How to hire from the shrinking workforce

The UK has experienced a great deal of social and political upheaval in recent years. The impacts on the recruitment market will last for years to come.

For decades, highly skilled engineers would arrive from Europe to address any skills shortages. Brexit put an end to that. Then the pandemic led to ‘the great resignation’ – reducing the number of experienced workers even further.

So, where are we now? The recruitment game has changed. A strategy of solely recruiting on a direct hire basis no longer works in the UK market. Companies must look to the contingent workforce to find the skills they need.

Brexit stopped companies bringing in talent from Europe. This approach often had cost implications, but the skills were always available. Not anymore. Additionally, the pandemic caused people to reevaluate their careers and many of those aged over 55 decided to retire. These two factors created a major skills shortage, especially in construction and engineering.

Engineering UK’s ‘The State of Engineering’ report forecasts an annual demand for 124,000 engineers and technicians, alongside a further 79,000 roles requiring some engineering knowledge. They expect a shortfall of between 37,000 and 59,000 in meeting demand for core engineering roles requiring level 3+ skills. That could mean up to 45% of roles not being filled.

For those hiring permanent staff, this is a huge problem. Many skilled workers prefer the flexibility available in contract work and are less keen on permanent roles – further reducing the pool of experienced permanent candidates available. And with many large projects that paused for the pandemic now resuming, there is fierce competition for skilled workers.

Brexit has cut the number of European workers permanently. Additionally, there is not a lot of training happening in key sectors like engineering and construction. Without the next generation of talent being developed, the pipeline will never meet current and future demand.

What does it all mean? Ultimately, putting more effort into hiring permanent staff is unlikely to pay off in the long-term. Companies will struggle to retain staff who can earn big contracts elsewhere. Long-term success will come from a blended approach hiring permanent and contingent workers.

With fewer skilled workers in the market, candidates have the upper hand in negotiations. But companies can find value too. In the traditional hire market, salaries are fairly static and only ever go up. Contract pricing is more dynamic, going both ways – in times of low demand they can drop much quicker than they rise. With the right timing, you have could hire the skills you need at a reduced rate.

This could make all the difference if you lose permanent staff. Where workers once moved for an average salary increase of 10-12%, they’re now gaining as much as 25%. The end result? You’re paying more than ever to replace staff.

When negotiating with contingent candidates, you need a more holistic approach. It’s no longer just about pay rates – you need to consider flexibility, milestone payments, and work out how to align pay models with your strategic objectives. 

People don’t necessarily want to work 40 hours a week either. Some don’t even want to work all year round. You need to offer flexible engagements to attract skilled workers. Your MSP can help you design a bespoke program to get the very best from the market.

Compliance is a major concern for those looking to hire a contingent workforce. And that’s not a misplaced worry, it can be tricky to get right. A good MSP partner will handle a whole host of compliance requirements, including IR35, to make sure you avoid penalties.

MSPs help you embrace just-in-time recruitment, which can bring the skills you need on short term contracts. Permanent hiring calls for much more long-term planning. They can also help when it comes to hiring the right mix of skills. While you might have had 20 people on a task or project just a few years ago, you may need to do it with a team of 15 now due to growing costs.

A good MSP will solve these problems and open new recruitment avenues, such as finding people from other sectors who have transferable skills. It also means exploring apprenticeships, graduate schemes, freelancers, and gig workers. We bring all of this together into a coherent strategy that gets you the right skills. This can also mean improving your supply chain by bringing niche recruitment suppliers into the MSP program to deliver talent that hirers can’t access directly.

 

Ready to build your contingent workforce? Contact us today to discuss the best options.