In the current climate, recruitment and staffing companies are facing many challenges and an uphill battle to remain competitive and profitable. With this in mind, we have looked at what recruitment and staffing firms need to consider and how to overcome the various challenges they face right now. By addressing these issues head-on and taking action early, businesses will be set up for success and growth in the coming years.
The Great Resignation, triggered by the pandemic, has profoundly influenced wages and working conditions in the United States and the U.K over the past year. The U.K and U.S governments issued home working orders because of the pandemic, forcing businesses to allow their employees to work from home full time. But with life now returning to pre-pandemic norms, many employers are preparing to welcome more employees back to the office. However, employees have become used to the freedom, greater flexibility and improved work-life balance offered by home working. As a result, employees may push back against the call to return to the office, leading businesses to experience a new boom in resignations as workers favor employers who offer hybrid or remote working models.
The rising cost of living, increased labor costs, and inflation are factors that are putting pressure on many recruitment and staffing agencies, which are already having a difficult time in a competitive market. Recruitment and staffing companies have seen their profit margins shrink as overheads increase. They try to keep up with the higher wages needed to attract the most talented recruiters to their business. Rising expenses driving up costs can be a serious problem for staffing and recruitment firms with pinched profit margins that don’t have the profitability to handle these fluctuations. In the coming months, the problem could become more widespread as companies face higher wage bills and rising inflation in 2022.
The cost of living is increasing the outgoings of employees and businesses alike. The U.K.’s energy regulator, Ofgem, announced that from April 2022, the energy bill price cap would increase by 54 percent. This will put a fresh squeeze on household expenditure budgets, and mean prices will rise by £693 a year for millions of households. In a recent speech, U.S. Vice President Kamala Harris warned Americans could also face rising energy costs as an immediate consequence of the confrontation between Russia and Western powers over Ukraine.
The skyrocketing cost of renting a home in the United States is affecting the cost of living too. Over the past year, home prices in major U.S. cities have risen substantially, causing increases in rental prices. This has forced many renters to move away from their current neighborhoods or pay considerably more of their income toward rent. Some, unable to afford the higher rates and unwilling to move, have asked their employers for a pay raise or have looked for employment with higher salaries.
The growing trend of employees demanding higher salaries is a result of increased inflation and the rising cost of living. The average monthly salary in the U.K increased by £1,464 in January, according to a new report from the Office for National Statistics. ONS figures estimate median monthly pay across the U.K. was £2,050 in January 2022. This is an increase of £122 per month or the equivalent of £1,464 per year, up 6.3% from the same period last year. According to a recent Workforce Vitality Report, in the fourth quarter of 2021, wages for U.S. workers grew 4.4%, reaching all-time highs of 5.9% for those remaining in their jobs and 8% for those switching jobs.
To add to the pressure, the U.K. Government recently announced National Insurance and dividend tax rates would increase by 1.25 percent from April 2022.
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Inflation in the U.K and the United States is surging, with the price of goods and services rising significantly. In the U.K., prices have increased by 5.5 percent in the 12 months to January 2021. The Consumer Prices Index (CPI) recorded its biggest increase in 30 years because of rising food, clothing and restaurant costs. In addition to these crucial factors, the recent Russian invasion of Ukraine will likely have an adverse effect on the global economy, with inflation perhaps increasing further and the cost of fuel rising sharply in both the United States and the United Kingdom.
Rising costs have been a significant issue for some time now, but they are building in severity and frequency of late. Lower profit margins for recruitment and staffing firms mean many face the prospect of no longer being able to afford to operate, and those that do have to hire less staff, with lower salaries, or cut costs in other areas of the business.
To overcome external market forces, outsourced recruitment services have become a popular strategy among staffing and recruitment agencies looking to become more efficient. Agencies are under pressure to be more cost-competitive, and many have seen their margins squeezed by the demands of a constantly rotating candidate pool that requires ever-increasing resources for recruiting.
Outsourcing is not a new concept; it has played a prominent role in the success of businesses for years. For many years, outsourcing was used as purely an effective cost-cutting measure for businesses. However, this has since transformed, and today, outsourcing offers a variety of advantages for companies of all sizes. Outsourcing recruitment services is an increasing trend for growing and competitive recruitment and staffing firms—particularly during in a period of market fluctuations with so many unknowns.
Job vacancies have soared in the past year, and firms providing recruitment and staffing services remain hard-pressed to meet demand. However, many are now turning to outsourcing as a solution to save money without making a long-term commitment. Every year in the United States, companies outsource 14.3 million jobs. In a recent survey, cost-cutting remained the number one reason businesses turn to outsourcing services (59 percent), followed closely by being able to focus more on core business activities (57 percent), and solving capacity issues (47 percent).
The rise in digital technology and increased cyber security have made outsourcing a more viable option for many businesses today. When choosing an outsourcing partner for your recruitment and staffing agency, consider only service providers with an excellent reputation, robust data security and recognized accreditation, such as ISO 9001:2015 and ISMS 27001:2013. Outsourcing has evolved dramatically in the past 30 years and, for many firms working in the recruitment and staffing sector, outsourcing has become a rewarding business strategy. Outsourcing is appealing because it allows a business to have access to many services on tap, including full cycle recruitment, head-hunting, passive search, recruiting via C.V.s, database regeneration, job postings, and resume formatting.
With so much uncertainty and the continuing rise in the cost of living and inflation, the way recruitment and staffing companies handle their current issues will be crucial to the future of their businesses. By utilizing outsourcing as an option for recruitment, staffing, and administration tasks, businesses will set themselves up for success further down the line by not getting bogged down in admin work or long-term commitments. This will help keep recruitment and staffing agencies competitive and profitable while ensuring the best possible service for clients.
