Inflation and Hiring
Inflation. It’s on everyone’s mind. Gallup recently reported that nearly 40% of Americans believe “economic problems,” which includes inflation, the economy in general and oil prices, is the most important problem facing the country today. A CNN poll found that percentage even higher, nearing 50% among registered voters.
If the COVID epidemic and subsequent supply chain issues weren’t enough, inflation is now impacting corporate revenue and, therefore, hiring. Companies still need to fill positions, but offering top-dollar salaries and benefits may not be economically possible right now in light of so much uncertainty. Alignable says 45% of small businesses have put direct hiring on hold because of inflation and labor costs that 60% of business owners say have increased by 25% since COVID.
Hiring additional headcount might be frozen, or perhaps you lost the budget allocated for hiring. But how does a company continue to grow, deliver customer value and compete if it can’t afford to fill key positions with top talent?
No one knows how long the impending recession will last or if it will ever happen, so companies have to be strategic and creative in how they hire so they can continue to drive initiatives forward. Are there other financial buckets to pull from, such as software budget remaining or any outside spend forecasted but not used? Is it possible to hire contractors on a short-term basis?
Watching the Trends
While we may not be able to accurately predict what the next six months to a year will look like, the good news is that trends typically form slowly enough that we can see the writing on the wall. With our finger on the pulse of recruiting and hiring, there are a few emerging trends we are seeing that serve as indicators of where things are headed.
Contractor hires will continue to rise
Based on what we are already seeing in the market, we can safely predict that as a recession looms and inflation continues to rise, employers will remain cautious about hiring full-time employees in the first half of 2023. Instead, many will look to contractors to fill their needs. Here are a couple of interesting surveys to back this up:
- A Gusto survey found that contractor usage surged during the pandemic across all industries and company sizes, and businesses view contractors as “essential” to their ability to remain agile and build their teams. Many of these contractors are either still employed by those companies or companies recognize the benefits of hiring contractors and will continue to do so to keep costs in check without losing productivity.
- A Robert Half survey of more than 1,500 managers discovered that 45% plan to hire more contractors by the end of 2022, with 60% of those going toward technology positions and 44% for marketing. These managers believe what matters most is finding the right skill sets for their work, and contractors give them greater flexibility.
The Robert Half survey brings up a valid point: contractors benefit companies more than just costing them less when comparing total compensation costs. While full-time employees typically bring greater loyalty and personal investment, contractors are able to fill specific tasks for a specific project for a specific time.
This flexibility can not only save companies thousands of dollars, but it ensures the right people are working on projects. Some direct hires have all the skills required to complete a task, but more likely, specialized skills are needed, at least for a phase of the project. Companies can hire exactly what they need and then decide if they want to bring in that contractor full-time or end the contract when the project is complete.
The contractor period also gives both parties time to adjust and determine whether a full-time position is warranted and desired. We’ve all read the stats on the cost of hiring the wrong employee, so if you can both test the waters before committing to a full-time position, you can save costs and potential project delays.
More retirees will re-enter the workforce
The Washington Post reports an estimated 1.5 million retirees have already reentered the U.S. labor market over the last year. The drivers? The realization that they can work from home or in a hybrid work environment and their retirement funds may not be as robust as they assumed, given inflation and the higher cost of living. Other studies show that nearly a third of recent retirees say retirement wasn’t what they thought it would be and feel isolated, and have lost direction.
While once these retirees, who range in age from their 50s through their 70s, were considered “too old” to hire, more companies are seeing they still have much to contribute. This new pool of “unretired” candidates are highly experienced veterans who are reliable and clearly motivated.
For companies willing to look outside of the box and add a new candidate stream to their HR efforts, considering these unretired professionals for part-time or contract positions is a smart strategy.
Freelance Workers Are Filling Gaps
While dedicated contractors are often looking for longer-term gigs and contract-to-hire arrangements, there are still plenty of freelancers who prefer shorter-term project-based and contract-based work. Technology is a primary enabler of this trend, allowing companies to hire remote workers with low friction and positive productivity.
McKinsey and many other sources discuss the growing trend of freelance, side hustle and gig jobs, and with persisting inflation, even fully employed workers are looking to add to their incomes. McKinsey’s American Opportunity Survey (AOS) reports that 36% of employed respondents (about 58 million Americans) claim they are independent workers, up from 27% in 2016.
Freelancers can quickly fill skill gaps with relatively less HR or hiring manager effort and costs, but they are more apt to take on multiple clients and projects at once. It’s important for companies to recognize the tradeoff as they plan for their hiring needs and available budgets.
How to Hire Contractors
As direct hiring has slowed down, companies are looking to hire contractors but often don’t know where to start. Digital employment marketplaces are one way to go about it, but for increasingly more companies, working directly with a recruiting firm is a better option. Here’s why:
- Not all contractors are of the same quality.
- Contractor pay and terms vary greatly.
- There are just as many great nearshore contractors as onshore.
- There may be contract-to-hire opportunities.
- Extending your teams with the right-skilled contractors is an art form.
With so many contractors currently available, it’s easier than ever to hire the wrong ones. While the majority of contractors are honest about their skills, some embellish a bit to get the gig, with fewer full time employment implications if they’re found out. A reputable recruiting firm will have standards and best practices to weed out the great contractors from the rest, ensuring you get what you paid for and that their compensation and terms are in line with the industry.
A firm should also give you options on hiring skilled nearshore contractors who are every bit as qualified as onshore candidates yet often at a lower cost. You can stipulate your requirements, and the firm will rely on its network of nearshore contractors to fill those positions.
As we said, it’s common for companies to end up hiring a contractor as a full-time employee once they see they’re a good fit and budgets allow. The process of negotiating these contracts and transitioning contractors to direct hires is smoother when you work with a recruiting firm experienced in multiple hiring types. And if you partner with the right firm, you’ll find they have the market, competitor and historical expertise to guide you on hiring the best-fit contractors for each project.
Looking for a recruiting firm to support your shorter-term initiatives and contract staffing? Contact Zilker Partners and learn more about our customized approach to recruiting and hiring.