Opinion by Denis Pennel, managing director, World Employment Confederation

In 2019, the year before the Covid pandemic disrupted the world economy, the HR Services sector recorded 5% year-on-year growth to deliver a turnover of €495 billion. 

The World Employment Confederation Economic Report 2021, based on 2019 data, details how the industry was on a positive trajectory before the Covid crisis hit in Q1 2020.  The pandemic has upended economies and labour markets around the world and brought a halt to the growth that the private employment services sector had experienced in recent years. The industry estimates that the global agency work sector contracted by as much as 18% in the first half of 2020 alone. 

In 2019, more than 60 million people were placed on the labour market by the HR Services sector. The sector placed over 7 million people in work in South America – over 4.6 million in Mexico, 3.5 million in Brazil, 415,000 in Columbia, 230,000 in Chile an 43,000 in Argentina. This underlines the important role our sector plays in supporting people and companies to manage change – a role that was to prove in invaluable over the subsequent 12 months as the sector worked to deliver innovative solutions in transitioning workers from economic sectors closed down by the pandemic into newly-in-demand sectors such as healthcare and delivery services. 

2019 market overview

Agency work remains the largest segment of the HR Services industry. It grew 1% year on year globally in 2019 and generated €391 billion in total revenues (including agency work revenues generated by MSP). The five largest agency work markets – USA, Japan, UK, Germany and France – contribute over two-thirds of revenues.

In South America, agency work revenues were €4.1 billion. Brazil is by far the largest market in the region with 83% of the region’s placed workers, 75% of operating agencies and nearly two-thirds of South America’s agency work revenues. While most of the region’s agency work markets saw growth in 2019, Brazil’s agency work market experienced a significant contraction and hence led the region overall into a decline.

The global penetration rate of the agency work sector, which indicates the share of agency workers in full-time equivalents among the working population, remained stable at 1.6% in 2019. Brazil has an above average penetration rate of 1.8%, with Columbia at 1.5% and Argentina at just 0.3%. 47% of agency work in South America is in services, with 22% in manufacturing and 12% in agriculture.

Managed Service Providers (MSP) and Recruitment Process Outsourcing (RPO) were the best performing industry segments in 2019, achieving double-digit growth across most regions at 13% and 25% respectively – likely fuelled by tight labour market conditions pre-pandemic. MSP reached a €135 billion turnover and RPO €5.7 billion. In South America, revenues from RPO were €0.22 billion.

Direct recruitment too saw strong growth at 6% compared with the previous year. Asian and Pacific markets expanded significantly – with Japan and China growing 30.1% and 17.1% respectively and the US was up 9%. The UK by contrast fell 16.8%. In South America, revenues from direct recruitment were €0.3 billion in 2019.

The career management sector – which has an estimated value of 1.9 billion – saw a slight decline of 1% in 2019 due to contraction in the largest markets (US, the Netherlands and UK) whose combined turnover accounts for some 50% of the global sector.

Over 161,000 private employment agencies delivered services to companies and individuals during the course of 2019 – thanks to the more than 3 million internal staff employed across branches in 41 countries worldwide. There are 8,500 private employment agencies across South America, employing 82,000 internal staff.

Looking to the future

The global pandemic and subsequent lockdowns around the world resulted in many sectors contracting significantly. HR Services also experienced unprecedented declines in many countries – both in number of workers placed and industry revenues. The gradual opening-up of economies during the 2nd and 3rd quarters of 2020 has been tempered by the reintroduction of lockdowns but has served to merely slow the recovery, not halt it. 

Agency work markets around the world were significantly impacted by the pandemic and subsequent lockdowns. It is a proven early-warning signal for economic health, and the declines observed in agency work were swiftly followed by official GDP data reporting contractions in many markets. However, while both the volume and value of agency work fell below levels witnessed during the last global economic crisis in 2009, the speed at which markets are recovering is much faster. 

In short, our 2019 economic report depicts the calm before the Covid-storm. Today, as vaccination programmes kick-in around the world and economies start to get back on track, the HR Services sector stands ready to support businesses, workers and governments in driving labour market recovery and getting the world back to work.

The full 2019 report can be found here https://wecglobal.org/uploads/2021/02/WEC-Economic-Report-2021.pdf

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