What does the UK skills shortage mean for recruitment agencies?

The biggest concern I hear from recruitment agencies is the growing skills crisis facing UK Plc today. Agency heads tell me the number of job opportunities continues to increase, but the skills shortage means there isn’t enough talented people to go around.

These experiences have now been supported by the UK Commission for Employment and Skills (UKCES) whose eagerly-anticipated Employer Skills Survey has revealed that almost 1 in 4 jobs now goes unfilled due to a lack of skilled workers.

Worringly, the survey also shows that the skills shortage has more than doubled in the last four years.

This major survey polls more than 90,000 businesses across the UK and is a recognised barometer of the UK economy. What it is showing us is that many UK industries are in the midst of a skills crisis.

But, what does this mean for recruitment agencies and how can they seize on the opportunity that the skills shortage presents?

Skills gap threatens UK growth

The UKCES Employer Skills Survey 2015 reveals that 23% of jobs can’t be filled because of the UK skills shortage. That means there are 209,000 vacancies without a suitable candidate – an increase of 130% on the last survey in 2013.

This figure has dire consequences for UK productivity and threatens to stall the strong growth the nation has seen in recent months.

Digging deeper into the survey and we can see that key professions like financial and professional services, construction, transport, communications, digital technology and IT, manufacturing and utilities are all at crisis point.

Financial services and business services have 57,000 positions unfilled, transport and communications needs 24,100 skilled people, manufacturers are crying out for almost 15,000 candidates and construction firms need almost 15,000 more workers.

To make matters worse, we are continuing to see a rise in the number of new jobs created – by as much as 8% in some industries – and this will only serve to widen the skills gap.


Recruitment agencies can help combat the skills crisis

The answer to this problem – while we work to train and deliver the skilled people we need in the UK – is the army of 1.6 million self-employed people we have in the UK. I’ve said before that making use of contractors and freelancers is the modern way of working for British industry.

Now, more than ever, employers are having to turn to recruitment agencies to deliver the contractors they need to fill the skills gap and provide the expertise they need to grow and develop their business.

Research shows that the contractor sector will continue to grow for at least the next five years and that is being primarily driven by the huge skills shortage we now face.

Recruitment agencies can become the vital lifeline businesses need to continue to push ahead on their goals, investments and strategies. By developing a rich portfolio of talent, recruiters can deliver the missing skills and also help to encourage more people to take up a role as a contractor and share their expertise.

Recruitment fees will increase

There has obviously been concerns that recent changes to taxation rules, like the changes to relief on travel and expenses and the continuing debate over IR35, will have a negative impact on the number of people opting to work as a self-employed specialist.

Granted, when the rules come into force in April, we may see some contractors reluctant to travel as far as they would have done previously.

However, the growing skills gap will exert increasing pressure on employers and that will turn into wage rises for contractors and increase revenues for recruitment agencies. This increase in fees should offset any losses brought about by the changes to tax rules and help to ensure the sector continues to grow and prosper.

The average salary for a contractor is £65,093 and is almost £20,000 more than a permanent employee with a similar role. And, research has already shown engineering salaries are expected to increase by an inflation-busting 7% in the next 12 months – that wage growth will be mirrored in other key sectors that are being impacted by the skills shortage. Once again this will help recruitment agencies to grow revenues.

What must recruitment agencies consider when employing contractors?

While the skills shortage does cause a headache for recruitment agencies, it also presents new opportunities. The continuing growth in job creation coupled with increasing salaries can help their own businesses to grow and, by utilising the power of the contractor sector, they can also help support their clients to get the expertise they need.

By making use of contractors, recruitment agencies can fill more roles, cement relationships with clients and, ultimately, deliver more profit.

However, by using contractors, recruitment agencies also have to consider the rules and regulations that surround employing freelance workers. In many cases you have to manage PAYE and consider a wealth of employee benefits like pension auto-enrolment.

Many agencies, unsurprisingly, are reluctant to tackle these issues and that’s because they are recruitment experts, not accountants. The good news is that companies like Danbro can provide the expertise they need and take the risk away from them by providing professional employment services for the contractors and self-employed people on their books.

Professional employment service companies – or umbrella companies – also have other benefits. Danbro can take care of pensions, provide statutory sick pay and deliver a wealth of rewards. It not only benefits the contractor, but also allows recruitment agencies to focus on what they do best.

The skills shortage is a massive issue for the country but recruitment agencies can help to provide the answer by becoming a valuable resource of freelance expertise.

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