The market for external personnel service providers in Austria experienced a slight setback last year, as indicated by a recent study by Interconnection Consulting. After two consecutive years of double-digit growth, the overall value of the market decreased by -1.7% in 2023. Although growth in 2023 was conservative, increases in value are expected in the coming years.

In 2023, the market for personnel service providers in Austria generated a total revenue of 203.5 million euros. Despite this solid result, it failed to reach the remarkable previous year’s level of 207.0 million euros with a double-digit growth of 20.9%. Staffing services saw a lower decrease in value, while quantitative growth (number of filled positions) declined significantly by -8.5%.

This discrepancy can be attributed to increased placement fees charged by personnel service providers, partly due to salary increases resulting from inflation (placement fees are typically tied to the salary of the placed candidates), and partly due to increased staffing efforts.

IT and Telecommunications Remain the Largest Occupational Segment

Despite the overall negative growth in 2023, some professional groups experienced positive developments, while others faced challenges. The tourism sector saw a notable increase of 6.2%, making it the sector with the highest growth rate. The IT sector maintains its leading position with a revenue share of 22.0%, showing high potential for future growth. Particularly promising is the growth potential in the engineering sector, with a projected growth rate of 5.0%.

In terms of the number of placed individuals, the entry-level sector accounts for 15.1% while in value it represents only 7.0%. Executive search accounts for 44.9% of total revenue but only about 20.4% in quantity, illustrating the significant variation in placement fees between the areas.

Importance of Direct Sourcing is Increasing

Direct sourcing is becoming increasingly important in the industry, while traditional portal searches are losing ground. According to recruiters, portals rarely deliver suitable profiles, especially in the specialist area, which is described as partly dried up. Therefore, there is a growing reliance on direct sourcing, even in the specialist recruitment sector, which was previously mainly associated with executive search. Companies are increasingly relying on active sourcing to counteract the shortage of skilled workers.

Since many companies do not have a sufficient pool of applicants and still primarily rely on online portals, the demand for external support from recruiters will remain high. In this context, the focus of consulting is increasingly shifting towards quality. The quality of applicants is still more important than the speed of filling positions.

The Top 5 Companies Account for 27% of the Market

The leading personnel service providers in Austria, alphabetically listed, are Deloitte, Egon Zehnder, epunkt, ISG, and Michael Page. These companies account for approximately 27% of the total market, with epunkt playing an outstanding role as the market leader, especially in the IT sector. The top 50 players have a combined market share of 75.7%. The industry remains dynamic and, despite short-term challenges, offers promising opportunities for the future.

The Czech & Slovak labour supply market grew by 1.1% in value last year. For 2023, Interconnection Consulting forecasts a further increase of 4.2%. However, the markets of the two countries are developing very differently.

The number of provided workers declined in both countries in 2022. In the Czech Republic, the decline in placements was more than compensated for by higher wages and a strong currency, so that overall turnover growth rose by over 4%. In Slovakia, however, both the number of placements and the turnover of the sector declined (-4.4%). In total, turnover in both countries amounted to almost €°850 million. Higher growth rates in the temporary staffing segment are expected for 2023, also because the recruitment process of Ukrainian and non-EU nationals has become easier. In 2022, the easier integration of refugees from Ukraine into the company contributed to the fact that mainly positions without qualification requirements could be filled. “However, Ukrainian refugees will not be able to perform miracles in the labour market either,” says Pan. Trained male workers in particular are not allowed to leave the country, Pan added. In addition, Ukrainian refugees tend to move even further west. In any case, wage increases will be clearly noticeable in 2023 and will increase the industry’s turnover. Overall, the labour segment storage & industry takes the largest share of turnover in the temporary staffing sector with more than half of the turnover. Technical & engineering occupations follow at a great distance with about 18%. The job groups construction, IT & telecommunication and health have the greatest growth potential.

Permanent Staff Wanted

The unemployment rate in the Czech Republic is one of the lowest in the EU. Therefore, companies struggle to find suitable workers for both highly specialised and less demanding positions. Due to this, companies prefer to hire new employees on a permanent basis. “A trend can be observed towards permanent placements increasing their share in the turnover of staffing companies,” explains Monika Pan, the author of the study. In light of the ongoing unpredictable situation, employers started to rely more on the permanent staffing pool as early as 2022, so that the turnover share of this segment increased to 12%, which is almost 3.5% higher than in Slovakia. However, the situation in Slovakia is similar. During the pandemic, many companies used temporary staff as a low-cost solution to cope with fluctuations in demand and to remain flexible. Now, the prevailing shortage of skilled workers, which leads to frequent downtimes and, in some segments, to production cutbacks, is causing companies to rely more on the permanent segment, which will also lead to a further increase in this segment in Slovakia. The main companies in the market are, in alphabetical order: Adecco, Gi Group, Index Noslus, Manuvia, Manpower, Randstad, Trenkwalder.

Last year, the temporary staffing market in the CEE countries (Poland, Czech Republic, Slovakia, Hungary and Romania) was no longer affected by the pandemic restrictions. Other challenges, such as high inflation and the energy crisis, were in the focus of employers. The market for staffing services grew by 6.7% to €3.6 billion last year. In the next few years, the market volume will increase by another 3% annually, according to a study by Interconnection Consulting.

Overall, temporary staffing provision accounted for about 80% of the industry’s total business in the CEE region in value terms. The share of unskilled labour will rise to 45.4% in 2023, while skilled workers account for about 42%. Poland, the largest CEE market, has shown an exceptionally strong recovery since the pandemic. Future growth for the temporary staffing sector is projected at 3.4% annually in value terms. The situation in Romania is even more dynamic. The market, with a volume of around €770 million, will grow by around 6% annually until 2026.  The next years 2023 and 2024 will benefit from the postponed projects and the material bottlenecks during the pandemic. “Companies are trying to compensate for the shortage of well-trained workers by recruiting EU foreigners, especially from Asia,” explains Monika Pan, the author of the study. The situation is similar in Hungary, where residence permits have been made easier for people from the Philippines, Vietnam or Indonesia, for example. In 2022, however, the market for personnel services in Hungary grew by only 2.1%. Above all, the high inflation of almost 13% contributed to this. For the next years until 2026, a decline of 1.3% in value is even expected for temporary staffing.

Czech Republic and Slovakia Rely on Permanent Workers

In the Czech Republic, the share of employees hired permanently by companies is now rising to 12%. The market for personnel services will grow by an average of 3.1% annually until 2026. The unemployment rate is very low, so companies are desperately struggling to find suitable employees for highly specialised and less specialised positions. Once found, companies then also prefer to retain them permanently. Similar to the Czech Republic, the share of permanent workers in Slovakia is now rising to more than 8.6%. The average growth for the temporary staffing industry will be lower than in the Czech Republic at 1.1%.

Large Staffing Companies at an Advantage

The storage & industry sector is the strongest segment across all countries surveyed with a share of 42.5%, followed by technical staff & engineering. The strongest growth potential is in construction, IT & telecommunication and healthcare. Despite the large number of small companies, especially in Poland, it can be seen that the market share of the large providers is increasing, mainly because they are better able to adapt to the challenges of a currently difficult market environment. Companies such as Randstad, Adecco and Manpower have the appropriate organisational, technical and financial resources to stay on top, according to Pan. Gi Group has also strengthened its position in the CEE countries mainly through the acquisition of smaller providers.

Top companies in the CEE region are, in alphabetical order: Adecco, APT Prohuman, Gi Group, Index Noslus, Interkadra, Lugera, Manpower, Randstad, Trenkwalder, WHC.

All That Glitters Is Not Gold

In 2017, recruiters found 10,248 permanent jobs for external clients within Austria. Total revenue in the personnel service sector in Austria reached EUR 131.9 million, making it the third year of growth in a row. Last year’s revenue growth was 5.9%. According to a study by Interconnection Consulting, the growth trend is expected to continue to 2021, with an annual plus rate of 5.3%.

Uneven Developments

Growth rates varied greatly according to occupation, but were positive overall. Although IT specialists are in demand, the number of actual job placements was lower than in the previous year. By contrast, engineers and technicians, likewise in high demand, showed much stronger growth. Commissions in this occupational sector grew 8.5%. Performance in the area of customer care was weaker, with a growth in turnover of only 0.8% over 2016. The most important client segment by far is finance/professional services, with a revenue share of 22.7%. However, vitality in this segment has cooled off somewhat, with banks especially slowing down their hiring. The occupational group engineering demonstrated very solid growth, reaching a growth in volume of 7.7%.

Top Positions Driving Growth

Turnover of job placements for managerial positions with a minimum annual salary of EUR 125,000 grew 7.9% this year, making it the fourth year in a row that the top salary bracket showed the greatest expansion. “The difference to less well-paid jobs has become minimal, however. Headhunting in individual sectors has definitely become a lot tougher,” explains Tobias Stickelberger, author of the study. 28.7% of the job placements fell in the segment between EUR 30,000 and 40,000, marking the first time this segment has grown in many years. In terms of volume, the salary bracket of EUR 75,000 to 100,000 led the field.

Hard-Earned Pay

Even though revenue in the industry rose sharply last year, recruiters’ expectations were not completely met. “Nearly all recruiters are reporting a difficult market on the supply side,” states Stickelberger. “They’re hesitating to accept new commissions because they feel the market for specialists has dried up.” Nonetheless, a few agencies with an especially strong network have managed jumps in revenue well above overall market growth. However, such has not been the case with the larger agencies overall. The market share of the top ten companies fell slightly to 37.8%.

The number of temporary workers in Germany has been decreasing since 2018 and will continue to do so this year. 2019 will see decrease of 4.2%. The production segment is particularly affected. The number of temporary workers right now lies around 958,000. The downward trend is expected to continue until 2022, as shown in a study by Interconnection Consulting.

Temporary Work as an Early Indicator

By 2022, the number of temporary workers will have dropped down to around 882,000. 2018 also saw a decrease in the number of temporary staffing companies (by -0.9%). The main reasons for the decline are economic developments and legal regulations. Particularly the automotive industry suffered from sales difficulties in China and uncertainties due to Great Britain’s planned exit from the European Union. „The temporary work industry is considered to be an early indicator of economic developments because it quickly senses any change in demand in the labour market,“ says to Katarina Gajdova, the author of the study. Furthermore, new legal regulations (Equal Pay, limited leasing periods), have increased the pressure on the industry. Both the shortage of skilled labor and the average cost per temporary worker are on the rise.  This is also due to a gradual increase in the minimum wage. According to Gajdova „the problem here is that the additional costs the face can rarely be passed on to the customer,“. The segment with the best performance is ‚personel services’, which saw an increase of 6.3% this year.

Digitisation Improves Service in the Industry

Digitisation creates new forms of work and fields of activity. Moreover, it has enabled flexibility in terms of working hours and workplace, which is in the interests of both employees and companies. „There are next to no temporary work agencies that would not rely on digital recruiting platforms,“ ​​says Gajdova. Social media and business networks are used more and more in recruitment. „Bots“ are currently considered a very hot topic. The market leader was able to slightly expand its position again, but the top 10 couldn’t quite keep up with the market. The top 15 companies in alphabetical order are: Adecco, Autovision, Dekra, Hays, I.K. Hofmann, Manpower, Office People, Orizon, Persona Service, Piening, Randstadt, Tempton, Time Partner, USG People, ZAG.