Recruitment in 2023 – What Trends Can We Expect?

The Association of Professional Staffing Companies – APSCo is an international trade body representing the professional recruitment sector, delivering expert support and market intelligence to members of APSCo around the world.

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IGA Talent Sourcing Manager, Katie Thompson, caught up with Ann Swain, the founder and Global CEO of APSCo to discuss the biggest trends in the recruitment market right now and the key challenges that professional services will be facing in 2023.

Hi Ann, thank you for taking the time to share your insights with us. As APSCo members we really enjoy reading your recruitment trend snapshots.

What were the major recruitment trends that your members reported in 2022? What were the key contributing factors driving these trends and what impact did these have on the market?

Perhaps the biggest trend APSCo’s members reported last year was a demand for talent on a significant scale while supply remained low. We saw repeated reports of record-breaking vacancy numbers from the Office for National Statistics (ONS) which, despite falling towards the end of 2022, still remain high. The post-Covid impact on hiring activity continued to play out for the first half of the year with skills shortages remaining rife across a range of sectors.

This dearth of talent has been the culmination of a number of factors. The pandemic certainly played a significant role, with the likes of the Great Resignation exacerbating the spike in recruitment that was already happening once lockdown restrictions were lifted. However, we can’t ignore the impact that Brexit and Off-Payroll legislation has had, particularly for the professional recruitment sector.

Since the UK left the Bloc, access to valuable international resources including highly skilled contract professionals has been limited. The country’s attractiveness as a place to work for non-UK citizens has been damaged – a situation that won’t be easy to reverse unless the legal landscape makes it a more viable route of employment for international talent.

The rollout of Off-Payroll legislation into the private sector has also exacerbated skills shortages. A report published by HMRC in December on the impact of Off-Payroll estimated that around 250,000 workers moved from being paid through their own PSC payroll to another organisation’s payroll between October 2019 and March 2022. That’s a significant proportion of the flexible workforce lost during a crucial time for skills.

?With so many businesses hiring at the same time at the start of last year, competition for talent remained tough for every staffing firm. As PwC chairman, Tim Ryan, said back in October , “The war for talent is over. Talent won.” In this environment, our members have increasingly reported having to manage a re-education of what will support talent attraction. While salary inflation may have been an obvious go-to – particularly as the cost-of-living crisis grew – we saw a battle between businesses and candidates around benefits and flexible working.

The number of employers that were reducing the scale of remote working options for staff began to grow, and as a result recruitment firms have had to manage a disconnect between what candidates want and what employers are offering. While we recognise that there are positive outcomes from being in the office in person together, when the cards are in the hand of candidates, failing to address what people want from a job will be detrimental to successful recruitment strategies. Our own Global Strategic Partner, LinkedIn, documented the demand for remote working last year , highlighting that candidates were increasingly seeking work from home jobs while employers were scaling back on flexibility.

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What are the key challenges that financial and professional services sectors will be facing in 2023?

Skills shortages will remain a key challenge for the coming year. While there has been a notable slowdown in hiring, the demand for top skills is still significant. What will become increasingly difficult to navigate is attracting talent without breaking the bank. The cost-of-living crisis is impacting businesses too and naturally with an uncertain economic landscape across the UK, firms are streamlining budgets. At the same time, people are looking for better pay themselves and are arguably more confident to command higher salaries while skills remain in short supply.

For staffing firms, this will not only put growing pressure on the solutions they provide for clients, but also their own attraction and retention strategies. The cost-of-living crisis will continue to influence job moves across the staffing sector as well, and firms will need to create a competitive package for their own hiring too, including offering access to career development opportunities and other benefits beyond good pay. Our recent Salary Survey showed a lack of training and development opportunities that is hindering staff retention across the sector. Less than half (47%) of recruitment firms indicated that they grew their own staff through training and development. This presents both a challenge and an opportunity for staffing businesses to bolster their competitive standing from skills development in the coming months.

How do you anticipate the UK recession will impact on professional sectors? What do you think the impact will be with contract vs. perm roles?

Any economic downturn is usually pre-empted by significant job losses and hiring freezes, but this recession is different. While there are some signs of a slowdown in hiring, the latest ONS labour statistics show that the number of jobs are still at historic highs across the UK. The recruitment market isn’t contracting as it did in the Financial Crash of 2008, but rather stabilising, meaning we’re facing an employed recession. In this environment, the professional recruitment sector will see continued demand for its solutions, however, with skills in short supply, we do expect to see a greater demand for consultative services as employers increasingly rely on the sector knowledge of recruiters to address the dearth of talent.

We are predicting an increased demand for contingent workers as those firms that are nervous about committing to the costs associated with permanent recruitment rely more heavily on the flexible workforce. However, as I mentioned earlier, the impact of IR35 and Brexit has meant that availability of these resources is lower than we would like. ?

Equity, Diversity and Inclusion continues to be at the forefront of successful talent acquisition strategies and diverse teams are key to ensuring competitive advantage, driving change and innovation as well as leading to a happier and more productive workplace.

- What do you think are the key ED&I initiatives that we will see professional sectors employ in 2023?

- Are there any specific ED&I approaches that have struck you as being particularly innovative??

Social mobility is a topic that is becoming increasingly prevalent in ED&I discussions at the moment both for recruitment firms and their end clients. In the recruitment sector itself there’s a general recognition that you don’t need to have a degree to be a recruiter. The focus is on talent, not skills. Specific attributes can be learnt, so on-the-job training is becoming more commonly sought after over specific education. Our members and those firms actively involved in APSCo’s Embrace Forum (our dedicated ED&I hub) have been incredibly vocal around social mobility as an ED&I focus and we expect this to continue throughout 2023.?

Generally speaking, the gender balance is in a pretty good place for the recruitment sector, though improvements are still needed at C-Suite level. We are finding that the focus for many staffing firms at the moment is on race, LQBTQ+ and neurodiverse equality. An increasing number of staffing firms are launching campaigns targeted at these groups. Lucy Morgan of Pod Talent, for example, recently launched “Campaign” – a peer-to-peer network group for LGBTQ+ recruiters and those who work in the recruitment industry. It was born from the belief that it should be much easier for LGBTQ+ people, at all levels, to build successful careers in the recruitment industry. APSCo is supportive of any initiatives such as this that members are involved in and will always help promote campaigns like this where we are able.

In terms of innovation in ED&I, I don’t believe that innovation should really be the focus of any diversity activity. What works well is if the diversity isn’t shoehorned in for the sake of appearances. Instead, having people at the top of the business who are truly passionate about and genuinely believe in ED&I is what drives an authentic inclusive culture across the entire business. ??

What changes do you think we will see in relation to the future of work in 2023? Do you anticipate the economic downturn will have an effect on post-Covid work trends? How do you think this will impact on candidates needs in today’s market?

It is difficult to predict what the future of work will look like in 2023 as we’re in a climate like no other. The power will very much remain in the hands of candidates for some time yet, and while that is the case we expect to see demand for flexible working and better pay remain high. However, where salary inflation isn’t available, access to better training and development opportunities will become a greater incentive for job moves.

The ability to be adaptable and flex with the changing demands of candidates will be a key competitive advantage for staffing companies and employers alike for 2023.?