What’s the Future Hold for Direct-Hire Placements?

There's no doubt that the most recent recession (or current one, depending upon who you talk to) was much different than previous ones. As a result, it stands to reason that the recovery will be much different, as well. According to a recent CNNmoney.com article ("Say Good-Bye to Full-Time Jobs With Benefits"), those who work a full-time job in the future may count themselves among the minority.

The article indicates that many of the jobs that employers are currently adding are temporary or contract positions, as opposed to full-time jobs. The reason? Plain and simple: to cut costs. Companies are looking at any way possible to cut them, and this is one of the ways in which they're accomplishing that goal.

The trend is an interesting one, to say the least. According to the CNNMoney.com article, five years ago the government estimated that 31% of people in the marketplace worked on a contract (or "contingent") basis. Furthermore, analysts predict that number could increase to 40% by the end of the decade. After that?

James Stoeckman of WorldatWork told CNNMoney.com that within the next 20 to 30 years, full-time employees could become the minority in the nation's workforce. That means that more than 50% of all employees would be working on a contract or temporary basis.

Is this a short-term trend? Or a long-term phenomenon? Is the U.S. economy in the beginning stages of a massive paradigm shift in terms of hiring and staffing?

More importantly . . . what does all of this mean for recruiters?

Let's say, just for argument's sake, that Stoeckman is correct and by the year 2030, more than 50% of all employees in this country work on a contract basis. If that's the case, wouldn't that mean there would be fewer direct-hire job orders than there are now, and certainly fewer than what existed five years ago? Would employers look to fill their open positions on a contract basis first, making a full-time hire a secondary consideration?

If less than 50% of all job orders in 20 years are direct-hire job orders, how many more job orders overall would have to exist for there to be the same number as now? And how many more recruiters will be working in the industry in 20 years? Even if there is the same number of direct-hire job orders, will there be the same number of recruiters vying for those orders?

And why the heck do I keep asking so many questions?

Probably because I don't have many answers. All of this is theory and conjecture at this point. What will happen for sure is anybody's guess. However, it appears there's at least a chance that eventually there will be more contract employees in this country than full-time employees . . . which means there's a chance there will be more contract job orders than perm job orders. A few years ago, the possibility of such a scenario was inconceivable, not even on the radar in terms of future trends. Now, for some prognosticators, it's more than a possibility--it's an inevitability.

What are your thoughts? Are your clients looking to fill more contract and temporary positions right now than they were five years ago, or even two years ago? Is the whole notion that direct-hire positions (and placements) are destined to decline a misguided notion?

(Matt Deutsch is a writer for Top Echelon's Recruiter Training Blog.)

Comment by Geoff Clendenning on June 24, 2010 at 12:51pm: We do both direct-hire placements and temporary and without a doubt our future is in temporary hiring. The demographics demand it, the economy demands it and the workers prefer it.

In the world of recruiters its much more difficult to operate a small independent staffing company versus a small placement shop. Fortunately their are companies like Staffing Edge http://www.staffedge.com that make this possible by providing back-end support, risk management and financing to small independent recruiters.

We see a great consolidation happening in the staffing industry as trends shift and technology changes the playing field. Most interestingly, we believe the leaders today will not be the leaders tomorrow; so their is a great deal of opportunity for a small nimble recruiting firm, with the right backing to grow and perhaps become an industry leader.

http://www.armorpeoplelink.com

Comment by Todd Kmiec on June 27, 2010 at 8:06am: Matt,

I think it's always a little dangerous to extrapolate current trends like the CNN article you reference does. Right now, hiring contract workers is more appealing to clients than it was in the past and that may continue to be the case. However, the reasons we see clients leaning more that way than before are not necessarily permanent factors. One reason is higher government regulation, incredibly long unemployment benefits, healthcare, unions etc.... Outsourcing the hire and those headaches and costs has become more attractive and if the trend continues to more government involvment, then that will continue to be a factor. But there could be a serious backlash on that front within a few years. The biggest factor we see for clients making a contract hire as opposed to perm is that they want to grow and move forward, but they aren't super confident that business conditions will improve or even that they won't take bigger hit from here. So they are dipping their toes in the water. Companies who are confident in their growth are making permanent hires. That says a lot. Even if business conditions remaine weak, the more time that goes by without things falling apart, the more confident existing businesses will be in their own growth and they will make more permanent hires. I agree that you can't predict wtih certainty. From what we see and hear from clients over time, I would bet that contract staffing will play a bigger role than it has in the past, but will never reach anywhere near 50% of hires. From the client's perspective, they are a much stronger and better business with the best employees they can find permanently on board in most roles, not as contractors.

Todd Kmiec
todd@toddkmiec.com

Comment by Lisa Howarth on June 27, 2010 at 10:31am: Companies augment their permanent employees with contractors so that they can have flexibility in the structure of their workforce: planning for growth (as Todd mentions), for fixed-term projects, for seasonal peaks etc. Companies historically have argued that contract staff are less expensive in the long run because they do not have to pay for things like benefits, government programs and severance costs associated with permanent employees.
In the future that may change, and companies may think twice about using contractors. Governments are cracking down on companies who use contractors effectively as permanent employees but circumvent the costs and benefits of employees. We can see this in the Microsoft decision, and many others.

In addition, governments are enacting legislation that requires companies/agencies pay contractors notice of termination and severance for longer term contractors, and are beginning to take away the tax advantages associated with being a contractor.

All of this may actually lead to people being less willing to be a professional contract, and companies wanting to use contractors less. Or it may simply lead to the need for more creative solutions in engaging contractors through "professional services" companies and the like.

However way you slice it, these are interesting times.