Annual Report 2011

The HR industry
Key growth drivers for our industry

Penetration rates, the number of full-time equivalent associates (temporary workers) divided by the total active working population, differ significantly across the markets globally. The key growth drivers for the penetration rates and, hence, our industry are appropriate regulation, the business environment, the need for flexibility, the move of production to the East and socio-demographic changes. In 2011, the UK enjoyed one of the highest penetration rates in temporary staffing, around 3.1% [1], but significantly below the prior peak penetration rate of 4.7% [2] in 2008. In Germany a new peak penetration rate of 2.2% [1] was reached in 2011. In the USA, the world’s largest staffing market, the penetration rate stood at 1.7% [1], in Japan at 1.4% [1] and in France at 2.2% [1], all still below historical peaks. In the BRIC and other developing countries, penetration rates continued to increase but remained below 1% [1].

Business environment  Growth in our industry, in particular for temporary staffing services, correlates with GDP development. Compared with temporary staffing, which usually picks up shortly after GDP trends start to improve, unemployment rates are typically a late-cyclical indicator. Uneven business trends in 2011 highlighted the importance of a flexible workforce in adapting to fluctuations in demand and workforce needs. Many industries and regions still offer immense untapped potential for HR services, and the structural growth drivers for the industry remain fully intact.

Need for flexibility  Greater flexibility in dealing with peaks and troughs in demand is achieved by companies employing temporary workers as a part of their workforce. In almost all developed countries, 2011 again augmented the need for flexible labour due to the uncertain economic development. More made-to-order production also resulted in an increased need of companies for flexible staffing levels. The inventory-to-sales ratio continued to decrease as witnessed in all businesses in the USA, where the ratio declined by 16% between 1992 and 2011. This trend is expected to continue and should further drive demand for our services.

Move of production to the East  Moving production to low-cost countries will continue to impact the geographical mix of our industry. As companies move East, the need for HR services and local staffing know-how in the Emerging Markets is increasing. Given the low salary levels, the Emerging Markets today still represent a minor portion of the total revenue potential for the staffing industry. However, in terms of volumes, this region already represents a substantial share.

Socio-demographic changes  The impact of socio-demographic changes on the labour market is becoming increasingly apparent. With declining birth rates in developed countries and people living longer, the scarcity of talent will hinder economic growth. In the USA an extra 25 million workers will be needed by 2030 while Europe will seek 35 million additional workers by 2050, according to ‘Adapting to Change’. The staffing industry can help to narrow this gap by accessing additional demographic groups (e.g. students, families, retirees), by taking full advantage of its global presence and pool of candidates and by facilitating mobility. Meanwhile, lifestyle changes are having a positive impact on our industry. Today, people increasingly want to explore new assignments on a more frequent basis and are ready to move where the opportunities are. This fits well with the trend in many companies to look for greater flexibility, better job-profile matches and higher acceptance of temporary employees in the skilled workforce, in order to overcome the growing talent shortages in many industries. It exemplifies that our business is not just about recruitment, but also about training and providing life-long learning to increase employability.

Appropriate regulation  The regulatory framework of labour markets in individual countries has a significant influence on the size of HR services markets and growth rates. The appropriate regulation of the HR industry, and in particular the temporary labour market, balances flexibility with security for companies and workers alike, and drives the efficiency of labour markets. Each market requires appropriate regulation to increase transparency and allow HR services companies to play their role in creating jobs and increasing labour market participation.

 

[1]Adecco estimate. 2010 estimates revised.

[2]Ciett = International Confederation of Private Employment Agencies