Labor Hoarding in Prep for a Recession

While employees across the board are feeling the pressure of inflation and an impending recession, small businesses also find themselves in a bind. A recent poll from from Insight Global found that over 77 percent of Americans plan to stay in their current roles, mostly for fear of a recession. Employees are concerned about job security. For small business owners, the mindset has shifted to “labor hoarding” as a way to offset the potential destruction a recession could present. This should ease at least a bit of the worries plaguing today’s employees. But what’s up with labor hoarding, anyway?

A study from Skynova unveiled that 91 percent of the small business owners who participated are “labor hoarding,” which Insight Global defines as “the practice of keeping employees within an organization by any means necessary.” What’s more, 89 percent of those surveyed plan to keep the hoarding up into 2023. Labor hoarding can take a few different forms, but it may mean keeping on workers that are underperforming or avoiding layoffs that would have helped reach a monetary goal. With the labor market tightening and unemployment at historical lows, resources are scarce—and that’s why employers are taking drastic steps to retain talent. Rather than replacing employees, companies that labor hoard are investing in them. One of the top ways businesses can prep for a recession is to invest in their existing talent pool. Plus, a slow-down in hiring frees up more time for management to really work on building up their employees’ skillsets—with less people to manage, there is more opportunity to develop. Another way labor hoarding can help businesses in the face of a recession? It cuts costs. Hiring and onboarding new employees is expensive in both time and money.

In order to retain employees and avoid layoffs, the Skynova study revealed several strategies that small businesses are looking toward. These include hiring freezes, cuts to benefits, switching to remote work (to reduce the cost of building leases), moving to a 4-day workweek, and cuts to contract/freelance workers. Strategies for employee retention include increased compensation, more transparency with communication, and connecting more with their workers.

While labor hoarding might sound like a great benefit to both parties, it’s not necessarily for everyone. For instance, companies shouldn’t hoard their workforce if there are critical roles missing from it—you can’t just shoehorn your existing employees into roles they’re not cut out for, just for the sake of retention.

Over at the Financial Pantry we cover topics ranging from financial news to industry trends, but we’re also committed to making sure you’re aware of the ups and downs in the small business world. If and when a recession strikes, you can be sure we’ll be talking about it. Check back with us every week for fresh content on everything you need to run a successful small business. Want to learn more about small business financing? Check us out today – we’ve got industry-leading loan products to help you weather any storm.