IBISWorld estimates that over the five years to 2008-09, the employment placement industry's revenue grew at an average annualised real rate of 1.6%. Low unemployment and strong economic conditions fuelled demand for employment placement services from the private sector for the majority of the current performance period, with unemployment reaching a low of 4.2% in 2007-08.
Businesses were competing to attract quality employees and workers were switching jobs easily and frequently. Businesses continued to turn to employment placement services providers for their recruitment needs, rather than using in-house resources.
This industry is now sensitive to changes in government employment and job programs, with around two thirds of its revenue derived from this source since the privatisation of government operated employment services.
Government funding to employment services has been relatively consistent over the past five years and this is not expected to change under the Rudd Government's new 'Job Services Australia'. The new program has, however revised provider contracts, with some existing providers not having their contracts renewed in favour of other providers.
The industry was already highly competitive prior to the downturn and firms were operating on thin profit margins. The significant proportion of expenses relating to wages, which are a fixed cost in the short-term, makes it hard for firms in the industry to cut costs quickly in response to a downturn in demand.
Over the five years to 2013-14, real industry revenue is forecast by IBISWorld to increase at an average annual rate of only 0.2%. Aside from the level of unemployment and general economic conditions, other factors driving growth once the recovery begins will be the expansion of major operators into new services including employee process outsourcing as well as expansions internationally.
Overall, the outsourcing of employment placement services by business and government will continue. A turning point is anticipated late in 2010-11 as unemployment reaches its peak and its composition begins to move more toward people who are switching jobs, with the proportion of people that have been laid off or are long-term unemployed falling.
The industry is progressively moving towards having a few large companies with international links and many small operators. It is expected that major domestic operators will increasingly expand internationally due to limited revenue growth opportunities in the domestic market.
Further growth opportunities still lie with providing online services to employers and job applicants, as well as expansion into providing a totally outsourced human resources service to clients, covering aspects from staff selection to payrolls and handling payments and claims for Workcover.
Key success factors for operators in the industry:
- Having contacts within key markets. Developing contacts in a wide variety of companies and industries is essential for identifying suitable candidates.
- Ability to effectively communicate and negotiate. Good communication and interpersonal skills, combined with industry knowledge, is important to retain clients, as well as for interviewing of applicants.
- Production of premium goods/services. Maintaining quality staff, service and high client satisfaction levels, is important in retaining and attracting clients.
- Capacity to objectively assess new investments. Medium and large companies also need funds to acquire other companies in the industry.
- Effective product promotion. The capacity to present a professional image and to market yourself to appropriate clients, is important in attracting and retaining clients.
- Access to the latest available and most efficient technology and techniques. The need to be completely computerised with databases containing information on people and clients. Ability for email lodgement of resumes and for clients to access these, online.
- Production of goods currently favoured by the market. Understanding the work environment and culture of clients' workplaces, and realisation that ultimate success will come from continually identifying and selecting the most suitable person for vacant positions.
Robert Bryant is the general manager of business information firm IBISWorld.
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