Hiring Still Down, but Contract Staffing Picking Up!

“Weak Outlook for New Hiring” doesn't sound like much of a pep talk. But when The Wall Street Journal ran a story under that headline in early 2010, it carried a glimmer of hope for recruiters who were paying attention. Many large employers were still reporting low staffing levels, mostly because consumer spending was weak, yet temporary and contract staffing firms were starting to see growth again.

What We Saw in March 2010

We called it a very good sign at the time, because temporary staffing usually picks up before permanent hiring resumes. It also meant the spring of 2010 was the perfect time for recruiters to mine some contract placements. Companies wanted to hire, but they were nervous because nobody knew what the economy would do next. Recruiters who suggested contracting gave those clients a way to bolster their staffs without making the direct-hire commitment, and we hoped the surge in contract work would be a harbinger for the return of perm hiring.

Why Temp and Contract Hiring Tends to Turn First

The hunch we had in 2010 holds up well against the data. A 2021 Monthly Labor Review article from the Bureau of Labor Statistics found that declines in temporary help services employment came 6 to 12 months before declines in the overall labor market in the 1990-91, 2001, and 2007-09 recessions. Temp services also added jobs several months before the overall labor market began to recover from each of those downturns.

The same article shows how big the swings can get. During the Great Recession, temp employment fell 34 percent while all private employment fell 8 percent. In the recovery that followed, temp jobs grew 75 percent compared with 19 percent for all private jobs.

If you've ever sat across from a nervous hiring manager, the pattern makes sense. Contract workers are the easiest headcount to cut when orders slow down, so they go first. And when work starts coming back before anyone trusts the recovery, a contractor lets the manager cover the extra load without betting a permanent salary on it. Permanent hiring usually waits until the business is confident the demand will stick around.

How to Pitch Contract to a Client Who Won't Commit

A client who says “we're swamped, but we can't add headcount right now” is handing you a contract job order. Here's how recruiters tend to turn that conversation into a placement:

• Ask about the work before the headcount. Find out what's piling up and who's covering it today. Overtime, burned-out staff, and missed deadlines all point to contract demand.
• Frame contract as a lower-risk start. A defined assignment lets your client add help now and decide on a permanent hire later, once they've seen the person do the job.
• Mention the budget angle. Contractors are often paid out of a different budget line than direct hires, which can matter a lot during a hiring freeze.
• Put conversion on the table. Contract-to-hire gives your client a trial period and, depending on your agreement, gives you a path to a conversion fee if they keep the worker.

For more timing cues, see our list of the best times to suggest contract staffing to clients.

Before the Next Slow Quarter

Recoveries don't all look like 2010, and temp employment won't call every turn perfectly. Still, when your direct-hire clients start saying “not yet,” contract demand is often just starting to build. So ask yourself: could you say yes to a contract job order tomorrow? If not, decide now who will be the employer of record for your contract placements, because sorting out payroll, taxes, and workers' comp after the client says yes will slow you down. A few months after this post, the numbers backed us up, and we covered them in Statistics Confirm Contract Staffing on the Rise.