(last updated July 2019)
What has been happening in the recruitment sector
Recent years have seen many more firms turning to temporary labour as a means of filling vacancies quickly and easily and ensuring that the business remains highly flexible. This in turn has prompted a greater number of workers to adapt to a routine of regular, short-term work placements, not just as a stop-gap measure but as a positive career choice. The great majority of both businesses and temporary workers use professional recruitment agencies to ensure that this system works smoothly and efficiently.
As a result of this trend, the temporary recruitment business performed very well throughout the early to mid 2000s. At the same time, a trend towards 'outsourcing' - engaging a specialist firm to handle a certain aspect of a business, led to growth in demand for permanent recruitment services. Many businesses now have neither the time nor the expertise to recruit new staff and turn instead to a professional recruiter.
The recruitment industry was quick to embrace the power of the web during the 2000s. Online recruitment became a major feature of the industry, with some 'virtual agencies' only operating online and most agencies making extensive use of the web. Some recruiters worry that more and more employers are cutting out the need for agencies altogether by using the web - including popular job sites and social media - to access potential recruits directly.
The early and mid 2000s saw a wave of immigration into the UK, particularly from eastern European countries. Although the influx of unskilled and skilled workers helped to fill gaps in the labour market, it was widely exploited by 'cowboy' agencies who ignore their legal obligations towards their workers.
A surge in demand for recruitment services prompted many new recruitment firms to start up in business. Some focussed on specialist niche sectors, for example medical staff or IT personnel. As a result, the recruitment industry became very competitive.
Unfortunately, the sharp economic downturn which began in 2008 and continued into the early 2010s had a very negative impact on the industry. Unemployment rose and employers went out of business, while confidence among remaining employers fell to rock bottom. The already very competitive recruitment industry had to work hard to find and keep clients. To add to the industry's problems, wages remained more or less static between 2010 and 2013 despite sharp rises in inflation. Sweeping public sector cuts hit the jobs market hard, causing real difficulties for recruiters who specialise in supplying this sector. Permanent recruiters in particular were hit very hard by the downturn. Some temporary staff specialists were however able to capitalise on the fact that the climate of uncertainty prompted more employers to turn to temporary recruitment instead of taking on permanent staff. The economy began to strengthen in 2013, and the jobs market continued to improve during the mid 2010s as unemployment fell, economic conditions continued to improve and wages finally began to increase.
2015 was a good year for the recruitment industry which saw strong demand for permanent staff in particular. Although the economic recovery continued into 2016, growth slowed compared with 2015 and wage growth remained relatively low. Following the UK's vote in June 2016 to leave the EU, many recruitment agencies reported that the previously buoyant jobs market was cooling. Industry research in March 2017 showed that the jobs market had weakened further as the uncertainty over the outcome of the Brexit negotiations led to employers cutting back on recruitment. Nevertheless, unemployment levels continued to fall during 2017, reaching a and 2018, reaching a near-44 year low in November 2018.
Although the jobs market remains strong and the outlook for the recruitment sector positive, there are concerns about a number of issues, including:
- growing skills shortages, particularly of highly skilled professionals like teachers, nurses and technology workers - this has pushed up wages
- the wage cap imposed on workers supplied to NHS Trusts
- public spending cuts which affect recruitment in local government and health care
- access to workers once the UK has left the EU
Perhaps the most significant events to affect the recruitment industry in recent years have been legislative changes. Several pieces of employment legislation were introduced during the late 1990s and the 2000s, most of which led to an increase in costs for recruitment businesses. Although the recruitment sector was partly deregulated in 1994, meaning that most recruitment businesses no longer have to be licensed, regulations made under the Employment Agencies Act (and the Employment (Miscellaneous Provisions) (NI) Order in Northern Ireland) were extensively revised in April 2004 and revised again in 2007, 2009 and 2010. One of the most important changes made restricts the circumstances under which recruiters may charge 'temp to perm' and other transfer fees when a temporary worker transfers to a hirer. Another important change saw the extension to temporary workers of many of the employment rights already enjoyed by permanent staff.
New agency workers regulations came into force in October 2011 and further strengthened agency workers' employment rights by requiring employers to provide the same basic working conditions for both temporary and permanent staff after a probationary period.
In 2013 the government consulted on simplifying the regulations for employment agencies, stating concerns that the existing rules were outdated and unnecessarily complicated. Following the consultation, the government announced that they would go ahead with the reforms to reduce the regulatory burden on businesses while at the same time safeguarding those work seekers who are most at risk of exploitation. The proposals also included a change to the way in which the rules are enforced, with a move towards more targeted enforcement.
2006 saw the introduction of compulsory licensing for gangmasters - employment businesses that act as basic labour providers - who work in the agriculture, forestry, horticulture, food processing and shellfish industries. The licensing scheme may in future be extended to other industry sectors.
In 2010 the government began phasing in a vetting and barring scheme for workers who have frequent contact with children and vulnerable adults. The controversial scheme saw many changes and amendments and was eventually scaled down considerably with some of the measures (including worker registration with the Disclosure and Barring Service) suspended, but it still has important implications for agencies which supply these types of worker.
HM Revenue & Customs has been making considerable efforts in recent years to clamp down on what it calls false self employment, and in 2015 new rules were introduced requiring employment intermediaries to report details of all workers they supply without operating PAYE on their pay.
From April 2016 employment agencies have been banned from carrying out generic recruitment campaigns in other EEA countries without also advertising in Great Britain.
From April 2017 employers (including recruitment agencies) have had to pay the Apprenticeship Levy if their payroll bill is more than £3 million each year.
In 2017 the Taylor Review of Modern Working Practices made a number of recommendations that were accepted by the government. A consultation was launched in February 2018 to get views on how to implement the recommendations, which aim to ensure that workers' rights are protected in the rapidly changing workplace. December 2018 saw the publication of the government's proposals following the consultation. The Good Work Plan proposes several changes to recruitment industry regulations.
Keeping up with developments
Membership of a trade association is a good way of keeping up to date with developments in your industry. The Recruitment and Employment Confederation (REC) offers its members a range of membership benefits. The REC also lobbies the government energetically on behalf of the industry to ensure that new legislation does not have an unnecessarily severe impact on professional recruiters. You can find out more on the REC website.
Other industry bodies representing the sector include the Association of Professional Staffing Companies (APSCo).
Subscribing to a trade journal is another good way of keeping up with the latest developments. Examples of relevant titles include Online Recruitment (Onrec) and Recruitment International.