Recruitment sector survey: Life after lockdown

29 May 2020

male typing at laptop with glasses on

The recruitment sector team at Saffery Champness, in partnership with the REC, has just completed its second survey relating to the impact of the Coronavirus pandemic on the recruitment sector.

Our first survey, carried out as at 31 March 2020, found that:

  • 73% of respondents predicted a fall in projected net fee income of more than 25% for the next financial year, compared with their original budget;
  • Approximately 40% of respondents expected to furlough more than 60% of their staff;
  • Almost 41% had introduced reduced hours and 44% were introducing pay reductions;
  • Only 14% had started redundancy negotiations with staff as at 31 March.

Our second survey re-examined the situation one month later, as at 30 April 2020, and also asked what steps recruitment business owners have been taking to be business-ready when lockdown ends.

One month on – what has changed?

Take up of the Coronavirus Job Retention Scheme has increased significantly, as reflected in the government’s announcement on 19 May that almost one million businesses had submitted claims, covering approximately 8 million workers.

As of 30 April 2020, 95% of respondents had communicated a programme of furloughing to staff, an increase on the 31 March figure.

Fig 1: Percentage of respondents that have communicated a programme of furloughing to staff

Whilst the number of recruitment businesses submitting claims has increased, the more recent claims are affecting fewer workers, as shown below:

Fig 2: The number of respondents that have furloughed more than 60% of their staff

The second survey also suggests an increase in the number of recruitment businesses operating reduced hours and reduced pay measures for their staff, as shown below: Fig 3: Percentage of respondents that have introduced reduced hours for some staff Fig 4: Percentage of respondents that have introduced pay reductions for staff (including the 20% not covered by the government’s Job Retention Scheme grant)

Whilst the increase in cases of agencies operating reduced hours for staff is only marginal, the increase in pay reductions possibly reflects the increase in take up of the Job Reduction Scheme since 31 March.

In our second survey we asked agencies whether their use of the Job Retention Scheme had extended to agency staff.

56% of respondents are (or will be) furloughing agency workers. Of that number, the vast majority (77%) expect this to be less than 20% of agency staff, with the remaining 23% expecting it to be up to 40% of agency staff.

The Job Reduction Scheme is in place to safeguard jobs and to minimise the number of redundancies. The extension of the scheme until September is clearly welcome in this respect and our second survey supports the view that the scheme is keeping a check on the number of redundancies. One month on from our first survey, the number of recruitment businesses that have commenced redundancy negotiations remains largely unchanged:

Fig 5: Percentage of respondents that have commenced redundancy negotiations with staff

Interestingly, hiring intentions have increased over the last month. The hiring of new consultants was effectively “on hold” as at 31 March 2020, with only 6% of respondents actively hiring. This has increased to 38% as at 30 April 2020.

The level of confidence illustrated by the increase in hiring intentions is also reflected in a reduction in respondent’s views on the expected impact on net fee income.

Fig 6: Percentage of respondents predicting a fall in projected net fee income of more than 25% for the next financial year, compared with their original budget

A more detailed analysis of the projected fall in net fee income is set out in Fig 7 below:

Fig 7: Likely impact of Coronavirus pandemic on net fee income for next financial year (compared to budget)

Coming out of lockdown

The majority of respondents are using this time to reach out to new candidates and potential clients, focusing on quick growth sectors, and providing training opportunities for staff.

Only a quarter of respondents were looking at diversifying activities, for example moving from permanent to temporary recruitment.

Fig 8: Steps taken to be business ready when lockdown ends (participants chose all that apply)

Other measures being taken included reviewing overheads for possible cost savings, looking to improve efficiencies in the business, exploring the health and safety aspects of getting staff back into branches / offices and generally keeping in touch with existing clients with a view to protecting customer loyalty.

Recruiters are optimistic by nature. Nevertheless, this positive view that the bounce back is more likely than not to be “V-shaped” is no doubt informed by conversations with end user clients on their future recruitment needs.

Fig 9: Confidence that the economy and individual businesses will bounce back

Conclusion

Commenting on the survey findings, Simon Kite, Head of the Recruitment Sector team at Saffery Champness, said

“One month on from our first survey, which was carried out one week after the start of “lock down” and shortly after the announcement of government support measures, our second survey indicates a significant uptake in the Job Retention Scheme. The number of claims has also been extended to include agency staff.

“The Job Retention Scheme has been effective in limiting the number of redundancies in the sector and is allowing recruitment business owners to take time to plan for the future.

“Predictions for the likely fall in net fee income have been relaxed somewhat, with recruiters now feeling more optimistic about protecting business volumes and the likelihood of a “V-shaped recovery. It is also evident, that business owners are using their time wisely in making themselves business ready for the end of lockdown.”

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