Subadhra Sriram's Blog

Tis the Season for Higher Margins

Buyers of staffing services are not going to be finding bargains this season; a shortage of certain skills sets is back on.

It was different during the recession, when staffing firms’ margins dived down. Margins are finder’s fees and with the economy down in the doldrums, staffing services were on sale. The laws of demand and supply kicked in, and suppliers were forced to charge lower prices.

But a recent report from Staffing Industry Analysts indicates a change in trends. In the third quarter of this year, the median gross margin percentage of eight large publicly held staffing firms was 23 percent, an increase of 50 basis points from a year ago, and the highest level of the past seven quarters.

“It is a striking result that gross margins increased at all eight large public staffing firms that we track in our quarterly report. This indicates a broad-based trend that is evident across the spectrum of temporary staffing skill sets,” says Timothy Landhuis, SIA research analyst and author of the report. “For example, gross margins were up at TrueBlue (industrial occupations), AMN Healthcare (healthcare occupations), and Robert Half International (finance/accounting occupations).”

Buyers had a good break during the recession. It should be viewed as a temporary gift. But seasons change. And thanks to the continuing economic recovery, the services of the vendors providing temporary labor are not going to be as cheap. Suppliers of staffing services are already having to work harder to recruit, and those higher costs are going to be passed on.

Bureau of Labor Statistics indicates that the bill rate index for office/clerical occupations was up 0.9 percent from a year ago and the bill rate index for industrial occupations up 0.7 percent.  It’s not a dramatic increase, but buyers should take these higher prices into account when making 2013 business plans, and expect more increases going forward.

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