Shruti Sabharwal & Anirvan Ghosh
The Economic Times.
IF THE IT/ITeS companies are feeling the heat of the US recession, recruitment companies that service a key need of the sector, appear more than scorched.
Though the severity of the impact has been mainly felt by companies that are involved in entry-level staffing, with some noting a whopping 60% fall in earnings, those that do mid-level staffing are fearing the worst in the days to come.
“The earnings for recruitment consultants have definitely slumped over last six months. The impact on earning from key accounts has dropped up to 60% with further impacts coming on the pricing front,” said TeamLease Services Permanent Staffing VP Sampath Shetty.
“For some individual consultants, the income is down to zero,” he added. This, he says, is the case with those who had all their clients in sectors that have borne the brunt of the recession. Working on a very low client base, some consultants have seen their incomes being almost wiped out.
Typically, a small recruitment firm with 10-15 people and working in entry-level staffing earns around Rs 15 lakh per month where employees work on a lowfixed, high-commission salary.
A 60% fall on such a base could, in some cases, even be life threatening. For every placement at the entry level, the consultant gets an average commission of 8% of the total annual income of the person placed.
That’s not all. IT companies are trying to make their money stretch more as they look for higher value from recruitment agencies. “With the metrics for hiring moving away from quantity to quality with prescribed non-negotiable cost to company for candidates, these expectations are marginalising the recruitment companies’ productivity and pushing for more value adds at similar pricing,” Mr Shetty added. Reports suggest that last fiscal,
While some other major recruitment companies say that the impact has not been that large, they are, nevertheless, expecting the growth rate to be much lower than last year.
Of course, they are also keeping their fingers crossed, hoping the crisis will blow over soon. “Companies will not grow at 30-40% like they did last year and getting new businesses will be tougher. Though right now we are not facing such a big problem since we work with mostly senior level executives, if things go on like this till October, it will be a serious challenge,” said ABC Consultants business development leader Yogesh Sehgal.
But there is another reason why times are tough even for those who place people at higher echelons. “At the senior level it is becoming tougher to find people who are willing to move, unlike before. These employees are in a comfortable position with perks like ESOPs and they do not want to take chances now,” said Mr GC Jayapraksh, principal consultant of Stanton Chase.
In fact, this is a serious issue that recruitment companies are battling. The recent market conditions have put brakes on people movements to some extent. While most do not want to take risks, others have become very choosy while shifting.
Freshers from B-Schools are now more willing than before to join smaller companies, while senior executives are becoming more cautious.
Experts say that IT companies that were hiring through a host of recruitment agencies are now likely to consolidate their hiring through a few key recruitment consultants.
That simply means that the recruitment industry as a whole is likely to see a shake out as some companies fall by the side and others are swallowed by bigger players. “This kind of consolidation is sure to happen over the next three months or so,” Mr Shetty said.
In such a scenario, says Mr Jayaprakash, home grown consultants are likely to sell out as a lot of M&A activity happens either when companies are doing very well or very badly.
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