We often speak of South African businesses as highly resilient. Our operating conditions are tough and yet many leadership teams have become adept at navigating complex socio-economic challenges.
However, despite this resilience – or perhaps because of it – many traditional operating models are changing in the wake of the Covid-19 pandemic, particularly in the workforce market.
Long-term workforce challenges come to the fore
Covid-19 has been devastating to South Africa’s economy, but it’s important to recognise that pre-pandemic, our industries were already under strain. Escalating unemployment and business uncertainty were exacerbating challenging trading conditions.
In fact, South Africa’s Q4 2019 unemployment rate was at the highest it had been since Stats SA’s Quarterly Labour Force Survey was launched in 2008. Our unemployment rate has been above 20% for at least two decades, mainly due to insufficient economic growth. And then the pandemic hit.
While unemployment rates are alarming and an indicator that our economy is not growing in the way we need it to be, what can we infer about the state of industry when unemployment levels continue to rise?
Do we assume businesses do not have a need for workforces or that they are cautious to overcapitalise? Depending on the industry, workforce costs can be anywhere from 30% to 50% of a company’s input costs.
This generally means that if a business needs to trim back its costs or decrease its production, one of the first places it looks at is its workforce. The challenge is managing this dynamic in an uncertain demand cycle.
Workforce models of the future
For decades, this is the space where contingent staffing solutions have added the most value. Working with a contingent staff provider allows businesses to deal with changing demand as required, particularly in industries that are cyclical in their nature. However, in South Africa in the recent past, there have been arguments against contingent staffing models. These however have been solved through legislative regulations protecting contingent workforces from abusive practices.
The realities of the pandemic – and an even greater sense of economic uncertainty – have shifted the employment landscape in South Africa even further and it is here that more traditional business models can benefit from workforce models of the future and those that provide variable cost opportunities.
Covid-19, unemployment rates and economic uncertainties are taking their toll, as evidenced by a report from National Economic Development and Labour Council (NEDLAC) that reveals that while total formal employment increased by around 61 000 between Q2 2020 and Q2 2021, it declined in a number of sectors, including all of the secondary sectors transport, storage and communication, finance, insurance, real estate and business services.
In fact, according to the Quarterly Labour Force Survey (QLFS), South Africa’s unemployed labour hit a new record high of 34.4% in Q2 2021.
The numbers speak for themselves. As a consequence of Covid-19, many companies have been forced to reduce their headcounts. However, what began as pure survivalist mode has now started shifting into mitigating and managing the risks of an uncertain future.
Many of the businesses that survived the extended lockdowns and subsequent restrictions did so because they either offered an essential service or they had strong cash reserves. Looking forward, leadership teams are focusing on the best ways to maintain their working capital and cash flow, and are pragmatic around re-engaging fixed costs, including those of inflexible workforce models.
Absenteeism, poor productivity and churn
The cost of permanent workforces during uncertain economic times is not the only challenge that businesses are facing. The demands of living under pandemic conditions for almost two years has taken its toll.
Absenteeism is skyrocketing and many companies do not have the expertise to understand why, nor the IR resources to investigate and discipline unlawful absenteeism. The result is that it is going unaddressed and adding significant costs to already high workforce bills. There is additionally the untold expense of deteriorating employee wellbeing.
Poor productivity, churn and the inability to attract and retain talent are also challenges that have always been present but are now gaining greater prominence.
Absenteeism will off course impact productivity, but so will mental exhaustion and anxiety. The industrial relations skills and expertise required to help employees navigate the pandemic on a personal level simply don’t exist within many organisations, nor have they needed to before now.
Attrition is also a common response to uncertainty, but the costs of recruiting, hiring, onboarding and training new employees can be high, which is why many businesses are choosing to wait before replacing permanent staff members – which in turn has a knock-on effect on productivity again.
Even if replacing employees is part of the HR strategy, many companies still do not understand the reasons why they are facing high attrition rates and they do not have the capabilities to cover the churn or demand volatility under such short notice, particularly if specialised technical skills are required.
Flexible solutions to meet flexible demands
Production demands are starting to increase which is a welcome sign. Similarly, there is an uptick in IT implementations, digitization, financial services and other professional services. And yet, many businesses are still reticent to add permanent overheads to their costs. How much can we manage with our current workforce and skills, leadership teams are asking? From entry level to highly skilled roles, positions are being left unfilled.
Around the world we have seen industries across the spectrum moving towards atypical employment models. Temporary workers, contractors, gig workers and outsourced services all fall into this model and the objective is the same for businesses, whether it’s a manufacturing plant with a large, once off order or an enterprise that requires specialised IT skills for an automation project: a variable cost workforce model. Workforces that can be scaled up or down based on a company’s specific requirements.
Procuring workforces based on production demands, flexibility and the ability to optimise expertise and efficiencies can give businesses a significant tactical and strategic advantage while protecting working capital and cash flow.
As a workforce solutions company that specialises in these various forms of flexible workforce solutions across different sectors and industries, Adcorp and its constituent brands have fine-tuned the best ways to support employees and contractors while giving clients everything they need from an optimised workforce solution model: From the recruiting of top talent and specialists per job role to conducting training, onboarding, site inductions, payroll, IR, HR management and off boarding services. Additionally total output solutions across a myriad of sectors complete a workforce lifecycle.
Most significantly in a post-pandemic world is the responsibility that we take for the overall health and wellness of our workforces. Engaged employees who feel supported deliver productivity. Our teams are HR and IR experts, so our clients do not need to be, particularly when they are focusing on their core businesses.
From a short-term contract perspective, there is often a high element of speed to deliver quickly. I mentioned the time and costs associated with hiring, training and onboarding new staff. A flexi solution draws on the relevant skills within a structured talent pool and deploys immediately. As a result of the above, performance and attendance is dealt with and staff who exit the business are immediately replaced with skilled talent, thus improving attendance, performance and productivity simultaneously.
Economic conditions, post-pandemic way of work changes, technological advances and social dynamics are contributing to how an organisation needs to consider its workforce modelling. All factors point to reducing fixed cost component percentages to outcomes that are specific and variable in their cost. Opportunities exist to reconsider total workforce environments and to build significant partnerships with organisations that can provide end-to-end workforce life-cycle assistance to secure an effective and efficient workforce model.