Spotlight

Top Recruitment Challenges 2020: Economic Uncertainty and Talent Woes Loom Large

Recruitment professionals are cautiously optimistic for 2020. Seventy-one percent expect to increase revenue in the year ahead. While still positive, this reflects a notably less bullish outlook than last year—heading into 2019, 79 percent predicted revenue to increase. This is likely connected to economic uncertainty: 45 percent expect a recession in 2020, compared to just 30 percent in 2019.

What will 2020 hold? Whether the actual outlook for the industry is sunny, cloudy, or apocalyptic, it’s healthy to examine the challenges firms continue to face. Let’s examine the headwinds for 2020, including the macroeconomic and political obstacles that lie ahead.

Overall Top Challenges
Skills Shortage 49%
Pricing Pressure 29%
Economic Uncertainty 28%

 

The talent pool remains tight

Despite persistent worries of a coming recession, the overall economy has remained strong in 2019, with one of the key indicators of strength being low worldwide unemployment. Like we learned in last year’s GRID findings, this has manifested in the staffing industry as concern over tight labor pools, with 77 percent citing it as a top hiring challenge in 2020, versus 73 percent last year. One of the solutions to the challenge has been investing in reskilling and upskilling workers; while GRID respondents did indicate that reskilling was also a challenge, a much smaller 25 percent identified it as a roadblock versus the more pervasive problem that it is designed to solve. 

Again, this is a slight increase over last year’s response, and it should be noted that 39 percent of enterprise firms cited reskilling as a challenge, far more than smaller companies. Anecdotally, we have also seen a number of government-led efforts in the U.S. to reskill federal workers. The demand for reskilling persists, and these numbers suggest smaller companies may be lagging in solving the challenge.

On a separate question, 51 percent of respondents said that the skills shortage is worse than it was five years ago, with DACH (72 percent) and Benelux (60 percent) even more concerned about the lack of available talent. 

Pay increases are still a concern in 2020

Another top-ranked hiring concern in 2020 is getting employers to increase pay (44 percent). To counter the scarcity of talent, the mobility of a workforce empowered by a good economy, and the upward pressure of new minimum wage requirements, employers must consider competitive pay to stay ahead in hiring. 

44% of respondents cite getting employers to increase pay as a top challenge for 2020 

In the U.S., 18 states began 2019 with new, higher minimum wages, and at least four additional states passed new legislation during the year. A number of states already have additional increases scheduled to go into effect in 2020, with many of them including planned incremental increases for upcoming years. This trend not only highlights required pay raises for some workers, but also creates a ripple effect which could lead to an increase in the rates for many in-demand positions across the board.

Recruiting firms face a challenge in convincing firms to pay more to fill their roles. Globally, the concern over the need for employers to raise pay is almost universally consistent (44 percent cite it as a top challenge), with only the Benelux region as an outlier (31 percent). 

Low unemployment begets high churn rates

The third hiring challenge most cited was yet another repeat from 2019: higher churn rates due to low unemployment. This year, 30 percent named this as a concern, as opposed to 27 percent last year. Churn creates costs as employers often must scramble to cover positions and shifts and train new workers more frequently.

According to the Work Institute, the number of people voluntarily quitting their jobs will increase to 47 million in 2020, up from 41 million in 2018; that equates to roughly 1 in 3 workers. Career development is far and away the top factor in the voluntary unemployment rate, and the low overall unemployment rate helps give workers the confidence to seek a job elsewhere. 

Of interest among the 2020 GRID results: Vice Presidents were far more likely to highlight churn as a challenge than business owners and other senior managers, likely because VPs usually only exist at companies above a certain size. Regionally, DACH and UK&I were far less concerned with churn, perhaps due to changing trends in geographic relocation.

Outside of the overall top three concerns, it is also worth noting that the DACH and Benelux regions included “worker shifts to non-traditional labor models” (such as freelance and gig economy roles) among their top concerns, far more than any other region indicated. 

Top Operational Challenges
Digital Transformation 55%
Pricing Pressure 46%
Competition from Freelance Platforms 31%

 

Worldwide, the top operational challenges were also unchanged from last year’s GRID survey: embracing digital transformation, pricing pressure, and increased competition from freelance platforms.

Digital transformation is not yet complete

More than half of respondents agree that digital transformation needs to be embraced in 2020. While 2019 was a year for increased awareness of digital transformation, including in the staffing industry, firms in general still consider the challenge unmet. 

As with last year’s GRID survey, DACH, Benelux, and APAC cited digital transformation more often, indicating a lag in the implementation and buy-in for automation, AI, and other advanced technologies to assist recruiting efforts.  

Digital transformation has caught the attention of the corner office, likely because it is a top-down strategic initiative; across functional roles, C-suite executives were far more likely to view digital transformation as a top challenge, as compared to other executives, managers, and practitioners. 

Pricing pressure and margin compression still weigh on recruiting firms

Forty-six percent of firms listed pricing pressure and margin compression as a top operational challenge. Various factors contribute to this challenge: varying temporary wages (including the upward pressure on wages), worker’s comp, state unemployment insurance and other benefit costs, and direct expenses, such as administrative fees to a VMS (VMS was ranked farther down on this list of challenges yet again). 

Of note regionally, DACH and Benelux respondents are less likely to view pricing pressure as a challenge than their international peers.

Freelance and gig work competition are on the minds of recruiters

2019 has brought a lot of uncertainty regarding new freelance and “gig economy” platforms. California recently passed a landmark law addressing the classification of gig economy and other temporary workers, a law that has had ripple effects felt in other states, and will remain on the radar of staffing firms in 2020. Disruptive new platforms, such as Uber Works, have the potential to compete with staffing firms meaningfully, should they become successful. 

While only 31 percent of respondents named freelance and gig economy platform competition as a challenge in 2020, up from 27 percent in 2019, it still ranks as the third-biggest concern overall.

Regionally, UK&I respondents are less concerned about this challenge, with 21 percent showing more concern for “expanding the breadth of services due to clients’ desire to consolidate preferred suppliers.” This “desire to consolidate preferred suppliers” may or may not be related to Brexit.

Top Macroeconomic and Political Challenges
Economic Uncertainty 64%
Low Unemployment Rate 43%
Data Protection Regulations 31%

 

In the category of macroeconomic and political challenges, the top three responses were again similar to 2019, though notably a new response tied for third in responses: 

Uncertainty over the future economy still dominates

While the overall global economy remained strong in 2019 and a recession remains a fear rather than a reality at the start of 2020, staffing firms overwhelmingly name uncertainty over the economy and future growth as their top challenge (64 percent). C-level executives are even more cautious (75 percent). UK&I was the only region to stick out here, with 73 percent citing economic uncertainty as their top challenge, likely attributable in part to uncertainty over Brexit. 

Low unemployment is great for workers, a challenge for recruiters

Forty-three percent of respondents globally named unemployment as a key challenge, up from 38 percent in 2019. Global unemployment sits below five percent, the lowest in a decade, according to The World Bank. As noted above, low unemployment means a tighter labor market and sourcing challenges for recruiters. The concern was slightly more notable among enterprise companies.

North American respondents were far more likely to name unemployment as a top challenge than any other region, despite uniformly low unemployment rates among the regions we surveyed. 

Regulatory concerns have recruiters’ attention

Regulatory concerns ranked third among top challenges (31 percent). This challenge particularly calls out the potential impact of overtime laws on internal employees, but unsurprisingly runs in parallel with legislative changes in terms of overall interest.

Legislative changes remain on the radar

Legislative concerns include the impact of overtime laws on internal employees, but respondents also take into account new attention to worker classifications (noted above), minimum wage laws, and privacy legislation, such as the California Consumer Privacy Act (CCPA), which went into effect in January 2020. Ongoing legislative concerns remaining on the consciousness of recruiters are GDPR for European respondents and Brexit and IR35 specifically for the UK respondents

2020: Keeping an eye on the economy and the talent pool

Overall, respondents in 2020 identified a similar set of challenges to those in 2019. Continued low unemployment and a recognized skills shortage contribute to a continued focus on tight labor markets and reskilling the workforce. Concerns about the economy are still focused on the future and the potential of a slowdown or recession, creating an air of caution about the year ahead. Meanwhile, digital transformation remains a top challenge, despite the increased education and available technology; it will be up to firms to seize the mantle of technological change to move ahead competitively.

Senior Media Relations Manager

Bullhorn

Doug is the Senior Media Relations Manager at Bullhorn. Before joining Bullhorn, Doug's career includes stints in public radio journalism, public relations, social media and content marketing. He earned his bachelor's degree from Emerson College. Outside the office, Doug can be found riding his bicycle unreasonable distances.