Short-time work, hiring freeze, partial retirement: effects and limitations

When economic pressure increases, a company doesn't have to immediately cut jobs. Short-time work, hiring freezes, and phased retirement are among the tools that can be used to reduce personnel costs or gradually adjust staffing levels without immediately resorting to redundancies.

This can be useful – but only if the measures are appropriate to the company's actual situation. All three instruments share one important characteristic: they can create time and financial flexibility, but they don't automatically solve a structural problem.

It is therefore crucial to realistically assess their impact and their limitations.

Hiring freeze: quickly decided, but slowly taking effect

A hiring freeze is often one of the first measures companies take when they want to reduce costs. Vacant positions are no longer filled, or only in particularly critical areas. This allows the workforce to gradually decrease through natural attrition.

The major advantage: A hiring freeze can be implemented relatively quickly and initially avoids direct layoffs. This can be a sensible solution, especially when no immediate staff reduction is necessary and sufficient time is available.

However, its effects can only be controlled to a limited extent. This is because employees do not automatically leave precisely those areas where fewer staff will be needed in the future.

In the worst-case scenario, the opposite of the desired effect occurs: Sought-after specialists voluntarily switch to other employers, while in areas with actual overcapacity, hardly anyone leaves. At the same time, positions that would actually be important for the company's future development remain unfilled.

A general hiring freeze should therefore always be accompanied by clear personnel planning. Strategically important positions must continue to be filled.

Short-time work: strong in temporary problems

Short-time work pursues a different goal. It temporarily reduces working hours and can therefore provide financial relief to companies experiencing short-term lower capacity utilization without directly reducing employment.

This tool is particularly helpful when a company anticipates that orders or capacity utilization will increase again after a difficult period. Instead of losing qualified employees and having to recruit them again later, employment relationships can be maintained.

But that is precisely where the limit lies.

If the cause is structural rather than cyclical, short-time work merely postpones the necessary adjustments. For example, if products are permanently discontinued, processes are automated, or the future organization requires fundamentally different skills, the demand for personnel will not return to its previous level even after the short-time work period ends.

The longer such a situation persists, the more problematic it can become. Employees remain uncertain about their future, and while the company may gain time in the short term, it may lose this time again during the necessary restructuring.

Short-time work is therefore primarily a bridge through a temporary period of weakness – not a substitute for a long-term restructuring strategy .

Partial retirement: planned staff reduction for specific target groups

Partial retirement can be particularly attractive for companies with an older workforce. Instead of laying off employees for operational reasons, it allows employees nearing retirement age a gradual or early transition out of working life.

This has a significant advantage for companies: staff reductions can be planned relatively accurately. At the same time, this solution is often perceived differently by those affected than a traditional dismissal.

However, the instrument is only suitable for a limited portion of the workforce and can involve considerable costs.

Furthermore, there is a strategic risk: Long-term employees often possess knowledge and experience that is not fully documented. If many of them leave the company within a short period, valuable know-how can be lost.

Partial retirement should therefore not be viewed solely as a tool for workforce reduction. Companies must simultaneously plan which knowledge needs to be retained and how it can be transferred to other employees in a timely manner .

The three instruments solve different problems.

Short-time work, hiring freezes, and phased retirement are often mentioned together as alternatives to job cuts. In reality, however, they serve very different functions.

A hiring freeze primarily takes effect over time and through natural attrition. Short-time work is suitable for bridging a temporary period of underutilization. Phased retirement allows for more targeted staff reductions within a specific employee group.

Therefore, the choice of instrument should always be based on the cause of the problem.

If order volumes are only temporarily weak, short-time work can be very effective. If the workforce is to be gradually reduced over several years, hiring freezes and natural attrition can contribute to this. If there is an older workforce in certain areas, phased retirement can offer additional options.

However, if there is a fundamental structural surplus of personnel, these measures may not be sufficient.

If alternatives only postpone the necessary job cuts

Precisely because direct dismissals are stressful for companies and employees, the temptation is great to try as many other measures as possible first.

This is generally a good idea. It only becomes problematic when exploring alternatives leads to a permanent postponement of necessary decisions.

Then the economic situation could worsen further.

At the same time, uncertainty builds up within the organization for months: Will there be short-time work after the hiring freeze? Will further cost-cutting measures follow? And will job cuts ultimately be imminent?

Companies should therefore distinguish early on between measures that actually solve a problem and measures that merely buy time .

Gaining time can be very valuable – if it is used to develop a clear target organization and to professionally prepare the next steps.

First the target image, then the measure

The crucial question should therefore not be: "How can we avoid layoffs for as long as possible?"

A more meaningful question is: What will our organization look like in the future – and what personnel capacities and skills will we need for that?

Only when this target image is clear can one assess what contribution short-time work, hiring freezes or partial retirement can make.

Perhaps a significant portion of the necessary staff reduction can be achieved through natural attrition. Perhaps employees only need to be retained through a temporary period of reduced staffing. Perhaps the age structure offers opportunities for voluntary transitions.

However, it may also be necessary to take additional measures.

This clarity is important so that supposedly gentle instruments do not ultimately lead to a long period of uncertainty.

Conclusion: Use them wisely, but know their limits

Short-time work, hiring freezes, and phased retirement can provide companies with valuable flexibility and help to avoid or reduce redundancies. However, their effectiveness depends heavily on the initial situation.

Short-time work is particularly suitable for temporary economic problems. A hiring freeze can reduce the workforce in the long term through natural attrition. Phased retirement allows for a predictable transition for certain employee groups.

However, none of these instruments replaces a clear answer to the question of what the future organization should look like. If persistent overcapacity exists, it can even be detrimental to continually postpone necessary changes.

Responsible restructuring therefore does not mean avoiding layoffs at all costs. It means selecting the right tools early on and, where layoffs are unavoidable, providing professional support to affected employees as they re-enter the workforce. Restart Career supports companies and employees in this process with individualized career guidance and outplacement consulting.