Economy forecast to return to growth: Is it time to ditch the temp desk?

Agencies seeing a falloff in demand for temp

Data suggests that permanent hiring seems to be on the increase. In the UK, London seems to be something of a bellwether in this regard, with businesses signalling significant intent to increase headcount. This is good news for the economy, signalling optimism and a clear indication that employers want to rebuild permanent payroll numbers in the wake of the economic turmoil that followed in the wake of Covid. 

In the light of industry media reports that suggests an increased trend for permanent hiring, a key question is:

Should recruitment businesses look at winding down or ceasing temp desk operations and focus on the permanent employment market?

Understanding where agency growth might be

Clearly, falling demand for permanent workers is likely to erode the profitability of the temp desks. There is a need to follow the direction which is determined by market forces.

To maintain growth, there is a clear need to focus on work streams that show the best prospects for revenue increases. However, the placement fees resulting from an uplift in permanent hires may not compensate for the loss of steadier, more predictable income often produced by the temporary work stream.

A return to economic growth may not be a silver bullet

Much has been made of the new government’s aims to return the UK economy to a position of significant growth. However, the success of such an ambition is by no means guaranteed.  

Uncertainty is an ever-attendant menace that stalks the operating environment. From regulatory change to tax increases; from changes of government to supply chain disruption; from disruptive new technologies to newly emerging diseases, the economy is not immune to shock factors. In short, there is no warranty against future economic woe.

Keep your options – and the temp desk – open!

All things considered, it seems reasonable that the best advice is for recruitment agencies to avoid any temptation to entirely wind down their temp desk operations.

The rise in permanent recruitment that is currently being seen by some may suggest a shift in market demand, however, it could easily shift back again. There are several reasons why maintaining a temp desk alongside permanent recruitment services is likely to be of strategic benefit:

• Hiring cycles – Hiring trends often fluctuate based on economic conditions, business needs, or industry-specific factors. Temporary recruitment tends to thrive in times of uncertainty or during economic slowdowns when companies prefer flexible staffing solutions. Ceasing temp desk operations is likely to mean recruitment agencies may lag behind when temporary hiring resurges.
• Seasonality and projects – Many industries experience seasonal peaks or require short-term project-based workers. Temporary recruitment is essential to fill these needs, and agencies should be prepared to offer these services to maintain a broader client base.
• Risk management – Focusing solely on permanent recruitment narrows revenue streams and exposes agencies to higher risks if the permanent hiring market contracts. Offering both permanent and temporary solutions allows recruitment agencies to diversify, avoiding overexposure to risk in the shape of over reliance on a single stream.
• Client needs – Many clients appreciate the flexibility of working with a recruitment agency that caters to both permanent and temporary staffing needs. Maintaining a temp desk is a strategic move that maximises the flexibility that an agency provides to its clients, reducing the risk of losing them to competitors who provide a wider range of services.
• Employer risk mitigation – Temporary staffing helps agency clients to mitigate risks associated with hiring full-time employees, such as benefits costs and the need for redundancies.
• Perception and loyalty – Clients often prefer to work with agencies that offer both temp and permanent staffing solutions, as it simplifies talent search and selection and reduces the hassle of dealing with multiple vendors.
• Building relationships – Temporary recruitment often serves as a gateway for candidates entering the workforce or seeking flexible working. Maintaining temp desk operations allows agencies to build relationships with candidates early in their careers with the potential for them to migrate to permanent positions later.
• Access to talent – A temp desk often has a large pool of active candidates. These workers provide the agency with a ready-made candidate database for marketing roles for permanent recruitment.
• Gig economy – The gig economy and freelance work are strong trends, meaning the demand for temporary workers remains high in certain sectors. Ignoring this may result in missed opportunities in industries that heavily rely on such talent.
• Hybrid and remote work – Trends for hybrid and remote work models may create a need for temporary staffing to support flexible or project-based work environments, even if permanent hiring is increasing.

All things considered, it seems reasonable that the best advice is for recruitment agencies to avoid any temptation to entirely wind down their temp desk operations.

Get a smarter recruitment back-office with ETZ

ETZ’s leading recruitment back office software solution streamlines the back office processing of your recruitment agency. Our complementary solutions to our leading timesheet and invoicing solution, are ETZ Comply for onboarding and document management, and Caspian for business intelligence. These give agencies further capability to streamline and uncover opportunities.

To find out more call us on 0800 311 2266 or book a demo.