporary workers and pay them a fixed monthly or hourly rate. A shorter notice period can likely be negotiated with a contractor or freelancer, where the contractor will agree to finish any urgent project and close the contract.
Hiring a Freelancer
Companies choose to hire freelancers for short-term projects, small tasks, and when they have limited budgets. In addition, it can take much less time to find talent because the freelancer pool covers the entire globe.
Moreover, managers can temporarily and immediately pause an hourly contract to stop a freelancer from logging more hours or wait until the company is ready to continue working on a project. Employers also have the option to terminate a fixed-price or hourly contract at any time.
- Companies can browse profiles, post a job, or let recruiters handpick freelance engineers on Upwork.
Hiring Contractors Using Staff Augmentation on Demand
Unlike the classic model of staff augmentation, where a company works with one agency, and it can take a month or more to find and hire the right developers, staff augmentation on demand offers the ability to hire contractors within a week. The YouTeam marketplace offers a pool of developers from a network of outsourcing agencies, and these developers are ready to start right away.
The hiring process, in this case, is fast and secure. Because the developers are already employed, their skills and experience are verified, and the company does not need to discuss benefit packages. Companies can also agree on a shorter notice period (usually one month), while contractors do not have to be compensated for contract termination.
- Companies can hire on-demand contractors on YouTeam.
Outsourcing Entire Projects
Even during a hiring freeze, employers can allocate budgets for certain projects that are vital to business growth. Tech companies may assign the entire project to outside providers managed by the CTO or product owner from the in-house team. Project outsourcing will also enable employers to avoid investment in technology, training, equipment, and infrastructure.