Despite record low interest rates and a falling Australian dollar, the job market in Australia is still suffering from continuing job losses and over supply of candidates, particularly in the struggling mining services sector. In this article, TMS examines the trends that are likely to emerge from this downturn in employment, and asks: “Is contracting the way to survive?”
Recent headline figures stating that Australia’s unemployment rate held at 5.5% in April, seem to mask the significant downturn going on in parts of the resources sector and associated industries that supply to it. In the past few weeks a number of high profile redundancies have been announced in this critical part of the economy, with the Queensland and Western Australian job markets particularly hardest hit. A more detailed analysis of trends is in the June edition of popular blog site Market Measures Australia.
This article shows that the number of job advertisements for permanent roles have dropped significantly in the last 12 months, with a particularly strong downturn for the engineering job market. However, what is also interesting is that the number of contract opportunities has actually remained broadly the same during the equivalent period.
Having been through a number of employment downturns in my career as a recruiter, what is interesting to note is that it is generally the contract market that picks up when the permanent employment market goes south, as employers demand greater flexibility in their workforce due to uncertain market conditions, and employees trade job stability for a source of income.
In recent weeks TMS has identified anecdotal evidence from our clients to suggest that history is likely to repeat itself, with a number of organisations having made redundancies and unsure of how they would ramp up again quickly if that major tender is successful. One solution that has been discussed is hiring contract resources to alleviate this short time peak in demand, without having to commit to employing full time staff given the uncertainty around projected future work. This is particularly relevant in the project related world of Infrastructure and Resources, where one-off pieces of work are becoming the norm and the traditional tender process is becoming acutely price sensitive. Another factor at play may be more political, with many companies reluctant or indeed unable to rehire workers they have laid off in recent months.
One key issue with this potential solution going forward is the current disconnect between contractor rates and permanent employment. At the present time, it seems that companies are open to hiring contractors should short term demand pick up, but not at the rates that have been paid in recent years, particularly during the resources boom. My belief is that there will need to be flexibility on both sides in the short term, with the likelihood of contract rates coming down once the candidate market realises this is “the new normal”.
As ever, much of this is open to debate and differs significantly from market to market. However both candidates and employers will benefit from thinking about this approach and how to optimise it for their businesses and careers. It is highly likely based on history and recent client feedback that contracting of resources will be a significant trend in responding to the current market uncertainty.
