Inflation has reached its highest levels in decades. In March 2022, consumer prices logged an increase of 8.5% compared to the previous year — the highest pace since the early 1980s. Does your staffing firm have strategies in place to handle the impact inflation will have on the industry?
It’s a crucial question. Prices are rising at rates not seen since a time when Atari represented the cutting edge of gaming and Michael Jordan hadn’t yet become a professional basketball player. That’s to say, most people currently in the heart of their careers haven’t seen a situation like this one.
As such, it’s important to consider the economic environment carefully. To navigate the situation, you need to understand the impacts of inflation and the sometimes-subtle ways it can affect your staffing firm:
How Staffing Firms Can Best Navigate the Challenges of Inflation
Wages Are Going Up
Labor costs are among the drivers of the higher rates of inflation. The reopening of the economy following COVID led to a tight labor market. This, in turn, gave workers additional bargaining leverage, pushing up compensation costs.
What you can do: Work with your clients on the wage issue. You sit in the middle of a complex economic negotiation. A tight labor market gives additional leverage to job seekers, meaning the candidates you attract will want higher pay. However, you need to serve the needs of your clients as well, helping them achieve their goals without busting their budgets.
Your Clients Will Look to Cut Costs
With higher wages putting a pinch on budgets, your clients will look for ways to rein in expenses. This could include less hiring or even steps to cut back on their current staffing levels.
What you can do: Continue to show your value. Ideally, your clients will find a way to keep expenses under control while still maintaining their staffing plans — the part of their business that directly impacts you.
You make this more likely by becoming as close a partner as possible. Work with your clients to keep their staffing needs filled, without the costs becoming a burden.
The Economy Could Slow
Higher inflation cuts into consumer spending by making essentials more expensive and leaving less money available for other purchases. Meanwhile, central banks are raising interest rates to tamp down price increases, which will make it more expensive to borrow money.
As a result of these factors, the economy could cool dramatically. In a worst-case scenario, the situation could tip into a recession, dramatically impacting your clients and cutting their need for additional staff.
What you can do: Stay prepared. The economy has entered an uncertain period. Rising interest rates will likely slow growth and could spark a recession. Run contingency planning sessions and have emergency actions contemplated if you need to hunker down during a downturn.
You Might Need to Adjust Your Own Business
Inflation won’t just impact your clients. It will also have an impact on your bottom line as well. Given the economic conditions, the wages you pay your staff might rise faster than you expect. At the same time, you might face higher costs for essentials, like power.
What you can do: Don’t forget you’re running your own business. Just like your clients, you need to closely watch your cost structure. Look for ways to trim expenses, seek out productivity benefits and negotiate with vendors. Given the rise of remote work, you might even have the opportunity to downsize your office commitments.
It also helps to have options in a worst-case scenario. A flexible funding plan lets you react to market changes and stay on a healthy path, whatever happens. A partner like Frontline Funding will make sure you have the right financing options in place.
Is Your Staffing Firm Trying to Work Through Inflation?
Contact Frontline Funding today to learn how they can help in challenging economic times.