2013: A year in recruitment

Steve Hemsley

As 2013 draws to a close, the UK jobs market is strengthening and recruiters’ businesses are growing. But the spotlight has also shone on employment agencies’ tax practices and zero hours contracts this year. Steve Hemsley reviews some of the high and low points for the recruitment sector this year.

The UK has seen some economic recovery this year, but there has also been a great deal of focus on the way people are employed and how they pay their tax. Things are looking up for recruiters, but there are still many challenges to face in 2014.

“There have been some tough issues to deal with around the Conduct Regulations, public sector procurement and zero hour contracts,” says Kevin Green, CEO of the REC. “But what we don’t want to see in 2014 is anything that could harm the UK’s flexible labour market.

The year ends with positive jobs news

At the end of 2012 the UK unemployment level was 2.52 million – or 7.8% of the labour force – but by September 2013 it had fallen to 2.47 million, meaning 7.6% of the labour force are now unemployed.

By November two thirds of bosses (66%) were planning to increase their permanent workforce going into the new year, up from 58% in October, according to the REC’s JobsOutlook survey.  

“It was pleasing to see a fundamental shift from a very flat market at the end of 2012 to some real growth 12 months later,” says Green. “It has taken five years to return to the 2007/2008 peak and it is encouraging that this is happening when the UK economy is still not growing that rapidly.”

2013 saw salaries for successful permanent candidates begin to rise as soon as people returned from their holidays in the new year and had more confidence to move jobs. Pay hikes for those in demand were driven by the ongoing skills shortages and a lack of strong candidates across a number of sectors.

However the skill shortages remain a concern for recruiters, with 15 industry sectors reporting a problem. “It is not just in engineering and IT but in managerial and blue collar roles too,” Green adds. “There are just not enough candidates.”

Changes to the Conduct Regulations

In January the government published a consultation document to reform the regulatory framework for employment agencies and employment businesses. It was part of the Government’s Red Tape Challenge and completed in April. The industry broadly welcomed the proposed new regulations outlined in the autumn.

It should mean the opt-out for limited company contractors and the ban on jobseekers being charged a fee are retained and recruiters are not obliged to publish additional information about placements and pay rates on their websites. The government will retain a small investigative team to deal with all other non-compliance issues.

The closure of the DfE’s quality mark

On 1 April the Department for Education’s removed the Quality Mark designed to improve the quality of supply teachers in schools. The DfE wanted the industry to make its own arrangements. The trade bodies have been busy filling the gap. APSCo launches its Compliance+ best practice standard for education recruitment businesses next month for instance.

Regulator advises on pension auto-enrolment

Recruitment was near the top of the list when the Pensions Regulator investigated which industries might struggle with auto-enrolment compliance. A pension hit squad was visiting recruiters throughout 2013 to prevent possible breaches and identify problems. More than 1,000 recruitment companies reach their staging date between April and July 2014. This is when their automatic enrolment duties begin.

Offshore intermediaries

In October the government published a summary of responses to the Offshore Employment Intermediaries Consultation. This was part of the National Insurance Contributions Bill and the government’s tax avoidance agenda. Legislation could come into effect next April with responsibility for accounting for national insurance and tax lying with the recruiter. It could create a huge amount of extra administration but it is still unclear how any new rules will work.

Zero hours contracts

The job market is a key political weapon for all parties and zero hours contracts received significant publicity during 2013. Yet research from the CIPD in November claimed zero hours contracts have been unfairly demonised. It said many people have a positive experience of them and are more likely to be happy with their work-life balance. The CIPD admitted that some employers need a better understanding of employment rights of zero-hours workers to remove bad practice.

2013 also saw the usual round of wheeling and dealing

Despite the economic uncertainty there have been a number of important acquisitions this year. “We have seen more consolidation with larger providers gobbling up smaller recruiters to get volume and boost their margins,” Green says.

In February ManpowerGroup announced it was buying Workshop Holding, the parent company of Norwegian construction industry recruitment specialist Workshop Bemanning og Kompetanse AS.

In another spring deal healthcare recruiter Medical Professional Personnel bought NHS finance recruiter Parkhill Executive Resourcing in a strategic move to diversify into this market.

After a quiet summer the dealmakers were back in September when technical and professional recruitment business Matchtech Group spent £4 million acquiring the share capital of niche technology recruitment business Application Services which trades as Provanis.

November brought an important deal when Flex Recruitment Plus in Leicestershire was acquired by US staffing provider Corporate Resource Services (CRS). This represented CRS’s arrival in Europe.

One of the big deals in 2014 could be completed as soon as the Christmas decorations come down when the purchase of Alexander Mann Solutions by New Mountain Capital announced in October is finalised.

A good year for recruiters

There has been strong growth during 2013 among niche recruiters and those looking to open overseas offices. “This is the age of the specialist, while members want to launch in countries where they can enjoy better margins,” says Ann Swain, chief executive of the Association of Professional Staffing Companies.

APSCo’s UK Recruitment Index 2013 carried out with Deloitte confirms how the industry has started to feel more positive during 2013 with 61% of APSCo’s members expecting to open new offices in 2014. “This should be the last year that members are focused more on propping up their business and now look for profits,” Swain adds.

Challenges for the industry

Despite the growth in the sector, whether companies can find the good consultants they need to grow remains to be seen, Swain says, which is why the sector must do more to promote recruitment as a career choice.

However, the main challenge to the recruitment sector is the relentless drive by clients to reduce investment in recruitment, according to Paul Farrer, chairman at Aspire Global Network, which includes the recruitment brands PFJ, The Graduate Recruitment Company, RPCushing, Periscope and Aspire Global Network Asia.

“Across the globe CEOs say the difficulty in recruiting and retaining talent is the biggest challenge they are facing and it is restricting them from achieving their strategic goals,” he says. “[They say] recruitment and retention is the key to achieving their goals in one breath before demanding a reduction in fees with their second. Where is the logic?”

Farrer also cites internal recruiters’ using recruitment agencies only for roles they fail to fill themselves and the use of applicant tracking software and Linked In to recruit without the use of agencies as the main challenges the sector faces.

“Fortunately most people are employed by the UK’s brilliant SME businesses where the key decision makers are accessible and view talent as an investment,” he adds. “Let’s hope that continues into 2014.”