Recruitment — the state of the recovery

Colman Collins.

Colman Collins.

In the past two years more than 50 per cent of the recruitment companies in Ireland have closed down and most of the others have experienced drastic reductions in staffing and salary levels.

The collapse in the recruitment industry commenced early in 2008, several months before many other industry sectors began to experience the full effects of the downturn in the economy. The good news for the recruitment companies who have survived the recession is that, since the beginning of 2010, the recruitment industry has been one of the first industries to begin to emerge from the recession and to report a significant increase in business compared to 2009. This augurs well for the Irish economy as the recruitment industry is a good barometer for the economy in general.

The recovery in the recruitment industry is not evenly distributed, however, as it has been mainly driven by multinational companies which have recommenced hiring. Unfortunately many indigenous companies and the SME sector in general are still in the depths of the recession. Far from recruiting, many of these companies are involved in an increasingly desperate fight for their very survival as they are experiencing ever increasing cash flow problems due to credit restrictions and due to growing cash collection difficulties.

In the multinational sector the recovery is not evenly distributed across all sectors. Two sectors which are doing particularly well are the Medical Devices sector and the Pharmaceutical sector, both of which have emerged strongly from the general downturn in the world economy.

Looking forward, I think it is reasonable to be optimistic about the prospects of most multinational companies based here especially as many of these have significantly reduced their cost base as part of their strategy of getting through this recessionary period. In addition there has been an upturn in the global economy which has resulted in increasing order books in multinational companies which is, in turn, giving rise to an increased demand for professional and managerial staff in these companies.

It is also possible to be reasonably positive about the prospects of seeing more foreign direct investment establishing facilities in Ireland in 2010. Ireland still has many attractions and advantages for companies considering locating here. The low rate of corporation tax is one of the obvious and most documented of these attractions but Ireland, as is also well known, has a well educated, flexible and committed workforce which compares very favourably with what is available among other European countries competing for this FDI business. Ireland has also become more competitive in the past two years, with significant reductions in the cost of doing business here. The most obvious example of this is where many companies have implemented pay cuts and where quoted salary levels for new vacancies are 10 -15 per cent lower than they were in 2008. This increasing competitiveness is helping to make Ireland more marketable to companies who want to establish a presence in Europe.

The prospects for the SME sector are less clear. Those SMEs whose main clients are multinational companies should soon start to see the benefit from the upturn in the multinational sector. However for many SME’s who have little or no involvement with the multinational sector the short to medium terms prospects continue to be very grim. The absence of lending from the banking sector, the increasing difficulty of getting paid promptly and the absence of any significant government initiatives to help this sector are all conspiring to leave SMEs in an ongoing battle for survival. The latest unemployment statistics and the latest statistics on company closures clearly suggest that unless some immediate and drastic action is taken we can continue to expect to lose over 100 of these companies a week, as has been the case for the past two years.

Over the past two years of the recession the recruitment industry has been adversely affected by companies doing their own recruitment rather than incurring the costs of engaging a recruitment company. Obviously many of these companies will continue to try to reduce their costs in this way but there is clear evidence that several companies are again using the recruitment agencies on their preferred supplier lists (PSLs ) to augment their recruitment activities. This trend towards reverting to PSLs can be expected to continue, especially in those multinational companies which are performing well.

Over the past couple of years we have seen a trend towards some social networking sites being used as part of the candidate sourcing strategy. Of these LinkedIn has becoming particular popular with employers as it is an effective way of targeting candidates who are not actively in the job market. However recent evidence also suggests that recruitment agencies have become skilled at finding such candidates on LinkedIn and introducing such candidates to their clients. This trend is likely to continue as LinkedIn represents a very efficient and cost effective way of recruitment companies adding to and updating their databases.

In conclusion, those recruitment companies which have made it through the past two and a half years and those which have most of their business with multinational sector and are on the PSLs of most of the growth companies in that sector can be cautiously optimistic about the prospects for the remainder of 2010 and for 2011.

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