North America – a Niche Recruitment Growth Opportunity
As the domestic recruitment market becomes challenging for many UK businesses and our relationship with mainland Europe remains uncertain, we’ve seen more recruitment companies looking to expand internationally.
Asia and the Gulf States have become popular markets to explore, with Dubai a common first step for many in the Energy, Finance, Aviation, Aerospace and Technology sectors. Increasingly though, UK recruitment businesses are looking westwards towards North America.
North American Economy
The US economy has typically had annualised growth rates of 3.2% over the past 40 years and suffered from critical skill shortages for some time. Despite the recent upheavals on Wall Street, the U.S. economy is predicted to grow in 2019 at 3.7% according to the IMF. The UK niche recruiter models are ideally set up to exploit these opportunities, so why has there been reluctance?
Traditionally, this has been a tough market to crack for UK Recruiters due to expensive start up costs to establish U.S. operations and the complex legal and compliance systems. Unlike the UK, in the U.S. there is a three-tiered legal structure of Federal, State and Municipal Laws. The risk associated with this can be difficult to navigate, and many a UK recruiter has fallen foul of this intricate maelstrom of legislation.
Companies who successfully overcome these challenges and have plunged straight in and opened a U.S. office have had mixed fortunes. Several have experienced the combination of high operating costs and slow market penetration becoming too much of a burden on their UK business and have been forced to withdraw.
The costs of getting it wrong have been huge for some businesses. In addition to the federal, state and municipal tax challenges, there are also repercussions should you “misclassify” your workers as happened with FedEx in 2016 costing them $240m in 20 states.
How can you make it work?
In 1989, I was charged with opening a North of England office from an attic office in Bristol. Economically, the UK was diving into a recession. Working with a team of two recruiters we were successful in securing 50+ technology contractors from our southern base and on 28th January 1992 we opened our office in Knutsford, Cheshire. We were profitable from day one and expanded to bigger and greater things. Both of my start-up recruiters went on to become industry top billers and COOs.
Today the same model is being employed by several of our UK recruiter clients by establishing a North American team that targets the US & Canadian market from a UK base. Most operate U.S. Eastern Time hours from their UK offices starting work at 12-noon (GMT) and finishing around 8pm (GMT).
Those that do succeed all tend to make the expansion on the back of established relationships, which they have serviced, initially from the UK, before crossing the Atlantic. This is the path I exploited in the early noughties when I successfully led Hays IT’s expansion into mainland Europe, working with clients such as EDS, Hewlett Packard, Lloyds Banking Group, BT, Compaq, BAE Systems and many more.
Precision Global Consulting
One thing several of our successful clients all have in common is they use the services of Precision Global Consulting. (PGC).
PGC is a workforce management platform. They employ a workforce on their client’s behalf and take on the legal responsibility for those workers and making sure back office processes run like clockwork by offer a number of expert solutions;
- Payroll and Tax Management (Federal, State & municipal, Overtime payments)
- Contractor/Worker On-boarding in all 50 US states
- Workplace Insurance
- Healthcare Plan (ObamaCare Compliant, Paid Sick Leave)
- Termination Management (all compensation and unemployment claims)
- Compliance Management (Visas, I-9s, Business Insurances)
All of which allows your typical UK recruiter to focus on finding the contractor and totally servicing their clients talent needs.
The availability of ‘WeWork’ style co-working offices both stateside and globally has seen the cost of the traditional office set-up also reduce. Often, many of the start-up tenants become clients as well.
The U.S. economy is expanding and is struggling to find the skills it needs to grow. The Bureau of Labor Statistics estimates the U.S. economy will need 100,000 new IT workers a year over the next decade and currently only 60,000 are entering the workforce each year.
In addition “boomers” leaving the workforce each day mean there are 3.5m new manufacturing jobs to be filled by 2025 and currently there is likely to be a 2m shortfall of jobs filled.
At present Pfizer, Boeing and Amazon are all struggling to find qualified workers and experts say they will increasingly be forced to look overseas for high-skilled workers.
In Canada the situation is no different. The Association of College Communities of Canada (ACCC) reports that Canada requires 260,000 construction workers over the next eight years and the Canadian Federation of Independent businesses report that there are over 300,000 job vacancies that have been vacant for four months or more. The list of high demand jobs in Canada includes all of those in the US but also Registered Nurses, Truck Drivers, Welders, Aerospace engineers, Software and Design Engineers, Pilots and Pharmacists to name just a few.
For most UK Recruiters, global expansion is now more than a dream, it is a real opportunity that might be worth considering, especially given the challenges Brexit may bring.
To find out more call either ourselves on (0370) 8790 105 or PGC if you’d like to find out more about managing workers across the U.S. and Canada at [email protected].