Restructuring in the recruitment and interim sector: what does the future hold?
Restructuring in the recruitment and interim sector
What issues are businesses in the sector facing?
How is the supply chain for the sector impacted?
We expect to see further consolidation among smaller and mid-sized recruiters. Those that have remained resilient throughout the pandemic have had to make some difficult decisions and scale back on some non- sales staff, including some of their back-office functions, with the highest percentage of redundancies seen in administrative roles and HR. These roles are unlikely to come back after furlough and consolidation will be a means of survival. Others will take advantage of the opportunity to explore new avenues for growth, targeting niche sectors, including agriculture, food production, health and social care services, where the labour supply will have been particularly impacted by Brexit. The life sciences and pharmaceutical sectors are also attracting huge investment in recognition of the fact that we might need more vaccinations in the future. Recruitment Process Outsourcing (RPO), when a company transfers all or part of its recruitment requirements to an external provider, was already popular with larger corporates. This now poses a huge opportunity post-COVID for the sector, as a lot of companies will struggle to adapt their HR function as people work differently. An effective RPO programme can install a talent acquisition team, the latest recruitment technology and flexible recruitment processes within an organisation, so there’s a big opportunity for RPO to steal a march on the market. What trends do we anticipate seeing across the sector over the next 12 months and beyond?
For those businesses that have managed to remain resilient in the pandemic, cash is still king. They will have to carefully monitor their cashflows, make sure they utilise all the government support measures as long as they are available and constantly reduce costs where they can. Initially, the sector will be leaner with the overall headcount significantly reduced from pre-pandemic levels as agencies have used the last 12 months to reduce costs. When the market does recover, relationship management with both candidates and customers will also need to be more proactive than ever before. There is also a lot of uncertainty about the new IR35 tax rules coming into the interim and permanent market, which raises the prospect of an increased administrative and regulatory burden for recruiters. The changes were originally due to take effect in April 2020, but the start date was delayed by 12 months as a result of the pandemic. Andrew Chamberlain, Director of Policy at The Association of Independent Professionals and the Self- Employed (IPSE), a leading organisation for the self- employed sector, said: “We believe there is no indication of the government delaying the private sector change for a second time, unfortunately. The legislation has already been passed so it would need a change in this year’s Finance Bill to prevent it from being introduced. There is no suggestion, that we are aware of, that this will happen.”
Cashflow is not currently at a critical level due to tax payment holidays, the coronavirus job retention scheme, business interruption loans and other forms of government support, but we are approaching a cliff edge with the schemes coming to an end. There is likely to be a rise in unemployment which will again increase the labour supply. However, this shouldn’t be underestimated as this will pose a significant opportunity for recruiters to find roles for candidates. There’s also an expectation that a number of people who have been on long-term furlough will be reluctant to return to the job they were previously doing, particularly if it means going back into the office having become accustomed to a change in lifestyle. Additionally, many are now used to working from home; they enjoy it, they realise they can do it more efficiently and they are saving time and money on their commute – along with other associated expenditure – resulting in a better work-life balance. What are the challenges and opportunities facing the supply chain? Many will now be seeking new opportunities that offer more flexible working. This shift is likely to cause significant disruption to the permanent market, with many people having already taken the opportunity to retrain or upskill themselves through online learning during lockdown. For interims, they will find it challenging to carry out their due diligence to establish the level of risk when they go into a business. As there will be less clarity about how stable a business is, they will have to think carefully about their remuneration and the risk-reward ratio of taking on the role. The idea of employing an interim to turnaround a business has fallen out of fashion in favour of business transformation – for example, using interims to support entering new markets or changing operating methods. While we foresee a higher element of risk to contracts, we also expect interims to be contracted for longer periods due to the changing nature of assignments. On the upside, especially for operational roles where interims are working on business transformation, contracts are likely to be longer, up from six months to a year or more.
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Percent growth in the recruitment sector each year since 2008 6 Percent of interims lost their jobs at the onset of the pandemic Billion pounds in revenue generated in 2019 by the UK’s recruitment sector 50
On the upside, especially for operational roles where interims are working on business transformation, contracts are likely to be longer, up from six months to a year or more. Susan Moor FRP Transition
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