In Short:
The recruitment industry is facing a cooling job market after a post-pandemic hiring surge. Companies are cutting costs by hiring internally, renegotiating fees, and extending hiring timelines. Many staffing firms, like Teamlease and Xpheno, have shifted their strategies due to declining demand, particularly in IT. Permanent hiring has slowed down, while contract staffing has increased. Some firms still experience growth in executive searches.
It seems like the aftermath of the pandemic has brought a significant shift in the job market, and surprisingly, the **recruitment industry** is feeling the pinch too. What was once a bustling hiring environment is now experiencing a notable slowdown.
The Recruitment Drought
Over the past year, many projects have come to a standstill. In a bid to cut costs, companies are now opting to fill positions internally, leading to fewer openings for hiring agents. Additionally, clients are pushing for lower service fees and extending their hiring timelines, leaving recruitment firms scrambling.
**Teamlease Services** has had to rethink its strategy, according to **Balasubramanian Ananthanarayanan**, senior vice-president of the company. They’ve optimized their team of recruiters and raised incentive targets for general staffing this year. For context, general staffing involves hiring employees for short-term contracts while keeping them on the payroll of the recruitment firm.
“Clients are asking to reduce sourcing fees,” Ananthanarayanan noted, adding that some are even negotiating to hire front-line staff at minimum wages. This is despite having high expectations regarding qualifications, skills, and experience. Typically, sourcing fees are expected to be around 8.33% of a candidate’s annual salary, but they’ve significantly dipped lately. This fee is essential for staffing firms managing third-party, temporary payrolls.
From Boom to Cooldown
The post-pandemic era saw an explosive demand for recruiters—a period often described as the **Great Resignation**. However, the recent lull signifies a shift away from the tech-driven excitement of 2021-2022, when the need for hiring agents surged for **CXO roles** as well as permanent and temporary staffing, causing an intense war for talent within the sector.
“After the boom of 2021, ABC Consultants now employs over 150 consultants, and we’ve focused on senior management mandates,” shared **Shiv Agrawal**, managing director at ABC Consultants.
Similarly, **Xpheno** is adjusting its approach as demand from the **IT sector** diminishes, with giants like **Tata Consultancy Services (TCS)**, **Infosys**, and **Wipro** reporting a combined decrease of 63,759 employees in their workforce for FY24.
“Hiring volumes dropped in 2023, and clients turned to in-house teams for replacements. While our full-time hiring business decreased, contract staffing rose by 25% compared to 2022,” stated **Kamal Karanth**, co-founder of Xpheno. The firm has shifted its focus toward global captive centres, observing a 10% increase in contract hiring from clients this year.
Fresh Faces in Recruitment
During the earlier hiring surge, many companies turned to home-makers seeking part-time work to manage the influx of resumes. However, this decision didn’t yield the expected results when firms hired recruiters focused on IT sectors.
“While a starting salary of **₹3-4 lakh** was attractive enough to draw engineers and insurance agents into recruitment, they would quickly leave for offers of **₹8 lakh** from competitors,” explained **Lohit Bhatia**, president of workforce management at **Quess Corp**. He noted that while Quess currently has over 1,700 recruiters on its payroll, permanent hiring has slowed down while contract staffing remains robust.
On the other hand, rival firm **Adecco** has seen a remarkable drop in recruiter attrition, down from 50% to just 20%, according to country manager **Sunil Chemmankotil**. “Recruiters are now more cautious and prefer to stay put as the market isn’t offering abundant opportunities across the board,” he observed.
Salary Structures and Market Trends
Compensation for recruiters can vary widely, with headhunters focusing on **CXO roles** earning substantial sums, sometimes reaching a couple of crores. Yet due to the sluggish movement in senior positions, retainer fees have stagnated.
“Timelines to fill roles have increased by 10-20% over the past year, partly due to global uncertainties and hesitations from hiring managers,” noted **Sonal Agrawal**, managing partner at **Accord India**.
Not all recruitment firms are feeling the slowdown, though. **KornFerry International**, an executive search firm, boasts nearly 500 recruiters in India and aims to add another 50-100 in the upcoming quarter. “The demand for CXO and CXO-1 levels has risen, with some of our accounts showing growth momentum,” said **Navnit Singh**, chairman and managing director of India for KornFerry. “However, it’s the middle and junior hiring segments, especially those tied to tech roles, that have faced the brunt of the slowdown over the last year.”
