It is becoming increasingly difficult for staffing agencies to meet the demands of clients by finding top talent. Many companies are having difficulty filling their staffing needs despite a slight decrease in unemployment rates in the US and record low unemployment in Canada. The reasons for these difficulties are complex; whereas in a typical economic environment, it could be that employers’ requirements are simply getting more stringent, there are many more factors at play which are proving a challenge for recruiters today. 

Some job types and industries have always been more difficult to fill, requiring very particular skill sets and experience. However, staffing agencies today have much more to contend with and must be innovative in overcoming talent shortages to help their clients find the right workers who have the skills and experience required and can be relied upon. 

‍What is Causing the Labor Shortage?

Many people have re-examined where, how, and why they work since the pandemic began. Some employees choose to retire early, while others stay at home to take care of the elderly and children, while others become entrepreneurs or work in the gig economy.   

 There are several possible causes for the current labor shortage, which are likely due to a combination of economic factors that are rapidly changing.  

• The Great Retirement: During the pandemic, early retirement by Baby Boomers created a labor market exodus unlike any other. 
• Caregiving Duties: Working mothers worldwide are disproportionately affected by the lack of childcare, with many dropping out of the workforce during the pandemic. The number of working mothers has dropped by about 1.4 million since pre-pandemic times, while the rate of women participating in the labor force has fallen to 66 percent.
• Loss of Immigrants: Two years of travel and immigration restrictions contributed to a 2 million decrease in working-age immigrants.
• Labor Market Mismatch: An IMF research indicates that lack of jobs and a lack of willingness to apply for them, particularly in older demographics, are the biggest causes of the labor shortage.  
• Aging Workforce: Over the next decade, the U.S. workforce is expected to shrink even more as more workers retire. 

Thousands of employees leave their jobs, however, they do not usually quit their jobs and become inactive. Their alternative is to change careers or industries and search for better working conditions or more importantly to most employees now – seek a better work-life balance. A clear dissatisfaction exists among North-American workers. Consequently, they are leaving the workforce in droves and moving to more autonomous and higher-quality jobs. 

How Do Labor Shortages Affect the Economy?

The economic consequences of labor scarcity can be severe and long-lasting. Additionally, the current labor shortage affects both skilled and unskilled workers alike. Based on all the facts, it appears to be a much larger issue with both short-term and long-term consequences.  

• Short-term Consequences: In the short term, we can expect higher wages, inflation, and supply chain problems due to the worker shortage.   
• Long-term Consequences: The shortage of staffing could cause slower economic growth, a recession and a decline in blue-collar employment and manual labor industries such as engineering and manufacturing. 

The demand for work has recovered, but the willingness to return to work hasn’t, albeit under different circumstances. Increased wages don’t seem to be tempting workers back and when they have more options than ever before, businesses are becoming creative with strategies to hire and retain talent. 

There are several approaches a staffing business might consider in the current climate…

5 Ways for the Staffing Industry to Manage the Labor Shortage

1. Set Expectations and Balance Job Requirements

While the labor market has been weakened by the economic turmoil, staffing agencies need to prepare for the challenges ahead. The agency representatives have to convince clients that it is very difficult to find and recruit the right workers whenever unemployment is low.

 Many clients insist that agencies find candidates who meet the client’s growing list of must-haves and more often than not, those demands may be a little unreasonable given that workers hold all the cards. In an effort to satisfy the client without compromising anything on the list, hiring processes often do not take into consideration the skills gap. For staffing agencies to fill important positions, they must explain to clients the importance of balancing long lists of requirements with the potential to upskill a candidate who has the majority of requested skills. 

2) Listen to Employee Feedback and Act On It

Respond promptly to employee feedback to improve employee engagement. Organize regular one-on-one meetings with hiring managers to share feedback, establish goals, and celebrate achievements.

 To improve your team’s work experience, conduct quarterly surveys of employee satisfaction. During your interview, inquire about the salaries and benefits, the company culture, teamwork, the work-life balance, and what resources they may require.

Improve your company’s culture and job satisfaction by conducting exit and stay interviews. Stay interviews aim to find out why employees stay at a company and how to improve the work environment. In contrast, exit interviews are conducted at the end of tenure. You can use exit interviews to make changes to keep star employees.

3) Promote Effective Communication

According to a study, approximately 85% of employees believe effective communication to be one of the most valuable workplace benefits, and 69% of employees said they would quit less often if they had better communication with their company, even if they paid less than ideal. To gain a competitive edge in the job market and retain quality employees, it is essential to adjust or replace outdated communication protocols with efficient workplace communication tools and processes. 

Rather than using multiple touchpoints ( text messages, emails, telephone calls, and paper trails), use a single primary communication source to support effective two-way communication. Juggling too many touchpoints can lead to confusion and operational errors. An easy-to-use, one-stop platform can prevent these errors.

It is easier for management to understand what employees value when they have strong workplace communication. Hourly employees have different needs and desires that drive their work ethic. By emphasizing transparency from the start and building relationships with all levels of employees, owners and managers can better understand and retain their workforce.

4) Establish a Healthy Work-Life Balance

Employee burnout occurs when employees overwork and are stressed, which is one of the biggest causes of employee turnover. Recruiters will need to get creative when putting together employee benefits packages, introducing some of these things will be just the beginning of creating a package that promotes healthy work life balance for employees:

• Flextime: If you offer flexible working hours, your team members can work the hours that work better for them instead of 9 am-5 pm.
• Remote Work: It is cost-effective and time-saving if employees can work all the time or part-time remotely and it saves them money.
• Compressed Work Week: Some forward-thinking businesses are offering the opportunity to work for four days per week with no need to work additional hours as employees are thought to be just as productive if not more so in the four working days.

Aside from these working structures, other perks being favored by workers are employer-led health and wellness benefits, child care options and reward and recognition programs to enable them to reach their career goals more quickly. 

5) Be Open to a Different and More Diverse Candidate

You can enlarge your pool of potential hires when you create a more diverse, equitable work environment and you can also gain a wealth of new perspectives that will strengthen your company. The wider the pool of candidates, the better the hires. When you add a little diversity to your hiring practices, your business will benefit from a wider pool of talent to draw from. A win-win situation for all.

With Challenge Comes Opportunity 

The labor shortage is a real thing and it is without doubt impacting staffing agencies and the way they must now do business. However, the gap in cost between permanent and temporary workers will likely decrease so temporary agencies must be especially mindful of this as competition grows. The most effective line of defense against labor shortage is to be considerate of employees and actively take steps to improve recruitment strategies. While it’s a challenging time for agency owners, growth opportunities exist for those that demonstrate added value to clients and prospective employees alike. For temporary staffing agencies to prosper, it will become more about providing quality, reliable staff on demand for clients rather than supplying the cheapest workers; in this respect it’s vital for agency owners to invest in the technologies that will help remove inefficiencies from the entire hiring process and retain staff through effective strategies around benefits, community and rewards. 

Moving Forward

Staffing agencies are often disproportionately affected by cash flow challenges due to the mismatch between accounts payable and receivable; making weekly payroll and not getting paid for 60-90 days can take a toll on the business’ cash flow quickly, leaving nothing in the pot for investment into the business. Sallyport works with staffing businesses to improve their working capital position allowing them to concentrate on some of the things that we mentioned  that will help grow the business. Get in touch today to find out how we help staffing agencies achieve their hopes and dreams in business.