Several years back I remember asking this question to a recruiter.
He had no answer, he just shared what the hiring manager said to him.
Over the years I realised some of the things it means:
1. The hiring manager wants to meet more candidates to find someone better. The on-hold candidate is a backup plan or waitlist for the hiring manager.
2. The hiring manager is not clear about what he wants so he wants to go window shopping & see what he can get in the market.
3. The position has not been approved, but the hiring is started to build a pipeline, in case they get approval they can hire quickly.
4. Fake hiring- done to either find out about the competition or to see the talent in the market, or to show the company is hiring to get eyeballs, there may be no open position.
5. After the hiring started the management has put the position on hold.
Any other answers you found for this question?
Has anyone been hired after being put on hold?
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