Surviving the COVID slowdown as a staffing firm

The global staffing market has experienced steady growth in the last five years. At the beginning of 2019, most global staffing firms projected significant growth in their business backed by digital transformation and the adoption of artificial intelligence in the industry. However, over the past few weeks, there have been some drastic changes affecting the economy and the staffing industry is no exception. 

Factors behind the industry slowdown

According to a report by the American Staffing Association, the top 16 recruiting firms recorded an average 25.3% increase in their gross margins in FY 2018-2019. But the same firms reported a 2.2% decrease in their margins for the Q4’19.

Slowdown in the staffing industry


Mind you, this was well before the devastating impact of the COVID-19 pandemic that has swept across the world putting the global economy at risk. While the top firms have only started realizing the impact, small and medium firms were already struggling to increase their profit margins due to the volatility of the market, increasing popularity of the gig economy, and competition from big players. 

The economic slowdown seems to have worsened the reduced demand and the increased wait period on payments staffing firms have had to tackle. According to a recent report by the American Staffing Agency (ASA), temporary and contract staffing jobs were down 8.1% for the March 9-15 week last year. As experts predict, it will not get easier for the foreseeable future as the financial impact of the health crisis unfolds. 

Harley Lippman, CEO and founder of Genesis10, an IT staffing provider with a presence across the US said, “Things are going to be back to normal; what no one knows is exactly when”. The collective stand of the TechServe Alliance, a trade association of the IT and engineering staffing and solutions industry, on the slowdown issue also resonates the same way. 

Steps to take now

However, staffing firms can manage profit margins with diligent monitoring and by improving the staffing business model. The best way to soften the blow of recession on your staffing business lies with diversification. 

Diversification, in this context, means expanding your focus into other verticals. Alongside focusing on what you do best, you should make plans to add revenue streams to the business.

  1. Diversify to SurviveAs wages go high, your clients may pause hiring to handle the cash crunch they might be facing, causing your staffing firm to take a hit. But as companies stop hiring, they might need to upskill or reskill their existing workforce to make sure business runs as usual. Providing the requisite training to skill your client’s employees may help you do more than just stay afloat. And, by offering services that your competitors aren’t, you are creating a niche for yourself, and continuing to profit even after the market bounces back.And if we are to understand anything from this report published this week by the Center on Budget and Policy Priorities, more specifically the data from the 2008-09 economic slowdown, is that markets do return to normalcy over time. What you could also do is ensure that you put more effort into keeping clients who come to you with requests more often and bring you steady business and leave the ‘high volume, low margin’ category on the back burner. Acquiring new clients, expanding business verticals, and keeping profitable clients happy is what will help you sustain and thrive.
  2. A few of the recruitment specialists are hoping that while employers may step back from hiring permanent staff, they might be interested in hiring temporary workers and remote workers, which could boost business, too. A senior executive from Kelly Services points out that when hiring temporary workers, the staffing agency is entirely in charge of paying the salary, deducting necessary taxes, and doing the paperwork – implying there’s something to work with there. As a staffing firm, you can increase your bill rate when recruiting a highly skilled individual. Additionally, providing training to these temporary workers before they join the client’s workforce may result in some brownie points for your business.
  3. The staffing sector is generally considered very competitive with multiple companies providing similar services. It is only natural for local small and medium players to lose out to their multinational counterparts. With the work-from-home concept on the rise, the concept of the gig economy is gaining momentum. However, not every staffing and recruiting agency is focusing on this as much as it should. Provide this alternate, and you could easily stand out among the competition.
  4. Automating day-to-day processes – initial screening, scheduling, background verification, and onboarding– is the best way to optimize existing resources. Along with improving efficiency, it also eliminates human biasContrary to popular belief, staffing giants such as Kelly Services, Randstad, and Adecco use a vendor management system (VMS) to submit candidates. A VMS allows a staffing firm to source and manage candidates through other staffing agencies as well. Almost all talent management and applicant tracking systems available in the market offer a fully scalable VMS platform, making it easy for staffing firms to integrate it into their existing process.

The road ahead

While there is not much for you to do to avoid a recession, you should focus on adding more revenue sources and coming up with plans to support your employees with a 30-40% decrease in profits. Our recommendation is to stay flexible in this unpredictable economy by focusing on varied business strategies to grow both in the short term and long after.