Job agency: Good prospects

The employment placement services industry in Australia has been growing steadily for the last five years, and this is predicted to continue. By JASON BAKER of IBISWorld.

By Jason Baker

Lower economic growth in 2006-07 is predicted to lead to higher unemployment, which will affect job agencies’ potential growth, as operators find it harder to place suitable people in employment.

A stronger economy and employment growth in 2007-08 is expected to lead to revenue growth of around 3.4% a year.

Recent Federal Government policy changes have affected operators in this industry.

From July 2006, the Government rolled over most of the existing contracts with 103 already contracted providers, provided that they had met the required outcomes over the past period for another three years.

It also included rolling the Community Development and Employment Program (CDEP) into the Job Network scheme for placement of any new indigenous people who become part of this scheme for 12 months.

The use of preferred supplier contracts or agreements has increased, particularly between larger industry operators and many of their clients, and although this has some advantages, it may also lock firms into a long term, discounted fee-for-service payment system. These typically ranging from 12% to 66%, depending on the service.

In general, clients of this industry are now more prepared to make increasing use of temps to cope with peak demands, and to replace their own staff when they are on leave. In the past, many large companies had their own relieving staff, but now many use employment placement companies to fill temporary vacancies.

While these overall trends are continuing to occur and to increase demand for industry services, it is the overall trend in the demand for labour that drives revenue and profitability of this industry.

The industry may continue to benefit from the on-going training of staff by companies and the outsourcing of part or all of the human resources/management area by the private and public sector.

The industry is progressively moving towards having a few large companies with international links and many small operators. It is now critically dependent on government-funded jobs programs.

Job agencies will continue to benefit from reasonably strong economic growth and employment. Further industry consolidation, particularly of local firms by the major international players, is expected.