The US labor market is as candidate-driven as it has ever been. According to the US Bureau of Labor Statistics, job openings are largely outnumbering the number of candidates, and this is happening in a context where unemployment is close to an all-time low. You may wonder how this situation could actually benefit enterprising staffing companies.

The twist is, the added value for your customers lies in finding the candidates who will stick — which is precisely why direct hire is one of the fastest-growing segments in the US staffing market.

While direct hire is traditionally more professional staffing-oriented than temporary staffing is, it is also undergoing a shift in nature. Candidate scarcity and skill shortages are pushing employers to convert temporary workers into full-time positions and attract talent with the promises of full-time jobs for roles that would typically have been contingent less than a decade ago.

Diversifying into the direct hire business can also be a win for staffing companies, as strong recruitment fee growth often saves margins from the impact of a slowing temporary staffing market. On the other hand, the direct hire market is even more cyclical than temporary staffing.

Staffing Industry Analysts’ “Global Direct Hire Market” report provides the lowdown on this thriving segment of the global staffing market. According to SIA calculations, the global direct hire market was worth $28.1 billion in 2018, representing 6.3% of the global staffing market.

Regional breakdown. The single largest region in terms of sales in the direct hire space was the Americas, accounting for 44% of the global market. The United States alone represented 42% of global direct hire sales in 2018. The Asia Pacific and EMEA regions accounted for 30% and 25% of global sales in direct hire, respectively, while the Middle East & Africa represented just 2.3% of the global market.

Ten countries were responsible for 84% of direct hire revenue globally in 2018. While the US stands out as the world’s largest direct hire market, as mentioned above, we believe China is the second-largest national market, representing 16% of the global market. China also happens to be the largest Asian market for direct hire, followed by Australia, Japan and India. Despite being the second-largest staffing market in the world, Japan’s direct hire market only places sixth globally.

The UK is the third-largest direct hire market globally: 8% of global sales, and the largest European market (35% of sales in Europe). This is also the largest and most mature staffing market in Europe. The proportion of direct hire sales as a percentage of the total UK staffing market was 5.6% in 2018, higher than the European average but still below the same ratio in the United States (8.4%).

The next European countries by direct hire sales in 2018 are Germany (4.6% of the global direct hire market), Switzerland (1.2%) and France (0.9%). Germany alone represents 20% of the European direct hire market. The German staffing market slowed down in 2018 due to a combination of increasingly challenging economic conditions and new regulations affecting temporary staffing. However, in this challenging context a number of companies operating in Germany reported that the underlying strength of the local direct hire market helped balance the losses in temporary staffing. Some clients took to converting temporary workers to permanent hires to retain the best candidates. Randstad is one example of companies that benefited from this momentum: The local business reported 8% growth in permanent placements in 2018, and a staggering 24% increase in the number of permanent placements when compared to 2017.

Switzerland, France and Italy come next, according to our estimates. These are well-established staffing markets where demand for professional staffing services and direct hire services is high.

The provider picture. Those looking to understand the competitive landscape in the global direct hire market will also find in this report a ranking of the 20 largest providers of direct hire services globally, based on revenue generated in 2018.

While half of the 20 largest direct hire services providers globally are based in the US, as many as seven companies in this ranking are based in the UK. Rounding this top 20 are global suppliers based in the Netherlands (Randstad) and Switzerland (The Adecco Group), and Germany’s Amadeus FiRe, for which finance and accounting comprises the largest share of its direct hire business.

The top 20 direct hire markets were responsible for 17% of the global market in 2018. The combined revenue of the 20 largest providers of direct hire services globally amounted to $5.2 billion.

The global direct hire market is highly fragmented, with the top five firms generating 10% of revenue in 2018. The largest share of the market is held by small, local recruiting businesses, for which direct hire is a significant source of income.

The largest global provider was PageGroup, followed by the Adecco Group and Hays. Direct hire’s share of revenue differed widely across these three companies, illustrating the diversity of business models in staffing. Permanent placements represented 76% of Page Group’s gross profit in 2018, compared to 12% for The Adecco Group and 42% for Hays.

Page Group’s gross profit share of permanent placement is well-documented in the company’s annual reports: In 2018, the highest share of revenue from permanent placements was found in the Americas (90%), followed by Asia Pacific (88%); this compared to 70% in EMEA (excluding the UK) and 69% in the UK.

The Adecco Group placed second based on direct hire sales in 2018. The group’s direct hire business continued to grow strongly in 2018 across most geographies. However, the Japanese market stands out for Adecco, with a 26% revenue growth in 2018, following 27% in 2017.

Hays’ direct hire gross profit increased by 15% in 2018 when expressed in GBP (19% in USD terms) and accounted for 42% of the group’s net fees. Net fee growth was the strongest in Germany and Australasia.