A low national unemployment rate coupled with the popularity of an outsourcing based business models, and growth across many industries has seen an increase in demand for temporary staff. Contract and labour hire services have seen a drastic increase due to the flexibility they offer clients in the current economic climate. Low entry costs and a high demand for staff has resulted in a greater supply of small and large market operators, increasing internal competition.
A tight labour market and a low unemployment level has resulted in higher wages across the nation. This increase has impacted business costs with wages typically making up over 70% of operating costs. Despite the increasing wages being passed onto businesses, the competitive nature of the industry means specialist staff service providers must offer attractive wages to contract staff while also offering competitive rates to their clients. This internal market competition is predicted to force providers to reduce margins over the next five years, having positive impacts on the operating costs of business in many industries.
Although the market is highly competitive and there is downward pressure on prices, businesses can further reduce the costs of staffing through contracting. Having an agreement in place with a preferred supplier or a panel of providers can not only result in more competitive pricing but will lower the risk of having staff shortages. This particularly important for firms in the medical and mining industry where understaffing can have significant cost and safety implications. To be successful using multiple staff providers, effective contract and stakeholder relationship management is needed to ensure healthy business partnerships are maintained and staff requirements are met.
