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The IT Contract and Recruitment Association (ITCRA) today has cautioned IT recruitment leaders that the overall tightening of the market can have disastrous knock-on effects for individual businesses unless the current climate’s challenges are approached with a long-term strategy in mind.
ITCRA is advising recruitment leaders that benchmarking to achieve sustainable best practice is becoming essential.
CEO of ITCRA, Julie Mills, referred to the recently released ITCRA Remuneration and Benchmarking Report. “The report indicates that the economic fundamentals underpinning the industry have shown some deterioration and that the structure of the industry will be re-shaped—again!—over the coming twelve months.”
The report provides a review across a range of business sizes of indicators including staffing structures; EBIT/wages; margins; analysis of strategies to improve profitability; diversity of service provision; salaries across all levels of staff; and staff turnover and retention; as well as key profiles required when seeking new consultants.
Summarising the key messages in the report, Ms Mills said that, “Margins continue to contract, with the report showing a 14% reduction from last year’s results and, in some instances, Preferred Supplier Agreement (PSA) margins have dropped a further ten per cent to become wafer-thin. It was interesting to note that a number of companies reported walking away from these agreements, which are creating a ‘commoditised’ view of the industry’s services.
“A further focus to improve profitability has been much closer management of staff costs, with the report this year suggesting that wages as a proportion of gross margin averaged 38.2% which falls between the Good Practice figure of 35 to 40%, and the Minimum Goal which should be 30 to 35%.”
Staff turnover has again increased for some companies to above 33%. This is higher than the average recorded over the last few years and is indicative of the economic climate. The report indicates that everything is in flux and this requires the contract and recruitment market to critically reassess its service offering, value proposition and services that are actually being delivered.