Market Talk: COVID Wanes but Supply Issues, war Loom Over Growth

BBJ: Can we say we are “post-pandemic?” Are companies recruiting again? Are people looking for work?

Sándor Baja: According to our Randstad HR Survey from February 2022, 30% of companies still have not fully recovered from the economic effects of the pandemic. The automotive industry was suffering a lot before COVID, and that is ongoing. Around 400 companies answered our survey: 89% plan to grow the number of employees. In other words, the effects of automation and digitalization cannot be seen this year in Hungary. People are on the move. The so-called “Great Resignation” has touched Hungary: 59% of companies expect the same this year.

Zsolt Beck: In 2021, we identified the first signs of a more significant predicament in changes affecting the economy. Pandemic stops created considerable levels of inflation, commodities became increasingly costly, and shortages began to manifest. Above all, wage demands started to rise. This had been noticeable in the IT market for years before the pandemic. However, higher wage demands have propagated throughout the labor market since the crisis. Increased earnings have a compensating effect on inflation, but labor shortages simultaneously emerged in several areas, caused by three trends: those who returned home from abroad due to the pandemic have since gone back and have taken more with them. Secondly, demographically, the ratio of people leaving the market is higher than those coming in. Thirdly, more women went, and are still on, maternity leave due to government incentives.

Tamás Fehér: Yes, absolutely. We measure the employment plans of companies every quarter, and the outlook showed a five-year high indicator, meaning that more workforce is needed than ever. Fortunately, people are more open to opportunities than during the pandemic; therefore, the labor market is very dynamic these days.

Tammy Nagy-Stellini: Companies are recruiting again, even more than pre-pandemic. In 2022, COVID is no longer a reason to slow down recruitment. According to our latest market survey, the Hays Salary Guide 2022, people are looking for attractive work, offering development opportunities, future prospects, and a higher salary. For the right opportunity, they will change jobs. However, we can see a trend that few active jobseekers are on the market. People are not in a hurry to apply for job advertisements. Today, there is more emphasis on engaging passive candidates and creating attractive employer brands.

Zsolt Beck

BBJ: What effect is the Ukraine crisis having on the recruitment market? Can refugees help with the labor shortages?

SB: Ukraine represents only a tiny percentage of Hungary’s foreign trade, but due to the complexity of supply chains, we are afraid it will have an effect in fields like the automotive and chemical industries. In Germany, we saw many layoffs at large auto manufacturers. In Hungary, employers prefer to keep their people to restart the business as quickly as possible. Most Ukrainian refugees are transiting Hungary; a lot are women with small kids, but, for sure, many thousands will remain for the time being in Hungary and will help to reduce the labor shortage.

ZsB: Most companies could cope with the pandemic crisis, however stressful it has been. Following this bizarre blend of the pandemic and a supply crisis, we have been hit by another negative factor in 2022 in the war in Ukraine. Alongside being a horrendous humanitarian tragedy, it has a massive impact on the shortages already present in the commodity market. While Ukrainian refugees were expected to appear on the Hungarian labor market, we are not detecting a surge in significant quantities yet.

TF: The Ukraine crisis has had many effects on the labor market. Men were leaving their jobs and joining the fight in their hometowns, while women with children were arriving in Hungary and looking for refuge. Many of them just pass through. I do not believe refugees are the key to solving labor shortages.

Tamás Fehér

BBJ: Putting black swan effects to one side, what are the most significant trends for recruitment?

SB: I would say there are four. Population: The demographic trend is clear: 40,000 more people retire than 18-year-olds enter the labor market (admittedly, a lot go to university) every year. We think that the rebound of the economy in the West is slower than in CEE; thus, the vacuum effect from the West is still low. Inflation: High inflation puts pressure on the value of salaries; companies who do not export (and thus do not have revenues in euros) will have difficulties matching wage demands. Flexibility: Globally, 26% of employees have more flexibility in their job after COVID than before; in Hungary, it is only 16%. Skills: 80% of employees feel they need to learn to keep their employability, but only 58% know what to study. The employer’s role is enormous here.

TF: There is serious wage inflation, which triggers people’s moves to other companies. It is quite common to receive 15-40% higher salaries in many job categories. I believe this effect will drive the market this year.

TN: Clients want to outsource their recruitment more. Companies are increasingly nearshoring positions to Eastern Europe, especially in technology and business services. With COVID restrictions lifted, hiring freezes have ended everywhere, and recruitment has accelerated at an extremely high pace. Companies’ recruitment teams are not prepared enough for such pressure and seek strategic partners that offer expertise and consulting.

Employer branding has gained much more significance. Companies need to differentiate themselves from the competition, as salaries cannot be raised infinitely. Employers need to attract to passive candidates and engage jobseekers in the countryside by offering flexible working solutions.

Contracting is gaining popularity every year. The flexibility it offers is appreciated both by clients and freelancers. Some clients, mainly in the technology area, already have a staff population of 70% employees vs. 30% contractors. And at the end of the project, it can be decided to extend, part ways, or employ the contractor permanently.

Tammy Nagy-Stellini

BBJ: What are your expectations for the market this year? Stagnation, growth or consolidation?

SB: This is very unpredictable; if the war could be stopped soon, we expect a growing economy and business. The first quarter was, by far, the best yet in the history of Randstad Hungary.

ZsB: 2022 should be a year of consolidation and economic incentives; otherwise, there will be difficult times ahead. We are still optimistic and hoping it will happen.

TF: I believe that the permanent recruitment market will grow further, while industrial temporary staffing needs are less predictable due to the Ukraine crisis and its effects on specific industries, like automotive. But as the need for more workforce is growing, it should be on a growth path soon enough.

TN: I see growth, and most areas look promising. Technology is definitely a growth trajectory, and this will continue this year as well. IT contracting shows a remarkable increase. Support functions like HR, marketing, sales, and finance are booming. Construction and property is a unique market in Europe as governmental measures keep the area growing. Engineering is the only sector where we might see some consolidation or stagnation over the year. The life sciences segment will develop further; health services are a growing market in Hungary. There’s a massive demand for qualified professionals in general; however, it’s matched with a considerable skills shortage in the labor market.

Our 2022 Recruitment Agency Market Talk Panel

• Sándor Baja, managing director for the Czech Republic, Hungary, and Romania, Randstad Hungary Kft.

• Zsolt Beck, founder and CEO, Beck and Partners

• Tamás Fehér, country managing director, ManpowerGroup

• Tammy Nagy-Stellini, managing director, Hays Hungary

This article was first published in the Budapest Business Journal print issue of April 22, 2022.