Staffing is poised for growth in this country, despite challenges
By Timothy J. Landhuis
This is the fourth in a series of snapshots of staffing climates in various countries around the globe. Here, we profile the market in Ireland, an island nation that is home to some 4.5 million residents. Ireland is also the home of a vibrant and cutting-edge staffing industry that has enjoyed a history of favorable laws and relatively wide social acceptance.
Ireland has quadrupled its gross domestic product during the past two decades thanks to some shrewd moves — joining the European Union, attracting foreign direct investment, investing in higher education and maintaining business-friendly laws. Ireland enjoyed sizzling economic growth from 1995 to 2007, with annualized real GDP growth of more than 7 percent, according to the World Bank. GDP per capita grew from $15,500 in 1994 to $59,500 in 2007, in current U.S. dollars, according to the World Bank, vaulting Ireland into the ranks of the world’s wealthiest countries.
The boom abruptly ended with the onset of the global financial crisis, and GDP fell 3.5 percent in 2008 and 7.6 percent in 2009. The Irish government was forced to bail out its banking sector, and ultimately accepted European Union and International Monetary Fund loans in 2010 to help pay its sovereign debt. The crisis still affects the Irish economy, compounded by the decline of property prices. The country now has the highest ratio of household debt to disposable income in the developed world, at 190 percent.
Despite these setbacks, there is some cause for optimism. The country boasts a highly skilled workforce, business-friendly laws, access to the European market and the presence of leading multinational corporations. Further, Ireland provides a tuition-free college education to all residents who qualify. The result is that in 2010, 49.9 percent of Irish residents aged 30 to 34 had attained a college degree, compared with the 33.6 percent average among all EU nations, according to data from Eurostat. The Irish government maintains a very low 12.5 percent corporate income tax rate, offers tax credits for R&D spending, has laws that protect intellectual property and has access to the European market, making it an attractive regional base for some U.S. companies.
“Ireland is the gateway to Europe for many companies,” explains Anne Heraty, CEO and co-founder of CPL Resources Plc., a Dublin-based staffing firm with offices across Ireland and parts of Europe. Prominent U.S. firms with operations in Ireland include Accenture, Dell, Eli Lilly, Facebook, Google, Intel, Microsoft, Oracle and Pfizer.
On the Cutting Edge
Staffing industry revenue reached a hefty €1.1 billion ($1.5 billion) in 2010, as estimated by the National Recruitment Federation in Ireland. The temporary segment accounted for €920 million and the permanent placement segment accounted for €110 million.
And demand for staffing services is growing, despite the struggling economy and an unemployment rate of more than 14 percent in 2011. Preliminary estimates for 2011 indicate temporary staffing segment grew 14 percent in 2011, and permanent placement grew 16 percent, explains Colin Donnery, president of the National Recruitment Federation, and general manager of FRS Recruitment, a large independent staffing firm with offices across Ireland.
Many Irish agencies practice cutting-edge staffing models because they serve multinational corporations from the U.S. that are pioneering these methods. “We tend to be ahead of Europe in terms of recruitment process outsourcing (RPO), vendor management, and other newer recruitment models,” says Donnery.
Players, Big & Small
“There are approximately 180 active staffing agencies in Ireland,” says Donnery. “Members of the National Recruitment Federation comprise 90 percent of the industry by revenue. And these agencies employ approximately 3,000 recruiters.”
The largest staffing firm in Ireland by revenue is CPL Resources PLC, a publicly owned firm with revenue of €235 million (US$338 million) for the year ended June 2011.
Other big players in the Irish staffing market include the international firms ManpowerGroup, Adecco and Kelly Services. “The multinational staffing firms do well with clients who require recruitment process outsourcing and when serving large multinational clients who have high-volume staffing needs, such as staffing a call center,” Donnery explains. “But indigenous staffing firms have made strong in-roads into this area over the past five years.”
Besides the foreign multinationals, other international staffing firms include local players Grafton Recruitment and Morgan McKinley. Grafton Recruitment provides temporary staffing, executive search, RPO and HR consulting in 16 countries. Morgan McKinley, a large provider of professional staffing, is in nine countries.
Beyond these relatively large firms, the market includes a host of smaller staffing fi rms. “The market is quite fragmented,” explains Donnery.
Market segments showing high growth include the healthcare segment. A moratorium on permanent hiring in the state healthcare sector due to budget overruns has increased demand for temporary services, Donnery says. However, this development has not been without criticism, with unions complaining strongly about the large amounts being spent by the Health Service on temporary labor, according to John Nurthen, executive director of international development at Staffing Industry Analysts.
Staffing firms focused on pharmaceuticals, technology, and financial services, should also see increased demand, Heraty says.
Bill Rates & Markups
Irish staffing agencies operate with a similar business model as in the United States. Irish staffing firms bill client companies an amount equal to the temporary employee’s hourly pay plus a markup amount, which is usually 35 to 55 percent of the pay rate, Heraty says. Employment agencies are also responsible for certain holiday pay and insurance.
The fees for permanent placement are typically 15 to 25 percent of the employee’s annual salary, Heraty explains, with the more difficult placements commanding higher fees.
Ireland maintains a number of laws that protect contingent workers; these laws have, in turn, bolstered the growth of the Irish staffing industry. Ireland passed the Employment Equality Act in 1998, which prohibits discrimination against temporary workers relating to access to employment, conditions of employment, training opportunities and promotion. In 1997, Ireland enacted the Organization of Working Time Act, which gives temporary workers rights equal to permanent workers regarding three annual holidays, daily and weekly rest periods, and the right to fi le complaints with a government commissioner.
However, Ireland has not yet passed legislation to address the European Union’s Agency Work Directive (AWD), the deadline for which was December 2011. The AWD requires that agency workers receive the same pay and basic work conditions as permanent workers; it also requires the removal of unnecessary prohibitions and restrictions on the use of temporary workers.
The impact of the AWD on the Irish staffing industry is unclear. Some staffing firms are concerned that the requirements of equal pay and benefits could reduce the cost advantages and flexibility provided by contingent workers, potentially dampening demand.
The United Kingdom has mitigated these concerns to a certain extent by implementing a “qualifying period” such that a temporary assignment must be longer than 12 weeks before the AWD’s equality provisions would apply. Ireland, however, has not established such a qualifying period.
Obstacles to Overcome
In addition to navigating a changing legal environment, the main challenge for the staffing industry is the health of the wider European economy and the world economy. For example, the 2001 dot-com collapse in the U.S. impacted the Irish economy significantly.
Another challenge for staffing firms is finding talent in areas of skill shortages. Donnery explains, “A recent U.S. Chamber of Commerce study reported that Ireland had more than 3,000 job vacancies in the information technology sector. For Ireland, that is a lot of positions to fill when qualified candidates are scarce.”
“The outlook for 2012 is looking reasonably well, despite the tough economy,” says Heraty. “Sectors such as information technology, finance, accounting, and pharmaceuticals, are doing quite well.”
“We estimate that permanent placement revenue could grow 10 percent in 2012,” says Donnery. “The temporary staffing market faces a lot of uncertainty because of the new regulations relating to the Agency Work Directive, and could even decline a bit in 2012.”
Staffing Industry Analysts’ own forecast for the Irish staffing market in 2012 is more optimistic, however, with a growth rate of 10 percent. “It is understandable that the National Recruitment Federation is cautious about prospects because of the uncertain impact of the AWD,” Nurthen says.
“However, we have seen that the impact of the AWD has not been as negative as expected elsewhere in Europe and these concerns have generally been overdone. After a period of weakness, there are some stronger growth drivers for the Irish staffing industry this year and we expect these to compensate for any downside coming from the AWD,” Nurthen concludes.
AWD issues notwithstanding, as the Irish staffing industry continues to mature, more small and midsize companies are now starting to get used to working with staffing firms and to take advantage of our services,” Donnery says. “This represents further maturation of the industry and will help our growth outlook.”
Timothy J. Landhuis is a research associate with Staffing Industry Analysts. He can be reached at email@example.com.