Many employees see the New Year as a time to consider a new role, so now is the time for recruiters to reap the benefits.1
However, recruitment agencies have faced recent challenges. Such as redundancies within the sectors they service which have reduced recruitment activity. Additionally, insolvencies have created uncertainty regarding customer payments.2
These delays or non-payments could have a disastrous impact on recruitment companies. This is why a trade credit insurance policy is essential.
Recruitment companies in particular sectors have been severly affected by financial struggles or insolvencies. For example, retail, manufacturing, and construction, may face unpaid invoices.3
Customers could take longer to pay their invoices if they’re operating at lower levels. For example, when demand has fallen. They may not be able to pay at all if they’re on the verge of closure but already have contracts with a recruitment agency.
Thousands of businesses have gone bust in 2023 due to challenges such as:
More firms are set to follow suit. Particularly now that COVID-19 loans and support schemes have been phased out. This would impact the number of companies that need to use the services of a recruitment agency and should be a key consideration.4
The Insolvency Service said there were 6,208 registered company insolvencies in England and Wales in the three months before the end of September, 2023.3
According to the official figures, construction firms in England and Wales suffered the highest number of insolvencies (4,276) in the 12 months ending 30 September. This was followed by:
Struggling firms could be unable to fulfil contracts that existed before the company’s troubles. This would result in recruiters waiting longer for client payments. They may also face bad debt if clients cannot pay invoices due to insolvency.
For employment agencies that pay wages before getting invoice payments, delays or non-payments can cause significant financial problems. This situation could even put the business at risk of going bust.
However, not all companies were close to collapsing. Some were able to offer higher salaries to their staff. Despite evidence of a cooling labour market in 2023, pay growth was at 7.8% - the highest since records began in 2001.5
Many employers have had to offer higher starting salaries and increase pay rates to attract the candidates they need. This has added to the financial burden on businesses.
The latest employment figures show that vacancy numbers fell for the 16th month in a row leading up to October 2023. Vacancies decreased in 16 out of 18 sectors.6
Despite the decline in advertised posts during the summer, vacancies fell by 45,000 to 949,000 from September to November 2023. according to the Office for National Statistics. Figures show that there’s still demand for recruiters to help fill vacancies.7
The ONS reported that 10% of companies in late October 2023 experienced staff shortages. This was only slightly down from the 13% of businesses facing worker shortages in late May.
There are demands for the government to address staff shortages by helping employers with childcare, training, and other benefits. This would likely strengthen the labour market and improve recruitment activity.8
Trade credit insurance essential for protecting recruiters from financial and staffing risks. It safeguards them against possible non-payments from companies.
Trade credit insurance could guarantee that any unpaid invoices for services on credit would be paid when a customer is facing insolvency.
This type of insurance gives recruiters an early warning sign. It can also be used to assess the financial health of new customers. You can utilise the insurer’s credit intelligence and grading systems.2
Trade credit insurance offers distinct benefits. Particularly in the areas of risk mitigation, growth, and enhancing working capital. In summary, for businesses in the recruitment sector:
Find out about how you can transfer the risk of unpaid invoices to your insurer by visiting our trade credit page.
Sources
1. independent.co.uk/jobs-hunters-best-time-new-year
2. marsh.com/securing-payments-challenges-facing-recruitment-agencies
3. gov.uk/commentary-company-insolvency-statistics-july-to-september-2023
4. bbc.co.uk/business-67261798
5. theguardian.com/uk-jobs-market-is-cooling-despite-record-pay-growth
6. ons.gov.uk/jobsandvacanciesintheuk/november2023
7. ons.gov.uk/jobsandvacanciesintheuk/december2023
8. theguardian.com/jeremy-hunt-staff-shortages-autumn-statement