Recruitment is a multi-billion dollar a year industry for a reason

I read an article in The Weekend Australian a few weeks ago which discussed the launch of Executives Online, a new service in the Australian market claiming it’s been established to challenge the projected multi-billion dollar a year mainstream recruitment market (collectively not just IT).

Admittedly, Executives Online is discussing executive positions but in the article the Managing Director suggests the recruitment industry is inefficient, dominated by agencies with limited reach and poor databases and that the vast majority of clients are dissatisfied with cost, reach, speed and efficiency of recruitment models.

Now does that depiction truly reflect a multi-billion dollar industry? If clients were really dissatisfied, the industry would not be where it is and the economy would not have the flourishing, flexible workforce it has.

Unfortunately, when the process of filling roles is reduced to a base transactional model, and price becomes the only factor in the equation, then jobseekers become no more than objects on an assembly line. This has been proven time and time again not to work – in any model of matching employees and employers.

With the growth of technology and online access to so many tools it is possible to eliminate the human element altogether. However it is important to remember that one of the most important aspects of an individual’s life is their employment – and the process of seeking employment, or managing the process of introducing jobseekers to employers, requires respect, confidentiality, knowledge of the parties and awareness of legislative frameworks.

There is a place for every model of engagement but to suggest the industry is inefficient, limited in its delivery and reach, and has dissatisfied clients is just a little too ‘broad brush’ when the statistics tell a very different story. The Weekend Australian article also stated that IBISWorld predicts a growth of 2.9 per cent in the recruitment market over the next four years and with over 4000 companies across the country forming the recruitment sector, I would suggest there has to be very satisfied clients and candidates to sustain a market at this level.

What’s the value-add of recruitment?

Are recruiters really necessary these days, when numerous other avenues exist for those seeking a job? It’s a question often asked when I tell people about my role at ITCRA. What is the value proposition? What makes a recruiter or their organisation valuable to jobseekers? Why not just bypass them and use job boards, approach organisations directly or use consulting or management companies?

It’s true that there are a myriad of ways to source employment in today’s world, and all are relevant at various points in the career cycle.

ITCRA asked a group of senior recruiters last week about the value proposition of recruitment, as we were discussing addressing this issue in a broader political context during a strategy meeting. Despite the fact that some areas of value relate to the performance of individual companies (such as their level of service and culture), I know there are some key attributes that both jobseekers and clients would want embedded in any recruitment organisation they choose to deal with. But are these attributes clearly articulated and understood? I believe that if they were, the recruitment industry’s right to exist and support the varied employment models would not be challenged at every legislative revision or workplace inquiry.

How often do we hear of other industries derided for doing what they were effectively created to do?

The difficulty is in the diversity of the recruitment sector, the personal nature of the relationship between recruiters and jobseekers, and the contracting commercial nature of the client/recruiter relationship, which is compounded by a currently challenging skills and employment environment.

What is  needed is a collaborative approach and a focus on the bigger picture – matching up the need for jobseekers to find meaningful employment with the need for an engaged workforce in a declining talent pool, rather than being waylaid in philosophical discussions about the differences of flexible working arrangements vs. permanent arrangements.

Recruiters can offer a range of advantages for jobseekers, including extensive industry knowledge and experience. They bring a raft of tools to the table, such as strong contacts; job opportunities not available elsewhere; guidance with CVs; and an understanding of jobseekers’ transferable skills sets. This is far beyond what many understand the role of a recruiter to be, and I would suggest that this sector will remain a valuable part of the employment landscape far longer than those who aim to establish an argument for its demise.

ITCRA’s response to the Living Away from Home Allowance reforms

As part of the 2011-2012 Mid-Year Economic and Fiscal Outlook last year, the Treasurer announced reforms to the Living Away from Home Allowance (LAFHA) benefits concessions in Fringe Benefits Tax (FBT) law. This means that from 1 July, employers and employees will need to substantiate LAFHA claims.

ITCRA recently responded to The Treasury’s consultation paper on this issue – Fringe Benefits Tax (FBT) Reform: Living Away from Home Allowance, which was designed to seek the views of stakeholders regarding transition and implementation of the reforms, and identify any unintended consequences.

We chose to respond to represent the views of our recruitment and contract management organisations, which often bring in overseas workers and maximise the mobility of the Australian workforce to fill skills gaps in the ICT sector.

Our submission to Treasury dealt with the primary concerns of the proposed changes from a tax policy perspective, taking into account the three criteria of a good tax – efficiency, simplicity and equity.

ITCRA believes the proposed changes will result in differing tax treatments, depending on whether the economic return of an employee’s LAFHA expense is paid as a cash allowance or an employer fringe benefit. As a result, we expect employers will prefer to pay a cash allowance, which will be a simpler system for them as they won’t have to worry about tracking expense payment fringe benefits and paying FBT. However, we believe employees will prefer not to receive a cash allowance, as they will be assessed on it and have to substantiate deductions by manually tracking expenditure.

Treasury’s plans for a system taxing an economic benefit based on payment will result in two sets of legislation in two different Acts, and may cause confusion. It appears that expense payment fringe benefits of a LAFHA nature will be dealt with under the Fringe Benefits legislation, while cash allowances will be dealt with under Income Tax legislation. This creates a layer of complexity and will cause confusion for employers and employees in understanding and applying the law.

Overall, we’re concerned that the reforms are likely to result in an exodus of employees currently receiving LAFHA benefits.

In order to ensure our position accurately reflected that of our Members, we conducted a comprehensive online survey through our iPulse program.

ITCRA Members believe the proposed changes will be difficult for employers to understand, while not one respondent believed the changes would lower compliance costs or ensure compliance.

Some of our Members were also concerned that changes will impact businesses in Queensland and Western Australia, where there is a strong reliance on overseas and mobile workers due to the mining and resources boom.

ITCRA’s submission to Treasury provided SkillsMatch data from 2011, showing increasing days to hire and continuing skills gaps. This demonstrates an ongoing need to encourage a mobile, global workforce in Australia.

If there are changes to LAFHA, we believe these should focus on reducing complexity, rather than introducing an additional barrier to meeting Australia’s need for specialised talent. We look forward to the Government’s response to our submission and those of others.

In order to make sure our Members are ahead of the game and fully understand the impact of the LAFHA changes, we’re running a webinar on 28 March. This will outline the proposed changes, the issues raised in our survey of Members, and the subsequent impact Members may need to consider. To register, please fill out the form on the ITCRA website.

What will the ICT recruitment market look like in 2012?

As most of you know, each quarter ITCRA reviews the data our Members contribute to SkillsMatch, in order to provide an analysis of the ICT recruitment market in the previous quarter.

This time around, we decided to instead take a look at all of the data from 2011. This allows us to not only review the past year, but also draw conclusions about likely trends in 2012.

Unfortunately, our data did show that we can expect a softening employment market this year. While it’s not unusual for recruitment to slow at the end of the year, as people go on holidays, there’s no denying the market overall is looking jittery.

For example, SkillsMatch tracks ‘days to hire’ – and in the last quarter of 2011 it took recruiters and employers in the ACT, NSW, Queensland and Western Australia longer to find and hire candidates. The most substantial increase was in the ACT, where in the third quarter of 2011, it took an average of 26.4 days to fill a role, jumping to 41.4 days in the fourth quarter.

And it’s not just ITCRA data that’s showing these kinds of trends.The Vacancy Report from the Department of Education, Employment and Workplace Relations showed vacancies for ICT professionals dropped 20.1 per cent in the past year.

The Longhaus Australian Tech Index, which measures the health of the Australian ICT industry, decreased 2.9 per cent by 31 December 2011 – the most significant decline since the second quarter of 2009. ITCRA partner Longhaus has put this drop down to a less demanding labour market in the last three months.

Meanwhile, SkillsMatch also identified continuing gaps between the top 10 skills offered by candidates, and those required by employers. In fact, five of the top 10 skills requested by employers – systems administration, telecommunications, testing, Java and SQL – don’t appear in the top 10 skills offered by candidates.

SkillsMatch also allows us to see ‘skills fulfilled’, which shows us how often recruiters were able to hire someone with the particular skill they required.

For example, our data shows that 35.66 per cent of hirers looking to fill project management roles in 2011 were successful in finding someone with that skill. The majority (59.7 per cent) of those looking for employees with C# experience were able to fulfil that need, while only 3.16 per cent of those needing workers with telecommunications experience were able to meet that demand.

However it’s not all doom and gloom, with many seeing a long-term positive future for the industry. This week, ABC finance correspondent Alan Kohler told subscribers of his investment publication Eureka Report that the only shares he’d recently invested in was SKILLED Group. He said this was because labour supply, along with mining and energy services, were one part of our economy that is definitely growing.

While the SkillsMatch data may point to a difficult market, it also suggests that there are still opportunities for both recruiters and job candidates.

I believe recruiters should continue to focus on building and maintaining connections with a strong candidate database, while focusing on sourcing job seekers who have the skills most requested by employers.

Similarly, those searching for employment need to focus on understanding the areas (location and skill sets) where demand exists, as well as what is required to address that demand and hopefully increase their chances of securing a role.

It’s also important to keep in mind that regardless of the current and future economic outlook, there will always be a necessity for a skilled and mobile IT workforce. By continuing to develop a diverse range of services in partnership with clients, including data-rich resources and compliance support, recruiters can be confident that this vital IT workforce will always ensure a demand for the core business of recruiters.

So how was your summer break?

In response to the challenges faced by companies in 2011, the ITCRA Secretariat has been busy over the summer break developing a new range of tools and information regarding current and new legislation. We will also soon make submissions on behalf of Members responding to the review of the Fair Work Act; amendments to the LAFHA/457 visas; and the practical application of the Work, Health and Safety legislation with the new WHS Code of Conduct.

We’re also reviewing contract templates and the latest in the ongoing independent contractor conversations. And these are only the issues we know about – I am sure there will be plenty of other state, federal and New Zealand issues that Members become aware of over the coming year.

We’re working hard to provide members with these resources, because I firmly believe the better the information and tools the better the decision-making. ITCRA regularly receives requests from Members to respond to issues that impact their businesses and members are also often asked to advise and assist clients.

Since I have been on my short break I have returned to find that the advisers and Working Groups have been beavering away on preparing commentary on the Fair Work Review; preparing a survey on LAFHA which has been issued this week; investigating the challenging implications of recruitment and contracting companies’ role in the Consultation, Co-ordination and Co-operation Code of Conduct under the WHS Harmonisation legislation; and preparing commentary on the Whole of Government Procurement Review in New Zealand.

So, what have you been up to on your break? Whatever happened to the long, lazy summers that we all remember?

Real-time data to support ITCRA Members in 2012

Recent figures from The DEEWR Vacancy Report showed that ICT vacancies fell 1.6 per cent in November, or 20.8 per cent year on year. However, overall, DEEWR reports there have been falls in ICT professional roles and rises in technical/front-end roles.

Data from ITCRA’s SkillsMatch generally shows increases in roles across the board. Technical roles are certainly rising, with placements for roles such as analyst programmers, application architects and network support all increasing between the first and third quarters of 2011. Placement numbers in professional roles are more mixed, but largely positive – account manager roles have fallen during this same period, while CIO/IT Directors and Communications Managers have risen. This shows that there is still plenty to be positive about in 2012.

For those that aren’t aware, SkillsMatch is ITCRA’s source of instant, as you require it statistical data regarding ICT jobs and placements by ICT recruiters. Approximately 20 of Australia’s major ICT recruitment companies enter data on the jobs they fill and the successful candidates for each, making it an invaluable source of real-time data.

SkillsMatch will be one of our key focuses for 2012, with the site relaunching this week. This update ensures there is more in-depth data and information available, providing the insight recruiters and clients need to make strategic decisions.

Our new SkillsMatch system is able to drill down further to gain detailed information about the skills in demand by ICT employers and the skills candidates are bringing to roles. It also allows Members to input their internally-used skills classifications into the central skills classification system used in SkillsMatch. Member-specific reporting can be subsequently provided using each Member’s own skills classifications, as well as, or instead of, SkillsMatch classifications. This means that not only is it easier to enter data, recruiters will be able to access information that makes sense to them and can be used immediately without modifications.

SkillsMatch is already used by a number of private and Government agencies to assist in understanding immigration needs, education forward planning, workforce planning and trends to support policy decisions and strategy. In 2012 SkillsMatch will help us to contribute to ongoing data provision and research projects, Government submissions, and whitepapers, which will ensure SkillsMatch and ITCRA Members have a voice in shaping the future of the ICT industry.

To find out more about how you can become a SkillsMatch partner, please contact the SkillsMatch Project Manager Carmel Barker on 03 8622 4773 or carmel@itcra.com

And so this is Christmas

Every year the media is full of stories about Christmas pranks or parties gone wrong, despite the repeated warnings that appear in blogs and general news. At ITCRA, we get our fair share of questions from Members and Supporters on this topic, so I’ve decided to share some of these along with the responses from our ITCRA experts to give you an indication of what has to be considered. Having read the information, I now understand why so many ITCRA contacts are telling me they are out of office NOW and are staying away until this corporate ‘silliness’ is over!

Q: I just read that small- and medium-sized enterprises planning a splashy Christmas bash for clients and contractors need to remember that ‘a big end-of-year bash at a swish venue could leave you with a dreaded fringe benefits tax burden.” What should we be aware of with our contractor and client parties?

Expert answer: The ability to deduct relates to taxable fringe benefits provided to employees only. Entertainment provided to other classes of persons, such as clients and contractors, is not deductible.

Q. Do you know if there are any privacy restrictions with a company posting photos of its contractors at Christmas parties etc on social media and its websites? We have never had any problems in the past but thought I should check.

Expert answer: There are six reasons why caution should be exercised when posting photos on social media, but in summary you should let partygoers know (well in advance) that photos will be taken on the evening and that nothing will be posted without consent. It would be best to obtain consent once the contractor/partygoer has actually seen the photo that you propose to post.

It would also be worth pointing out to staff that that they will be asked to observe the same protocols with regard to any photos they might take themselves.

Company Christmas parties provide a great opportunity to enjoy the company of colleagues and cement relationships. It can also be a minefield if conduct or behaviour at the Christmas function is less than expected, particularly if clients and contractors are also in attendance. Here are my additional tips for avoiding problems:

• The dress code needs to be clear
• Understand that ‘shop talk’ can be damaging in a mixed environment
• Have safe alcohol consumption and safe driving procedures in place as a reference before the event
• Ensure Kris Kringle presents avoid anything that could be seen as discriminatory or of a sexual nature – no matter how funny or well-intended

So having taken all the fun out of office Christmas parties, make sure you read ITCRA’s ‘Twas the Night before Christmas and see where this is all heading!