The global staffing services market is believed to have crossed the $500-billion mark in 2022 after staying put at around $490 billion for three straight years, barring the first year under the pandemic when it had shrunk by a tenth. Still, it remains a highly fragmented market.
There are around 162,000 companies operating across 41 countries, as per the World Employment Confederation Report 2021, and the top three companies accounted for only 14.3% of the total market. This highlights the fragmented nature of the competitive landscape.
And India is no different.
- The global staffing services market is believed to have crossed the $500-billion mark in 2022 after staying put around $490 billion for three straight years
- India accounted for 4.3% of the global staffing services market in 2020 in revenue terms.
- In terms of volumes Indian market is the sixth largest in the world and accounts for 5.8% of the total global market and has the potential to grow exponentially in the long term.
- In terms of revenue, temporary staffing accounted for over four-fifth of the total.
- As per the Indian Staffing Federation, the total number of temporary workers in India reached 3.3 million in 2018 from 2.1 million in 2014, recording a CAGR of 16.1%.
- The General Staffing segment is forecast to more than double to almost Rs 2 trillion by the year ending March 2026, as per Frost & Sullivan
India staffing market dynamics
The size of the HR services market in FY2021 was estimated at Rs 1.45 trillion. The market recorded strong growth in the past five years, expanding at a CAGR of 13.1% between FY2016 and FY2020, though this was punctuated by a marginal 4% growth in FY2021, according to Frost & Sullivan.
India accounted for 4.3% of the global staffing services market in 2020 in revenue terms. Although this value seems insignificant, in terms of volumes Indian market is the sixth largest in the world and accounts for 5.8% of the total global market and has the potential to grow exponentially in the long term.
If we look at the structure of the market, it is segmented into temporary staffing, permanent staffing and other HR services such as payroll, time and attendance and recruitment process outsourcing. Temporary staffing is by far the largest segment and is further divided into general staffing, IT staffing and professional staffing.
In terms of revenue, temporary staffing accounted for over four-fifth of the total.
As per the Indian Staffing Federation, the total number of temporary workers in India reached 3.3 million in 2018 from 2.1 million in 2014, recording a CAGR of 16.1%.
General staffing was the largest segment (in volume terms), accounting for around half of the total, followed by IT staffing at 25% of the market in FY2021. In terms of revenue, general staffing dominates even more, accounting for around three-fourths of the total Rs 1.18 trillion in FY21, according to Frost & Sullivan.
Temporary general staffing in India is a fairly nascent industry when compared to developed markets like the United States, Japan, France and Germany. However, in the last five years, this segment has evolved into a strong contributor to the country’s economy.
The general staffing services segment includes temporary staff placed in sectors like e-commerce, retail, telecom, financial services, healthcare, hospitality and manufacturing segments. This includes both blue- and grey-collar workers. The segment is forecast to more than double to almost Rs 2 trillion by the year ending March 2026, as per Frost & Sullivan.
IT staffing involves providing skilled IT professionals, on contract, by staffing companies to end-user companies for a defined duration. Based on a contractual agreement, staffing agencies screen, hire and deploy IT professionals to the customer’s site. The contracts are either time-based or project-based where the salaries and other benefits of professional flexi-staff are met by the staffing company.
This was estimated to be Rs 21,750 crore business in FY21, having grown at a CAGR of 17.8% from FY2016 – FY 2020, which dipped to 5.4% during the first year under the pandemic. This is expected to grow at a CAGR of 20.2% to reach Rs 54,600 crore by FY26.
The third pillar of the temporary staffing business is professional staffing services, which was worth Rs 5,800 crore in FY21. It is projected to grow at CAGR of 12.6% to almost double by FY26.
Top Staffing Firms
Quess Corp, Teamlease and First Meridian are the top three companies in the general staffing services segment. While Quess and Teamlease are long-time incumbents, First Meridian entered the market in 2018 and has grown significantly through acquisitions as well as organic growth and captured a strong market presence in a short span of time.
Attrition rates are very high in this segment and hence developing a strong recruitment team is crucial for staffing companies. Technology adoption for the recruitment process is seen as a key competitive factor among major companies to stay ahead of the competition. This segment is driven by economies of scale and this is seen as a factor that drives market consolidation; the top three companies in this segment have a combined market share of 11.7% of the total segment market.
Multinational companies Adecco, Manpower and Randstad are the other three key players in the general staffing segment in India.
In the IT staffing business, Quess Corp, Teamlease, Collabera, Allegis, Adecco, Randstad, Kelly Services, Manpower and First Meridian are the main players. This segment is even more fragmented than general staffing.
In the professional staffing segment, which is the least fragmented, Quess Corp followed by Teamlease, Randstad, Adecco and Allegis dominate the market.
If we focus on the top three local players in the temporary staffing business, we find that Quess Corp, Teamlease and First Meridian have added over 2 lakh associates over the last three years.
Quess Corp, the market leader, added around half of this number. This does not include Quess Corp’s other business units where it provides facility management and technology services.
Indeed, if we stick to the top three players, Quess Corp has gained market share while the other two have seen their share shrink.
In fact, Quess Corp had overtaken Teamlease with a sharp jump in associates in FY20, right ahead of the pandemic. In that year, Teamlease as well as First Meridian’s headcount was almost flat.
This turned the following year with a decline in the number of associates in FY21 while both the other two gained. Teamlease also got more aggressive, adding the most number of associates among its peers for the year ended March 2022. It has gained some of the lost market share though it still has some distance to reclaim the crown.
With the economy expected to rev up again soon enough, demand for the workforce is only going to increase in the world’s fastest-growing market. The large homegrown firms have been holding on to their market presence in the country even as multinationals are close on their heels.
Quess Corp overtook Teamlease in terms of the number of associates right ahead of the pandemic and has seen its total headcount from the workforce services business vertical rise over 50% over the last three years. Teamlease seems to be getting back on track. With the overall market poised for a double-digit growth there is going to be enough pie for everyone but it would be interesting to see if the pecking order changes again in the near term.