Online platforms to hire workers — from fully online independent contractors to on-site W-2 employees — have been proliferating and advancing in recent years. At the same time, the platform landscape has become confusing with all the changes.
A report published last week, “Understanding the New Platform Environment,” aims to put that into perspective for contingent workforce managers.
“This market evolution means that contingent workforce program managers need to consider platform models as a useful source within a ‘complete’ supply chain,” according to the report.
Platforms can provide access to skilled candidates who may not be available elsewhere, and judicious use of platforms can help solve local skills shortages as well as lower labor costs.
There are two main types of platforms: “staffing platforms” and “talent acquisition technology platforms.”
- Staffing platforms, often developed by staffing firms, that provide temporary staffing or direct hire (or both) as part of a more automated, low-touch solution, and
- Talent acquisition technology platforms providing freelance workers including Talent Platforms (such as Upwork) and Work Services Platforms (such as Uber). Sub-categories of Talent Platforms include Crowdsourcing Platforms and a recently new variant, Talent Platform Aggregators.
Definitions are also available in SIA’s online Lexicon.
The talent platform category alone posted $10.7 billion in spend in 2020, up 25% from the previous year. In a market with very positive growth characteristics, LinkedIn launched its own talent platform, Service Marketplace, in October 2021.
Talent platform adoption by enterprise firms has also ratcheted up. Enterprise adoption had grown in the low single-digits up until 2015, then it grew in the mid-teen digits from 2015 to 2020. It was in 2021, with increasing acceptance of remote working, that adoption jumped to 22%.
Enterprise adoption has been underpinned by the participation of talent platforms as sub-vendors in MSP arrangements. According to SIA data, almost half of talent platforms now participate in MSP accounts. Integration of talent platforms with VMS has also been a factor in enterprise adoption.
Talent platform Upwork Inc. said in its annual report that it began increasing investment in sales during the fourth quarter of 2021 to attract enterprise clients. The company also noted enterprise revenue rose 73% in 2021 to $34.9 million. According to the company’s 2021 shareholder letter, 2022 is the year that Upwork will take the next steps in evolving from being the largest global freelance marketplace to “broadening our horizon as the world’s work marketplace.” Upwork is not the only talent platform broadening its services; other vendors are also adding different types of labor supply such as W-2 employees and even direct-hire services.
IT skills dominate. SIA’s report also indicated that nearly half of spend through talent platforms, 47%, is for IT skills.
It’s not a surprise given IT is an area where skilled workers are in particularly short supply. The TechServe Alliance, a trade organization of IT and engineering staffing firms, found the number of IT jobs in the US ticked down in February for the first time in 18 months because of the tight supply of jobs.
Talent platforms also allow companies to find workers, including IT workers, wherever they are located without regard to international borders. The report noted that while 37% of freelance projects on talent platforms are commissioned in the US, 70% of the work is undertaken in Asia, led by India, Bangladesh and Pakistan.
Recently, not included in the report, several staffing platforms have suspended business in Russia and Belarus because of the ongoing war in Ukraine. Those platforms include Upwork and Fiverr. In a note to SIA, Freelancer.com said it was following sanctions as they are put in place. At the same time, Upwork withdrew its market guidance as 10% of the company’s total revenue in 2021 was derived from work where either the talent or the client was located in the region.
Alongside the development of talent platforms, staffing firms and others have been building their own variety of online, low touch engagement model. Staffing platforms deal with the supply of temporary workers as well as direct hire/permanent placement services. It is quite common however, that these services are split and offered by singularly focused platforms: temporary staffing platforms and hiring platforms.
Temporary staffing platforms marry technology and processes found in talent platforms with a traditional staffing firm pricing model. Just like talent platforms, they operate as a two-sided digital labor marketplace with ratings systems, algorithmic recruiting, management and matching. Unlike talent platforms, temporary staffing platforms will take responsibility for paying workers either directly or by outsourcing to a payrolling firm.
Temporary staffing platforms include Adecco’s Adia, TrueBlue’s Jobstack and Aya Healthcare’s Shifts app. One of the most prominent temporary staffing platforms is Jobandtalent which describes itself as the “world’s leading digital temp staffing agency.” The company operates primarily in hospitality, logistics, call center, events, construction and retail and the app is currently available in the UK, Spain, Germany, Sweden, France, Mexico, Colombia and, more recently, the US with the acquisition of InStaff. According to recent media reports, Jobandtalent plans to go public after reaching a valuation of approximately $2.35 billion (€2.05 billion).
As the name implies, hiring platforms are for direct hire/permanent placement and, thus, are distinct from the other platform categories which focus on contingent labor. Hiring platforms position themselves as being more efficient than staffing firms. They enable employers to self-serve by selecting candidates from the platform database and communicating with them in order to move through the hiring process with minimal or no mediation from the platform itself. Part of the added value they offer is the ability for both employers and candidates to showcase themselves and find each other through sophisticated matching algorithms.
The IT sector is, by far, the most visible area of specialization among hiring platforms and clearly recognized as a sweet spot for this particular business model.
Hiring platforms have a pricing model that is usually (though not always) by way of a placement fee calculated as a percentage of the basic annual starting salary of the successful candidate. These platforms deliberately position themselves as lower-cost alternatives to staffing firms. Placement fees can start from as low as 7% though 15% is, by far, the most common – which compares to the average 20% charged by staffing firms.
Some staffing firms have built or acquired their own solutions. Robert Half launched RH Direct in 2019 while Adecco acquired both Vettery and Hired which have now been merged under the Hired brand. In February 2022, Swedish staffing firm, Poolia acquired Roi Rekrytering which operates a hiring platform called Workspace Recruit.
The two largest online job advertising firms in the world have also created their own hiring platforms. LinkedIn, part of Microsoft, originally launched LinkedIn Recruiter in 2008 while Indeed, part of Japanese staffing giant Recruit, launched Indeed Hire in 2016.
The full report is available to members of SIA’s CWS Council.