Struggling companies turn to staffing agents: The talent shortage
The staffing industry to be the savior to the US economy contributing $23.2bn in revenues for 2022, with unprecedented number of job openings. But unemployment rates are going down, with 6.3 million unemployed and 10.6 million job openings, where did everyone go?
Companies are struggling to find employees and have become heavily reliant on staffing agents to fill the record number of job openings as they struggle to attract staff during a talent shortage.
Falling birth rates battling early retirements
Due to an increased fear of catching COVID-19, the lockdown drove early retirement with more than half of Americans over 55 retired by the beginning of September 2021. Many workers who lost their jobs in their 60s and 70s found little opportunity to re-join the workforce.
In addition to this, birth rates have been falling significantly in the US since the 1970s due to the introduction of family planning.
Companies struggling to find staff are turning to staffing and recruitment agents for their expertise. Their vetting skills and vast databases of potentially qualified candidates can help companies save a lot of time and resources.
High employee volatility: Flexibility, happiness, career advancement, and more money
A lot of people think differently now compared to their pre pandemic life and employers are struggling to retain talent. The pandemic led to a worldwide lockdown and in that time many worked remotely, evaluated what really mattered and assessed their careers.
Requirements have shifted with more job seekers looking for a job with flexibility and work from home benefits. Some companies are taking a firm stance and not extending their remote work options, resulting in employees leaving to find other companies who will offer those capabilities. This is echoed by staffing agents I contacted, who are specifically receiving resumes from candidates requesting only hybrid working. Workers in high stress environments during the pandemic, such as healthcare and banking, have been burnt out. A mental toll on workers has led many to jump ship for an employer who will prioritize their health and happiness or to a completely different industry!
Attractive hiring bonuses beaconed workers to move jobs and with the time given in lockdown to revaluate their career advancement and money opportunities. To retain or find staff, salaries and bonuses have been pushed up in many industries.
The talent shortage has consequently caused high demand for staffing and recruitment firms, to help a company source highly skilled employees, but also to fulfil the employee’s lifestyle needs. This is to prevent temptation to move to another company as a result of the hike in salaries across the market.
A skill mismatch
A skills mismatch is apparent across the US with a record number of job openings and low hiring rates. Even before COVID-19, according to the national skills coalition, in 2018 52% of job required skills training beyond high school, however only 43% of American workers had access to the skills training necessary to fill these roles. Therefore, resulting in not enough workers with the right skills to fill these jobs. Whilst underqualification is an issue, so is overqualification.
When the workforce has a skill mismatch, it is hard to find qualified employees to fulfil the roles needed. Traditionally companies have only looked for staff in a certain city or area, however with the new world of working – candidates can by employed worldwide. With staffing and recruitment agents becoming essential to fill the talent gap in these areas.
What industries is this affecting?
Staffing and recruitment agents have seen job openings across the board in different industries, with a limited number of candidates to fill them. The healthcare industry was put under extreme pressure during the pandemic and has not recovered. However, this is not the only industry experiencing staffing shortages, IT, finance, construction and banking are also being impacted.
Employees are realising that although they were highly paid, it wasn’t worth the high-pressured and high stress work lifestyle which was causing mental health issues, burn out and a detriment to their lifestyle. Employees are turning to recruitment agents to help find their next role that is better suited to their lifestyle.
Staffing agents are seeing this particularly in the restaurant and hospitality industry where they were hard hit during the pandemic. Concerned for their health and safety during the pandemic combined with battles with unmasked customers, this led to a mass exodus of staff. Workers in this industry also had to deal with high stress due to the uncertainty of their shifts and jobs causing more staff to leave the industry to find a job that was more stable – nearly 1 million left the hospitality industry in December and the data suggests they aren’t coming back.
Another sector that is currently suffering is IT industry. It’s experiencing the second highest talent shortage, with workers preferring the work from home benefits rather than returning to the office.
Additionally, the construction industry saw a boom in demand, but the US was already in a housing shortage, with a shortage of staff before the pandemic. This, combined with an increase in clients looking to remodel their homes, increased the demand for construction workers is substantially.
Why has the need for staffing firms increased?
Staffing agencies are needed to find available workers as they are currently in short supply. Staffing agents are needed to ensure workers are qualified for the job, during a moment in time where we have a skills mismatch and workers swapping industries.
The vetting of workers has never been so important during ‘The Great Resignation’.
Potential pitfalls of a booming recruitment and staffing industry
Recruitment and staffing industries will likely see an unprecedented boom in the demand for their services, but with this comes a marked increase in their exposures too. A talent shortage often leads to workers job hopping into different industries, so the vetting of the workers has never been so important. It is crucial that a candidates credentials stand up to scrutiny to perform the role they have been placed in.
The exposure to staffing firms and recruitment agents are major and can undermine the entire business if proper processes and risk management procedures are not put in place.
Pressure is mounting for staffing firms with a high volume of job roles to fill and applications to review. This led to mistakes resulting in a professional liability lawsuit. Vetting will need to be undertaken to reveal any discrepancies in what a candidate claims in their resume.
If a staffing agency doesn’t vet a candidate correctly and it results in an individual being unqualified to perform the role, the staffing agency may be brought into a lawsuit due to negligence in their vetting of candidates.
The vetting process itself has also changed, with interviews being performed in a hybrid way, virtually and in person. Can we still get the same feel for a person online compared to in person? A recent poll of U.S. employers found that 82% of respondents said they implemented virtual interviews for candidates because of the pandemic, and a majority 93 percent—expect to continue to use virtual interviews in the future.
Why is this important for insurance brokers?
The staffing industry is under pressure to provide the right people for the job and negligently vetting candidates will result in professional liability claims. Therefore, this is an industry that brokers should be seeing an increased number of submissions for given the need for coverage. If you currently aren’t seeing submissions for this industry, it is certainly one for you to get into!
CFC is a specialist insurer offering bespoke products for the staffing industry. Click here to find out more about our product or email firstname.lastname@example.org.