Recruiters hunt for jobs as hiring boom fizzles

A cooling jobs market after the post-pandemic frenzy has now struck the recruitment industry itself.

Over the past year, projects have dried up, companies are picking up employees internally to save costs, and clients are renegotiating service fees and increasing closure timelines. The result: a paucity of hiring agents.

Teamlease Services has had to optimize its team of recruiters, and also increased targets for incentives in general staffing this year, said Balasubramanian Ananthanarayanan, senior vice-president (SVP) for the company. Under general staffing, companies hire employees for short periods and the candidates are on the payrolls of the recruitment firm.

“Clients are asking to reduce sourcing fees—bringing and, in some cases, negotiating to hire front-line staff at minimum wages, though they have stringent expectations with regard to qualifications, skills and experience," Ananthanarayanan said. Sourcing fees, which should be at least 8.33% of a candidate’s annual salary, has fallen below that level significantly, he said. This is part of what staffing firms earn for managing third-party, temporary payrolls.

Big demand

Demand for recruiters outpaced availability after the pandemic, a period of churn dubbed the Great Resignation. The listlessness in the sector now marks a cooldown from that tech-driven euphoria of 2021-2022 when intense demand for hiring agents—for search (CXO roles), permanent and temporary staffing—triggered rampant poaching both within the sector and by HR teams of clients.

"From the highs of the post-covid boom in 2021, where there was a big demand for recruiters, ABC now has over 150 consultants and our operating model has moved up the value chain over the past 2-3 years to focus increasingly on senior management mandates only," said Shiv Agrawal, managing director of recruitment firm ABC Consultants.

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Xpheno is another recruitment firm that has changed its business strategy as demand from the IT segment dried up. IT sector majors Tata Consultancy Services (TCS), Infosys, and Wipro reported a cumulative full-year decline of 63,759 people in their workforce in FY24.

"The hiring volumes decreased in 2023, and clients used in-house teams for replacement hiring. In 2023, our full-time hiring business decreased, and contract staffing upped by 25% compared to 2022," said Kamal Karanth, co-founder of Bengaluru-based Xpheno. Over the past 7-8 months, the firm decided to focus on global captive centres (GCCs) instead, and has seen a 10% higher contract hiring by clients so far this year.

Home-makers hired

During the hiring blitz, many firms were forced to rely on home-makers looking to earn money to sift through resumes. Some hired recruiters focusing largely on IT and related services, but that strategy boomeranged on them.

"The starting salary of ₹3-4 lakh was sufficient to draw engineers, insurance agents as recruiters and they would leave when companies offered ₹8 lakh. But now, those offers from rivals have dried up," said Lohit Bhatia, president of workforce management at staffing company Quess Corp. Bhatia noted that Quess has more than 1,700 recruiters on its payrolls, and the contract staffing business is in demand while permanent hiring has slowed down.

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Rival Adecco has seen recruiter attrition drop from 50% to 20%, a huge improvement from the post-covid frenzy, according to country manager Sunil Chemmankotil. 'Recruiters are circumspect and prefer sticking to the job as the market is not hiring big-time in many sectors," the country manager said.

Varying compensation

Compensation for recruiters varies and can go as high as a couple of crores of rupees for headhunters who look at CXO roles. But slow movement in senior roles means their retainer fees are stuck.

"Timelines to close have increased, sometimes by 10-20% over the last one year, partly because of overall global uncertainty, hesitation by hiring managers, or differences of appetite or opinions between stakeholders," said Sonal Agrawal, managing partner, Accord India.

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Not all firms, however, have reported a slowdown. Executive search firm KornFerry International has close to 500 recruiters across its recruiting businesses in India and plans to recruit 50-100 over the next October-December quarter.

“The demand for CXO and CXO-1 levels has upped and a few of our accounts have gathered growth momentum," said Navnit Singh, chairman and managing director of India for KornFerry. “It is the segment targeting middle and the junior hiring that has faced the brunt over the last one year, especially which were focused on tech hiring."