Companies increasingly favoring temporary staff over permanent hires
Employers across the U.S. and Europe are increasingly relying on temporary workers to keep their businesses going, holding off on permanent hires because of economic instability and artificial intelligence-driven disruptions.
Staffing firms, in their latest earnings calls, said clients are turning to contractors as companies evaluate how AI will affect their labor needs. The unpredictability of global geopolitics and the economy is adding to hesitancy over how many workers they need, and for how long.
“When clients will have more confidence and talent to start changing jobs or organizing work with more permanent jobs, we don’t know,” Amsterdam-based Randstad NV’s Chief Financial Officer Jorge Vazquez said on the company’s latest earnings call.
Hiring remains weak overall, company results show, though contract work is holding up better than permanent placements. Menlo Park-based Robert Half Inc. reported that contract talent revenue was down 5% in March from a year earlier, improving from a 7% decline for the quarter, and slipped just 1% in early April. Permanent placement revenue fell 6% in March and 7% in the first weeks of April.
UK-based PageGroup PLC also flagged softer hiring, with both temporary and permanent recruitment declining in the UK and France, though temporary contracts outperformed. In Brazil, temporary hiring rose while permanent placements fell. Peer Hays PLC said it expects near-term conditions for permanent roles to remain challenging, and greater resilience in its temporary and contracting segment.
Mainly large companies are the ones assessing headcount in light of AI, “and while they’re making that evaluation, to the extent they have needs, they use more contractors in that case,” Robert Half’s Chief Executive Officer Keith Waddell said during the company’s latest earnings call. About 30% of Robert Half’s clients are mid-cap companies, and the rest are small- and medium-sized businesses, he said.
In recent months, news of large job cuts at large corporations has rattled labor markets on both sides of the Atlantic. Household names like United Parcel Service Inc. and Heineken NV, plus tech giants such as Oracle Corp. and Meta Platforms Inc., have laid out plans to cut tens of thousands of workers.
The staffing firms’ comments echo what economic observers have pointed out, at least in the U.S. The latest Federal Reserve Beige Book survey noted that some districts saw “increased demand for temporary or contract workers, as firms remained cautious about committing to permanent hires.”
Most recent U.S. employment data also showed that the number of temporary employees has generally ticked up since December, with month-over-month changes in temporary employment faring better than total non-farm employment over the same period.
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