Contractor placements return to growth, hinting at “turning point”

Temporary billings expanded at quickest rate for 20 months in August

After the COVID-19 lockdown led to some of the worst performing months on record for contractor hiring, data gathered in August shows a long-awaited return to growth - a development which has been described by one expert as a possible “turning point”.

This was the key takeaway from The Recruitment & Employment Confederation (REC) and KPMG’s monthly Report on Jobs, which signalled an increase in contractor and permanent hiring activity last month, as businesses opened their doors after spending months on pause.

Contract workers “one of our jobs markets biggest strengths”

The research showed that while the number of permanent placements rose only marginally in August, temporary and contract pavements expanded at their sharpest rate for 20 months, since December 2018.

According to the REC’s CEO, Neil Carberry, while this was to be expected somewhat as businesses get back to work, it nonetheless demonstrates the importance of contract workers in difficult economic periods.

“Temporary work is critical in any recovery - businesses turn to temps to help them ramp up and meet demand while the future looks uncertain. At the same time, it enables people to find work quickly.”

He then added: “Past recessions show that temporary work bounces back more quickly – it is one of our jobs market’s biggest strengths and that’s really showing now.”

Have we reached a “turning point”?

Of a similar view was KPMG’s Vice Chair, James Stewart, who believes August’s hiring trends could be looked back on in time as a “turning point”:

“It’s positive to see an uptick in hiring activity, particularly for temporary staff, which could mark a turning point with businesses appearing more willing and able to hire as more parts of the UK economy reopen.”

Stewart was, however, cautious about a possible second wave of the virus which, along with yet more Brexit uncertainty and an unstable jobs market, could stunt further growth:

“But with total candidate availability rising at a near-record pace, strong and sustained rises are needed to move the UK jobs market back to levels seen pre-COVID – and with concerns around a possible second wave of infections, the winding down of the furlough scheme and a Brexit deal outcome, there are still many challenges ahead.”

Availability of workers rises sharply 

As touched on by Stewart, August also saw the availability of temporary workers and employees increase significantly.

The study showed that while hiring activity returned to growth last month, demand for candidates overall remained low. This led staff availability to rise at its second steepest rate on record, and one not seen since December 2008.

This vast pool of readily available talent is said to have had a detrimental impact on earnings. But while contract workers and permanent employees saw rates of pay fall last month, on the bright side, the decline in earnings dropped at a weaker rate than seen in the previous four months to August.

Demand still “weak” overall 

While a return to growth in contractor hiring offers hope at a difficult time, this report also revealed the extent of the damage caused by the pandemic. This was reflected in the fact that vacancies across the board fell for the sixth successive month in August, with the rate quicking slightly since July.

The data suggests that while the jobs market may be over the worst, COVID-19 uncertainty continues to weigh heavily on the mind of hirers and there is some way to go until demand recovers.

When focusing on ways to stimulate the struggling permanent jobs market, the REC’s Neil Carberry encouraged the Government to incentivise hiring by reducing tax for employers:

“Slower growth in permanent staff appointments is concerning. It reflects the uncertainty businesses face about what will happen over coming months with the pandemic and Brexit.

“Government can take action to address this – by focussing on getting a trade deal in place and supporting businesses to keep people employed. A reduction to employers’ National Insurance Contributions, and greater flexibility on skills support would both help firms to maintain jobs and hire more people.”

All monitored English regions bar London experience growth 

Also explored in the report was regional variations in hiring trends. The data highlighted that all four monitored English regions other than London recorded higher temporary placements in August, with the steepest increase experienced in the South of England.

Notable demand for blue collar contractors 

While all ten industries monitored recorded a fall in permanent vacancies last month, temporary opportunities increased in three areas, with demand for blue collar contractors seeing the strongest growth. In contrast, demand for temporary executive, professional and retail workers fell fastest.

In conclusion, this insight offers contractors and temporary workers some hope at least - perhaps even a reason to be cautiously optimistic. This is because, judging by August’s Report on Jobs, it will be the flexibility and skills offered by independent workers that businesses turn to as they look to navigate this recession.

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