While temporary staffing agencies remain popular, their work is becoming harder.
The labor shortage has become so widespread across the entire Hungarian economy that we cannot speak about most-infected sectors anymore. “Whether it is a family-run ice cream parlor or a flower shop, from corner shops to big multinational companies, everyone needs manpower,” Gábor Gosleth, sales director at Adecco tells the Budapest Business Journal.
Fulfilling labor needs is a growing challenge and, given that Hungarian society is aging, it is not expected to be solved by nature. On top of that, the actual picture might be even bleaker than it appears at first sight as, according to Csongor Juhász, CEO of Prohuman, statistics still showing the percentages of available workforce in given areas include basically unavailable people too: mothers staying home with their children as well as those who do not live at what was their home address anymore as they have found work abroad.
As such, while temporary staffing continues to be a service in demand, if they find good quality workers and have the positions, companies are quick to employ people fulltime instead of using them as temps. According to Róbert Csákvári, CEO of Work Force, a new trend is that even laborers and unskilled workers can find permanent employment more easily. “There is an everyday frustration,” he says referring to the threat of fluctuation, which is higher among temporary staff than permanent workforce.
Even wage increases do not seem to stop this trend. “Some companies raise salaries two or three times a year, especially for physical workers,” Gosleth notes.
In such circumstances, an expanded scope of solutions is needed. Agencies recruit from a bigger geographical territory, mostly looking to attract people from the eastern part of the country to the western. Workforce mobility is an option, nonetheless it needs travel and/or accommodation to be taken care of by HR companies or their sub-contractors.
However, as the eastern counties are also seeing an increasing number of developments absorbing workforce, available workers can often be found only beyond country borders. Most come from Ukraine, although the quality of the workforce there is far from ideal due to lack of language skills. Hungarian-speaking Ukrainians, once they decide to leave home, often opt to go a few hundreds of kilometers beyond Hungary and find an even better paying job farther west.
Also, Hungary is still more on the negative side of workforce immigration, with more candidates leaving than coming back, though the situation is not yet as bad as it is in Croatia, where 10% of the active population is reported to have left the country. “Workforce immigration is still ongoing, which is natural. The question is if we have enough well-paying jobs to attract those people back home,” Sándor Baja, CEO of Randstad says. “We haven’t experienced it yet in volumes, but if the wages keep rising, that trend might change.”
People tend to return home only if they see secure career opportunities and wages that are more or less internationally competitive. In the recent past there have been some cases of successful recruitment among Hungarians living abroad, such as the meat company Bonafarm, which managed to bring home a huge number of butchers with the help of events organized across the Hungarian diaspora in Western Europe.
Prohuman’s Juhász says immigration from Hungary is slowing down due to the wage spiral here. He also points out that many Hungarians go abroad chasing the big money but forget that most of that nice salary will go to cover accommodation and other basic needs. “If they understand that the not even necessarily higher living standards come at a higher price, and that they might return home after five years of hard work without any savings, they would rather stay at home,” he says.
However, a survey about salaries and market trends recently conducted by Hays seems to somewhat contradict this. It showed that 60% of candidates were planning to go abroad for better career opportunities.
HR experts agree that a good salary in itself is not enough to retain or even to attract workforce: among other aspects, the speed of the decision-making process is also crucial, Csákvári notes. “If there is a candidate, we have to get them in two days, otherwise someone else takes them.”
Also, companies tend to make compromises regarding the technical skills of their new workforce just to make it sure they are the first to engage them. “Requirements of having high-school graduation or two-to-three years of work experience have had to be dropped many times,” Prohuman’s Csongor says, adding that companies would rather spend time and money on training people, even if they run the risk of educating them for a competitor as “those workers with a reference are already in the crosshairs”. Csákvári agrees: “Employers have to be flexible. otherwise they lose competitiveness.”
Substituting human workforce with robots could somewhat ease the effects of the labor shortage; however, this type of technology is unanimously reported to be only in its infancy in Hungary. Still, “most manufacturing companies certainly have to spend a major part of their profits on technological developments if they want to solve their labor issues and survive in the medium- and long-term,” Gosleth suggests.
“Robots can do a lot of things but they do not think,” Csákvári says, pointing out that machines will never fully substitute humans anyway. A car can be put together by a robot but both the car and the robot have to be designed and maintained, which takes an engineer. “Several statistics show how many workplaces will cease but at the same time new ones will be created,” he concludes.
Robots will first and most quickly spread in production and agriculture, where the workforce they replace will move to sectors like services and tourism, Randstad’s Baja predicts. As companies have created a lot of semi-skilled workplaces in the past 20 years, digitalization will definitely make a big difference one day, but not in the near future, he says.
In the meantime, human resources have to be found in order to avoid the cancellation of investments and risk an economic slowdown. Hungary’s employment rate being at around only 68-69% might, at first look, serve as a base for optimism. First and foremost, the hundreds of thousands of people in the grey economy could ease the labor tension; however, the young just coming out of school and people above 50 would also come in handy. Most temporary staffing agencies have now created pensioner departments. This trend is far too new to offer any firm conclusions, yet what is certain is that elderly people can work only in a relatively small scope of jobs, mostly at offices or in the commercial sector, meaning that they will definitely not solve the country’s manpower demand in general.
To try and quickly drive younger workers to the corporate sector, the government initiated the dual education system at the beginning of the decade, closely involving companies in the training process to provide hands-on experience for students while also sharing some of the costs of their education. “I am optimistic,” says Gosleth about the scheme which he considers a good and useful initiative that is also welcomed by many companies.
Gergely Hacsi, permanent placement branch manager at Trenkwalder does not share Gosleth’s hopes, however. “The demand is far bigger than what dual education could ease,” he says.
About other resources of the Hungarian workforce, there seems to be a consensus that integration and/or the creation of a useable workforce takes time. “All statistics about the labor resources show that the problem is not with the quantity but with the quality. I think the same about the public work scheme,” Gosleth says, adding that those public workers who could be properly trained and used have already been picked up by the corporate sector.
Hacsi goes even further, saying that sections of the missing blue-collar workforce could only be supplied by public workers if the scheme would really support the employment of those taking part in it and would use them in real jobs.
Csákvári estimates that only about one fifth of the public workers are really available for companies, but even those people have to be educated in the very basics like the concept of working hours. “Strong intentions and good strategies are needed to integrate them,” he says, adding that even though the government’s plan is to end the public work scheme by 2020 and it has already created a financial incentive system to get public workers employed, it is not yet clear how those people could help the labor market in large numbers.
In the acute competition for workforce, HR agencies also have to provide more than ever, which, topped with the general economic trends and some changes from the legislative side, has somewhat cleared the market. The deposit temporary staffing agencies have to pay has been increased to HUF 10 million from HUF 3 mln, an amount that a lot of smaller companies failed to pay. While growing wages keep tightening agencies’ profit margin, that also puts the smaller operations at a temporary, yet often fatal disadvantage.
According to Randstad CEO Baja, whether an agency is small or big, only those who have the highest professional knowledge and latest digital tools can survive, since companies nowadays not only demand good quality candidates, but also need strategic advice for a range of issues from employer branding to wages.
Digitalizing HR processes is also becoming increasingly crucial in order to maximize efficiency, but good data-mining software to ease sourcing processes often costs HUF 20 mln-100 mln. As usually it is only the larger companies that can afford this, the market is predicted to see further consolidation.