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Perm hire freeze over coronavirus and economy fears: Why companies are looking to contingent roles

Published 26th February 2020
Businesses around the world are feeling the financial impact of the recent coronavirus outbreak.

Qantas is among the first to announce a freeze on recruiting new employees amid the global coronavirus pandemic as a result of its financial impact on the company.

Qantas, which predicts annual profits will be A$150m (£77m) lower, plans to reduce flights to Asia by 15% until at least the end of May. While its planes remain grounded, Australia’s flagship carrier will put employees on leave and freeze recruitment.

Alan Joyce, the Chief Executive Officer of Qantas, said there was a similar drop in demand for flights during the Sars outbreak in 2003, which affected the airline for six to eight months. Qantas believes it can manage for at least six months without cutting jobs. 

Singapore Airlines froze hiring last week and Virgin has also grounded planes and is likely to hold off on hiring new permanent staff in the immediate future. While official travel bans have impacted the numbers, the growing concern among Australians has also meant fewer flights have been booked.

The impact on local industry and the Australian Stock Exchange

Australia Treasurer Josh Frydenberg says “here in Australia, the economic impacts have been significant to not just the tourism and education sectors, which together contribute around $16 billion to the Australian economy, but also agriculture, and the destruction to end-to-end supply chains.”
The Canberra Times reported a number of Australian publicly listed companies have issued warnings the coronavirus will hurt their earnings in the short term. Travel and tourism companies, education businesses, food stocks and oil and gas producers are among those whose revenue will be affected in the next few months.
On a global scale, the ASX continued to lose $50 billion in what investors are calling a “bloodbath”. The outcome of the fall in our global economy is likely to see companies tighten spending and one of the first areas to be hit is employment.

What this means for the employment landscape

Given the current economic environment, it is predicted that permanent hiring will continue to slow down across the board. The trend towards a contingent workforce model will increase as businesses still require specialist skills but will prefer to hire on a short term basis or on contract.

This is a trend that is already occurring.

The latest Sunsuper Australia Job Index released last week revealed that across 2019, contingent job vacancies (temporary, contract and casual work) experienced successive quarterly growth, while traditional permanent employment struggled.

By comparison, across the same period, traditional permanent employment reduced in the first half of the year but went on to manage a minimal recovery in the third and fourth quarters of 2019. The report showed that while permanent job opportunities still account for the majority (69.8%) of advertised jobs, that percentage has declined from 72.8% a year ago.

Multiple factors forcing the rise of contingent work

The Sunsuper job index shows a long-term move towards contingent and away from permanent hiring.

Sunsuper’s Chief Economist, Brian Parker, said that there are two possible reasons behind the rise of contingent work.
“The first is that employers are responding prudently to tighter business conditions by hiring temporary and contract staff in case conditions deteriorate further.
“Secondly, there has been a more general longer-term trend both locally and internationally for employers to shift their balance towards contingent staffing solutions, in search of greater workforce flexibility,” said Mr Parker.

Companies are continually undertaking more project-based work to keep up with a myriad of technology upgrades, and digital transformations, where the reliance on contingent workers is steadily growing. Given the freeze on permanent hire in some industries following the coronavirus outbreak, as well as the Australian bushfires, the need for contract workers will continue to rise.