Understanding the Staffing Industry

The staffing industry is a deeply important part of the economy, known for providing businesses with temporary, contract, or permanent employees. Sometimes referred to as the employment or recruitment industry, its focus is on a variety of employment-related services for the workforce solutions ecosystem. MeeDerby is here to break it down for you.

Staffing Industry Analysts (SIA) – the global research and advisory firm focused on staffing and workforce solutions – outlines the industry’s evolution in its complimentary History of the Staffing Industry report: 

“The provision of temporary work through private intermediaries is a more recent development although there are plenty of ancient examples of people working in a temporary capacity. In fact, contingent forms of work would have been the norm before the concept of ‘full-time’ employment with workers’ rights properly developed in the 20th Century.”

“The history begins with the era of ‘proto-staffing’ (It’s staffing – but not as we know it – recruitment services practiced by Romans and Medieval guilds) and ends with the current decade in a chapter titled ‘Pandemic, remote working, platformization and Generative AI.’”

The Workforce Solutions Ecosystem

SIA further explains the interconnected components of the staffing industry and other types of workforce solutions in its Workforce Solutions Ecosystem research report with the accompanying graphic.

This workforce solutions ecosystem comprises six primary industry segments: Staffing, Process Outsourcing, Payrolling/Compliance, Direct Work Engagement, Talent Acquisition Technology, and Other Workforce Solutions. The staffing industry is at the core of this ecosystem.

With so much conversation about convergence in this ecosystem, SIA published its Convergence in the Workforce Solutions Ecosystem research report to explore how, where and why this is happening. SIA found convergence is being driven by four business drivers:

  • Adjustments to business models which make, what used to be, quite distinct service categories more similar
  • Traditional offline businesses taking advantage of digitalization and new online models blurring the line between the analog and the virtual
  • Vendors operating in one niche segment broadening their services to take advantage of one or two complementary segments
  • Multi-platform vendors broadening the scope of their services to take advantage of client demand and become one-stop shops across a broad range of segments

Temporary Staffing

The largest segment of the industry and the most well-known is temporary staffing, a frequent source of on-demand hiring for short- and long-term assignments. SIA categorizes the following occupational verticals:

Commercial

  • Office/Clerical 
  • Industrial

Professional / Specialty

  • Information Technology
  • Healthcare
  • Finance/Accounting
  • Engineering
  • Life Sciences
  • Marketing/Creative
  • Education
  • Other (e.g., human resources, sales)

State of the Industry

SIA publishes a comprehensive forecast of the US staffing industry twice yearly. Following are highlights from the research firm’s US Staffing Industry Forecast: March 2024 Update:

  • SIA forecasts the US staffing industry will decline 3% in 2024 to reach a size of $184.6 billion, as the industry continues to pull back from prior peak levels. 
    • Industrial staffing, IT staffing and healthcare staffing are expected to decrease, while office/clerical is projected to hold stable. 
    • SIA projects mid-single-digit growth this year for engineering, life sciences, marketing/creative, education staffing, and place & search.
  • Looking ahead to 2025, SIA forecasts the US staffing industry will grow 3% to reach $189.9 billion, in line with modest overall growth in the US economy. The research firm predicts the commercial segments will return to growth (5% for industrial and 2% for office/clerical), while most professional segments other than healthcare will enjoy mid-single-digit expansion.
  • Headwinds for the staffing industry include high pay rates, greater client preference for hiring on a permanent rather than temporary basis, and growing competition from alternatives to temporary staffing.
  • Tailwinds for the staffing industry include greater acceptance of contingent work arrangements, the convenience of staffing platform technology, a shift to remote work that has enlarged the talent pool, and the increased complexity of staffing and talent acquisition technology.

SIA provided a more global perspective in its Americas Staffing Market Estimates and Forecast: May 2024 research report:

  • SIA estimates that the global staffing market fell by 5% in 2023 to reach a size of $626 billion. Nevertheless, the research firm estimates a modest bounce back of 2% in 2024 for a market size of $637 billion, and growth accelerating to 4% in 2025.
  • In 2023, the Americas region constituted a staffing market of $210 billion. This represented 34% of the global market, with the remaining portion accounted by the EMEA (41%) and APAC (25%) regions.
  • The 2024 outlook is mixed across country markets. The staffing industries in the United States and Canada are both experiencing a cyclical downturn. SIA projects positive growth for all of the Latin America staffing markets.

How it Works

Temporary staffing firms recruit, screen, often train, and assign their employees to work at client companies on an as-needed basis. The staffing firm retains its position as employer of record (EOR) and is responsible for paying the temporary employees as well as handling any tax, insurance and benefit requirements. Clients are charged an hourly rate for each employee.

For larger employers, staffing firms may provide an on-site manager for the large temporary workforce at the customer’s facility. This is referred to as vendor-on-premises (VOP).

Some larger companies will also work with a managed service provider (MSP) that will take responsibility for managing the company’s contingent staffing buy and relationship with various staffing vendors. They may manage this process through managed service agreements, which also provide performance metrics and measurements.

Temp-to-hire staffing provides a means for employers to try an employee on-site to assess their skills and fit before committing to a full-time hire.

Search

This is a smaller segment of the staffing sector, but one with significant impact. Search firms find full-time employees for their clients, and take responsibility for sourcing, recruiting, screening, interviewing and matching potential candidates for a client company’s full-time job openings. 

Search options are:

Retained Search

  • Client company pays a predetermined fee for the search firm to identify and interview for executive-level positions.
  • This model requires significant consulting time and resources to identify the right candidates.
  • This exclusive search fee is typically paid in thirds: at the signing of the contract, upon submission of a shortlist of candidates, and when a candidate is hired.

Engaged Search

  • A search is conducted to find qualified candidates to fill open jobs and charges a portion of the placement fee as a retainer.
  • The balance is due once the hire is made.
  • Engaged searches are best for higher-level positions or hard-to-fill jobs that require more in-depth research and considerable resources.

Contingent Search

  • The search firm is only paid upon the successful hiring of a candidate.
  • This “pay for performance” model provides access to top talent.
  • There is no fee until the hire is made.

Fees are typically a percentage of the candidate’s salary, although the fee schedule for retained search can be structured in a variety of ways to accommodate the client.

The Rise of Staffing Technology

Another development in staffing that bears watching is the increase in the number and usage of platforms that assist the industry or compete with it. SIA explores such technologies in its annual Temporary Staffing Platform Update and Talent Platform Update research reports.

Temporary staffing platforms automate tasks involved with provisioning temporary employees, getting them to work faster with fewer speed bumps. These platforms are gaining a foothold in sectors like light industrial which require large staffing volumes. SIA research found the worldwide market for temporary staffing platforms reached a scale of $18 billion in 2023.

Talent acquisition platforms streamline and automate the various tasks associated with the hiring process, including recruitment, engagement, assessment, and verification. SIA research found the worldwide market for talent platforms grew 22% year-over-year in 2022 to $16.8 billion then just a forecasted 3% year-over-year growth in 2023. SIA forecasts the worldwide market for talent platforms will reach a scale of $18.5 billion by 2024.

MeeDerby is a member of Staffing Industry Analysts (SIA), the global research and advisory firm focused on staffing and workforce solutions. The firm’s proprietary research covers all categories of employed and non-employed work. SIA members may access the full reports on SIA’s website. Please visit the SIA website for additional information as well as the latest staffing and workforce solutions research, news, and thought leadership.