21 October 2015

RIB Report 2014/15 Review: Temp/contract market surges to record high

Last week I wrote about the Recruitment Industry Benchmarking Report 2014/15 review, in which I analysed the vast drop off in drop that commonly occurs when an agency moves from less than 10 staff to 11 to 20 employees.

This week I am returning to the same document to have a closer look at the temp and contract results.

Here's what the data reported:

Productivity area
Total annual temp/contract hours processed per participant#

Average temp/contract gross profit (GP) as a % of sales
Average temp/contract contribution to total agency GP
#126 agencies

As you can see from the above data, the news was very good all round. Total Annual Hours per participant (agency) surged nearly 25 per cent to reach a new record high of an average of 251,624 hours processed for the 12 month period. This was especially encouraging after the worrying decline across 2011 - 2013.

Total average contract/temp sales improved 20 per cent (to just under $16 million), compared to the previous financial year with a total of 85 out of the 126 agencies reporting a year-on-year improvement.

Even better news was that the increase in hours was accompanied by an uptick in the average annual margin from 12.9% to 13.1%.This margin increase held up in the face of average annual per hour charge rate, across the whole report (126 agencies) falling 4 per cent, indicating the increase in volume of hours was concentrated at the lower end of the contract/temp market.

I don't know why the temp/contract results have improved so much this past year but I suspect it would be attributable to some, or all, of the following:

1.    Internal recruitment teams are less competent in sourcing quality candidates for temp/contract roles hence the need to go to an agency.
2.    Perm roles have been harder to fill hence temps/contractors are brought on to fill the gaps until a permanent employee starts.
3.    Demand in the economy has improved but companies, cautious about the strength of the improvement, initially improve their employee capacity through temp/contract resources before perm employees.

Regardless of the reasons, our industry can be heartened with this very real evidence that the temp and contract labour services we provide are not just valued, they are in greater demand than ever before.

This evidence is even more pleasing given:

My overall conclusion is that the future of our industry is looking bright, very bright, contrary to the many naysayers who love to predict the end of our industry.

However ... let's remember the reality (as evidenced by the 126 RIB Report participants) of the most recent year (2014/15) compared to the previous year:

·         47 per cent did not improve their profitability
·         13 per cent made a loss
·         Participants in the 21 to 30 employee range reported median staff turnover of 40%

The key to being on the right side of the industry good news is focus.

What's your focus right now?

I acknowledge and greatly appreciate Nigel and Deb's permission to republish data from the F15 RIB Review. If you are interested in how benchmarking your agency's performance can assist you improve productivity please contact Nigel or Deb via this link.

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