The State of the Staffing Industry in 2023

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This year started with a continuation of widespread layoffs, particularly in the technology sector, where layoffs of more than 10,000 workers from Google, Amazon, Meta, Amazon and Microsoft took place. In addition, fear of a looming recession, fueled by high inflation, has led to a rise in gig work as companies hire contractors to replace laid-off staff. Known as “quiet hiring,” companies are either hiring contract workers or asking current employees to expand their job duties. recently surveyed 1,000 U.S. business leaders in companies with more than 50 employees to find out how they are handling the “quiet hiring” trend. These are some of their key findings:

  • 57% of companies have had layoffs in the past 3 months; 56% say they plan to lay off employees in the next 6 months.
  • 37% of companies with recent layoffs are hiring contractors to replace laid-off workers
  • 66% asked employees to take on additional work; 5% of companies doubled employees’ workloads
  • 53% asked full-time employees to move to a contract position

In companies where employees were recently laid off, 80% said they will replace laid-off employees with contract workers. This is a cost-cutting measure during uncertain times because companies that hire contract workers are not responsible for paying for the contractors’ benefits or paid time off. As the economy gets better, companies can decide whether they want to convert contractors to full-time roles.

And all this is good news for the staffing industry.


Call-out: About 4 in 10 companies that recently laid-off workers are hiring contractors to replace them according to a January survey of about 1,000 U.S. business leaders by ResumeBuilder. Most of the executives say the strategy, at least in part, is intended to save money.


The time is now for staffing companies

When the economy tanks, staffing firms experience a rise in demand for contractors and consultants with the right set of skills and experience to do certain jobs. Companies want to take advantage of the money they can save by hiring “gig” workers to replace laid-off employees. It saves them money because they only pay for the work they do, which is usually a lot less than a full-time salary. Plus they don’t have to offer any benefits, like health insurance or paid time off.

Staffing companies are experiencing a boon in business right now after suffering major losses during the pandemic. They saw an 11% decline in revenue in 2020 after experiencing years of growth. In 2021, the industry experienced a 16% increase, and in 2022, according to Staffing Industry Analysts, growth reached a record high of $212 billion, 13% higher than originally projected. Statista projects that by 2027, 86.5 million, almost 50% of the U.S. workforce, will be contingent workers.


What does this all mean for the staffing industry?

All of this is good news for staffing companies who can expect to see the following trends this year:


Staffing shortage persists

Shortages have been around for a while – even before pre-pandemic. Many baby boomers retired during the pandemic and parents had to leave their jobs to stay home with their children. These shortages had a significant effect on clerical and light industrial jobs.

According to the Bureau of Labor Statistics report in February 2023, there were 10.8 million jobs available and only 5.1 million job seekers – almost two openings for everyone looking for a job. Investing in technology that makes recruitment more efficient will make staffing firms more competitive.


Inflation and cost-of-living increases

While some employers have increased wages to attract top talent, these increases aren’t

necessarily keeping pace with inflation. Staffing companies will need to consider bill rates when negotiating with employers to ensure they can attract the best candidates for each job and maintain margins.


The right technology is key

Advances in technology happen every day and having the right tech to be able to compete effectively is critical. The tech stack will enable staffing firms to:

  • Recruit, onboard and pay candidates more easily
  • Spend more time building relationships with clients and candidates
  • Spend less time with manual processes and paperwork


Cultivating relationships to stay on top 

Staying connected with candidates and employees already on the job through mobile messaging apps is gaining prominence. Being able to communicate like this comes in handy when a current worker’s engagement is about to end and a new role becomes available. Having the ability to quickly communicate helps staffing agencies to retain their talent and immediately place workers in their next role. It will also be important to find out how current workers like their assignments.

Equally important is building and maintaining relationships with clients so they don’t decide to work with another staffing company.


The staffing industry has recovered nicely from the pandemic and is poised to leverage the current economic situation to increase revenues. With potentially more layoffs, particularly with talent acquisition teams, more and more employers will be looking to staffing firms to help them locate and recruit the best candidates at a lower cost than doing it themselves.

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