Uncertainty grips flex industry

The flex industry has been hit hard by the corona crisis, but can also recover quickly once the economy rebounds. In 2021, the sector is showing a strong recovery after the sharp decline in volume in 2020, with volume increasing by about 10% in 2021. Indeed, during previous crises, it has been found that many companies prefer to hire flexible staff first in the event of growth rather than hiring permanent staff immediately.

Strong contraction of temp hours in second quarter

The volume decline in the flex industry started at the end of 2019. Initially, the number of temp hours declined due to the tightness in the labor market, making it more difficult to find suitable staff. In the second quarter of 2020, compared with the same period a year earlier, the number of temp hours declined by 22% due to the lockdown introduced in March. In the third and fourth quarters of 2020, although the contraction is expected to be smaller, it is still substantial.

Number of flex workers drops by 200,000

The number of workers in flexible employment, including temporary and on-call workers, declined sharply in 2020. In the third quarter, there were 1.7 million employees with a flexible contract, 200,000 fewer compared to the end of 2019. Incidentally, the decline is not only due to the corona crisis, but also partly due to the tight labor market at the end of 2019, which resulted in more people getting permanent contracts.

Flex workers are the first to be laid off

As the corona crisis also shows, it is the flexible workforce in particular that in times of economic crisis first to take the hit. From earlier research already showed that temporary workers, alongside self-employed workers, are the main cushion for absorbing economic shocks. Moreover, relatively many temporary workers are employed in sectors that were hit hard by the corona crisis, such as hospitality, aviation and non-food retailing

Labor market less strained

While the industry was still struggling with a tight labor market in 2019 and early 2020, during 2020 the tension is due to the corona crisis in rapid pace decreased. For example, at 1.1 unemployed per open job, there were almost as many job openings as unemployed at the end of 2019. This made the difficult for staffing organizations to find enough suitable temporary workers to find. Meanwhile, the choice is considerably wider with nearly 2 unemployed people per open job opening in the third quarter. With unemployment on the rise, the tension in the labor market will continue to ease in 2021.

Lower revenue drop thanks to higher rates

Like volume, sales in the staffing industry in 2020, albeit less strongly. This is because higher rates were charged, due to Of the introduction of the Labor Market Act in Balance (WAB) effective Jan. 1, 2020. The law is designed to make a fixed contract less fixed and a flexible contract less flexible. The law made all flexible labor more expensive. For example, the cost increased for a temporary worker on average by 5%. Payrolling was also more expensive for companies and thus less attractive. Under the WAB, a payroller is entitled to the same terms and conditions of employment as a employee who is directly employed by the company. Several payroll companies have therefore switched to a temp model.

Flexibility has its price

The flexible shell of personnel is in corona time for many companies has been the salvation. The need for a flexible shell remains in the future as well, according to From the business survey of the CBS. One in seven companies say they want to build a more flexible workforce because of the corona crisis. This makes companies more agile by allowing them to scale up and down in personnel more quickly when needed, thereby increasing companies' chances of survival. The only question is whether, and to what extent, companies are willing to pay a higher price for more flexibility.

Dark clouds over the flex industry....

In addition to the corona crisis and the WAB the industry has its hands full with a number of other challenges. For example, the revenue model is under pressure from competition from self-employed workers and online platforms, there are abuses in the housing of migrant workers and excessive flexibility.

...but also certainly opportunities

On the other hand, there are also plenty of opportunities for the flex industry. As mentioned earlier, the need for a flexible shell will continue to exist in the future. Furthermore, the coronavirus is causing certain work to change or even disappear altogether, making retraining and job-to-job coaching for flex workers increasingly important for temporary employment agencies, for example.

New labor market regulations

There may be new, and more stringent, regulations during 2021 to better protect flex workers and create a more level playing field in the labor market. This is expected to be based in part on the recommendations made by the Borstlap committee in early 2020. The recommendations are not all equally positive for the flex industry. For example, it is proposed to capping the agency clause at 26 weeks instead of the current 78 weeks. This is to use temporary work only for sick & peak and no longer for work on a structural basis. 

Uncertainty grips industry

In short, the flex industry is entering an uncertain time. Although the industry is expected to show a strong recovery in 2021, because of all the developments and associated uncertainties, by the end of 2021 the flex industry will not yet be back to the pre-corona level of the end of 2019.

This article was published on ing.co.uk