Recruiting platform Gem laid off 100 workers, one-third of its workforce—is this a sign of what’s to come?

The San Francisco-based company’s layoffs followed hiring freezes and layoffs for its clients.
article cover

Bill Varie/Getty Images

· 4 min read

On November 1, 100 employees at recruiting software company Gem woke up to the worst kind of email: They were being laid off, effective the next day. Many of them, according to a spreadsheet compiled by Gem’s head of engineering recruiting, Salehah Hassan, worked in sales and recruiting roles.

“The extremely difficult decision to reduce our workforce came as a result of a volatile macroeconomic situation in which many of our growth-stage tech customers are reducing or stopping their hiring altogether—conditions we expect to persist for multiple quarters,” CEO Steve Bartel wrote in an email to HR Brew via PR representative Lindsey Scott.

For HR professionals, this news might feel like a big, flashing warning sign: Are layoffs at a company like Gem—with over $100 million in funding and a $1.2 billion valuation—a bellwether for recruiting as a whole?

Hiring is in a weird place right now. Surveys suggest that many top executives have at least been mulling downsizing their workforces for months. Some 81% of 657 executives, including 100 senior HR leaders, surveyed by PwC between October 12 and 18 said they had ​​plans to reduce their headcount through hiring freezes, layoffs, or another tactic.

But that doesn’t mean they’ve actually made deep cuts. Julia Lamm, workforce strategy partner at PwC, told HR Brew that companies that take steps to reduce their headcounts are likely to be conservative in their approach, leading to a slow cooling of the hiring market, rather than a swift one.

Julia Pollak, chief economist at ZipRecruiter, agreed. Most headcount reduction plans, she said, are still hypothetical, “more like disaster preparedness plans” or “emergency escape routes.”

The Department of Labor’s monthly jobs report, released last Friday, mostly supports this picture: Although hiring declined in October, US employers still beat economists’ predictions by 56,000, adding 261,000 jobs.

But... While hiring in most industries is still chugging along “quite nicely,” Pollak noted that hiring in tech has “cooled a lot.”

She said Gem’s tech-heavy client portfolio might have left the company “exposed” to more risk. Its website’s rotating banner of 40 featured clients—including Coinbase, Instacart, MasterClass, Robinhood, Twilio, Shopify, Snap, and Square—reads like a highlight reel of 2022 tech layoffs. Other Gem clients, including Lyft and Stripe, have announced hiring freezes.

HR is challenging. HR news doesn’t have to be.

HR Brew keeps you effective in the fast-changing business environment.

Given the hiring slowdowns among tech startups, Bartel said in a statement that he intends to pivot and “double down on the enterprise market.” Scott told HR Brew by email that the company will dedicate more resources to targeting enterprise clients and launch a new tool to help companies review large numbers of inbound applications.

Will others follow? HR Brew reached out to competitor recruiting software firms to ask if they plan to make similar cuts.

Though representatives from Lever and Greenhouse declined to comment, and Fetcher and AmazingHiring did not respond by press time, Anoop Gupta, SeekOut’s co-founder and CEO, and Steven Jiang, hireEz’s CEO, told HR Brew that they had no such plans. The majority of hireEz’s profiled clients are in the financial services sector, while SeekOut’s are diversified across industries.

Gupta, via Yuki Klotz-Burwell, said SeekOut is particularly resilient because it used the $180 million it raised in Series B and C funding to preemptively diversify its offerings beyond recruitment to include retention, growth, and internal mobility products. Jiang, via Matt Lee, said that hireEz hasn’t taken this approach, but he sees outbound recruiting staying top of mind for HR teams.

As companies increase headcounts more conservatively and invest less in recruiting, Lamm thinks it will be sink or swim for recruitment companies vying for clients.

“So many companies [are] in this space that the successful ones are going to float to the top and the others will fold,” Lamm predicted.—SV

Do you work in HR or have information about your HR department we should know? Email [email protected] or DM @SusannaVogel1 on Twitter. For completely confidential conversations, ask Susanna for her number on Signal.

HR is challenging. HR news doesn’t have to be.

HR Brew keeps you effective in the fast-changing business environment.