Experts say that we are heading into a global recession. Many tech companies are wondering how to survive the recession. Well, one popular option is to use staff augmentation services to gain top talent on a temporary basis.
The key question on business owners’ minds is how can I survive the recession with IT staff augmentation services.
The global pandemic has contributed to a number of existing trends in the market. The first trend is the great resignation. This is where tech talent such as developers were quitting jobs that were making them unhappy for various reasons to find better options. Along with this trend, we have something called quiet quitting. This is where software engineers are doing the minimum at their jobs because they are unhappy. Perhaps do not feel like they are growing professionally or are looking for different benefits than they have currently.
The upcoming trend that is going to hurt is a massive recession. We can already see the consequences of the poor economy with massive layoffs in the IT industry. Amidst recession fears, many businesses turn to various solutions. Solutions such as temporary workers to save their business from going under.
What is a recession? What does it mean?
A recession is defined as a period of economic decline when GDP (Gross Domestic Product) falls. This decline is typically followed by major layoffs and unemployment increases. Plus when looking at consumer behavior there is a general decrease in spending and investment.
Recessions can take place on smaller and larger scales. You can experience a recession within a particular country due to poor politics. Or your country can experience a disaster of some kind that can lead to a recession. There are also global recessions that can be caused by pandemics, war, etc.
Economic uncertainty can cause challenges for everyday individuals and business owners. Let’s dive into what challenges lie ahead for tech firms during a recession.
Challenges tech companies face heading into a recession
When a recession is looming over the heads of tech company owners, they fear they will struggle with a few factors. All three of these factors are connected and intertwined.
The first challenge for businesses when heading into a recession is hiring struggles that result from a hiring freeze. The second concern with an economic downturn is a reduced budget to run hiring procedures. Along with a reduced budget to hire permanent staff.
And the last challenge that we will discuss is software developer retention. How do you keep employees? How do you not lose employees due to a struggling economy? Just like employers, employees are often looking for more security, during a recession. They want to know that their job is safe and that their salary can take the hit of inflation. An employee will weigh their options carefully to see if it makes sense to stay in a company during a recession.
Hiring struggles because of a hiring freeze
Let’s take a closer look at challenge number one, which is hiring struggles. Most people will look at a recession through the lens of the employee, not the employer. Right? Our heart tightens at the thought of people losing their job, not being able to pay bills, etc.
But believe me, the grass is not so green for the business owner either. Not to mention that the human resource department of that company also has its hands tied during an economic downturn.
Many companies during a recession will be looking to lay off current employees. We have seen this in late 2022 when big giants like Amazon and Meta let people go. Also, many of these companies have introduced hiring freezes. This is all a result of budget cuts. The combination of all these factors prevents these businesses from growing. It limits or prevents companies from hiring and scaling their business.
Another key aspect of the hiring struggle is that a tech company will have fewer job postings online due to a hiring freeze. Many tech companies will notice an influx of resumes even with limited job openings. This can be a positive change but it can be difficult to select only one of many qualified candidates to add to your company.
Reduced hiring budget
As we alluded to earlier another common challenge during a recession is reducing the hiring budget. But this only causes problems when trying to find top talent despite the financial crisis.
Many times hiring managers with a limited budget will only search within their local talent pool to hire someone during a recession. This is because they cannot afford to look beyond it, without breaking the bank.
This action will also prevent companies to look externally to try and hire talent. Specifically, most companies will not want to hire an HR agency to help find suitable candidates to hire. This is because an HR agency simply is too expensive.
Did you know that when an HR agency finds you a software developer, you have to pay them one or two months’ worth of their salary?
So for example, if you hire a software developer who on average makes $6000 per month. Then you would owe the HR agency at least $6000 if not $12000. Crazy right?
So when a company has a limited budget in terms of hiring, they won’t reach out to a recruitment agency for help. They will try in-house recruitment or won’t hire much at all.
Another aspect of a limited hiring budget is not being able to offer potential new full-time permanent developers the salary that is expected. You may have to offer lower rates because you simply don’t have the funds in your company to offer standard salaries for these developers.
Software developer retention
Another unfortunate consequence of a recession is the inability to retain software developers. You cannot keep employees that were previously hired. This can happen for a few reasons:
- They want a higher salary to offset the cost of inflation but your company cannot afford it, so they leave when offered something better.
- You have to let programmers go because you cannot afford to keep people on the bench who are not assigned to a project.
- There are fewer projects that you can offer because you have fewer customers which leave developers bored. A bored and stagnate developer will search for something new and leave your company as well.
Plus not to mention you may be forced to lay off developers which will leave you with skill gaps and empty employment slots. These slots should be filled to keep your business going but you can’t without diving into the red.
How to use IT staffing augmentation to survive a recession
There are 7 ways you can 👉 use the IT staff augmentation model 👈 to survive a recession. IT staffing will help you recession-proof your business by giving you access to programmers with advanced skills. It is a more affordable option than using a recruitment agency.
Also, you gain more flexibility by being able to hire temporary staff from a bigger talent pool. You are able to reduce the cost of hiring permanent employees and optimize your staffing costs. Let’s dive into each of the factors in more detail.
Access programmers with advanced skills
An IT staff augmentation company will give you access to programmers with advanced skills. This vendor will have or be able to quickly find a developer that meets your project needs.
For example, if you are looking for a software developer who specializes in PHP and the Laravel framework to create the back end of your web application. Then the staffing company can provide you with a coder, who has those skills and proven experience.
They will have a developer with this skillset in their database. You will go through an accelerated interview process and hire them onto your team temporarily. You can have these advanced tech skills on your team in as little as one week.
Avoid bloated HR agency fees
The hiring process through a staff augmentation vendor is less expensive than using an HR agency. So, when looking at the 👉 price of hiring via staff augmentation 👈 you typically pay the daily rate of a developer. The vendor will take that daily rate multiply it by the number of days they worked on your project for the month and send out an invoice. Here at Swyply, you will have 14 days to pay that invoice.
Whereas, with a recruitment agency they will charge you a minimum of one month’s salary for the developer they find for you. So you may find that you’re hiring a developer who will earn $6000 per month. You will owe the HR company $6000 if not more. This rate does not cover additional employment expenses such as taxes, health insurance, employee perks, etc.
The beauty of staff augmentation is the vendor covers these types of costs within that daily rate. So costs like taxes, health care, and vacation time are no longer your concern. Also, they will pay for laptops, home office infrastructure, and employee perks. You only pay for the work that the developer does and that’s it.
Increase your team flexibility with temporary workers
Contingent workers are a great way to give your development teams more flexibility. When using staffing augmentation you can add, remove or switch developers in the blink of an eye.
When you use an augmented staff member they provide you with the technical skills you need at the time. So for example:
You have a team of back-end developers but need front-end developers. More specifically you need a front-end developer that specializes in ReactJS for 6 months. A staff augmentation company can provide you with that type of programmer for the time frame that you need.
Another example of this type of flexibility is you need an Android mobile app developer for one aspect of a project for 3 months. And after that, you will no longer need him or her. The staffing company will provide this technical expertise. And then keep him or her on the bench once they complete your project. Or they will move him or her to a different project and company.
Decrease the need for permanent hires/limit the number of permanent hires
One of the key goals for companies during a recession is to limit the number of permanent employees on their payroll. A staff augmentation vendor gives tech firms the ability to achieve this goal.
When renting software engineers from a staff augmentation vendor, you are hiring them on a temporary basis. Typically this would be hiring coders on a project basis. Once the project is complete the temporary developer moves on.
You only pay for the developer or developers that you use and their services. Once you no longer need them, you do not have to pay to keep them on the bench. They never officially join your payroll so you do not have to count them as permanent staff.
This helps you decrease the need for hiring permanent staff. All without needing to shrink your business to the point where you are barely breaking even.
Access to a wider talent pool with more affordable options
Within the staff augmentation model, there are a few options to help you expand your talent pool without overspending. You can gain programmers 👉 onsite, nearshoring or offshoring 👈.
When you are looking to hire developers using staff augmentation the choices are endless. You may find someone onsite, meaning they work in the same country but join you remotely. Or you may look for coders in countries nearby using nearshore staffing. For example, if you are in the UK, you may find developers in Poland to remotely work with your team.
Lastly, you can look across the ocean for potential software engineers. This would be offshoring staff augmentation. So if you are in the United States, you may find awesome coders in Central or Eastern Europe.
This option is more affordable than even traditional in-house recruitment. For a few reasons:
- You only pay for the developer as long as you use them
- You do not have to cover costs associated with full-time employees such as taxes, health insurance, vacation time, or sick leave
- You do not have to pay for office space and other infrastructure as they will work remotely. And the vendor will likely provide them with a laptop to do their job.
Staff augmentation can help you survive the recession by giving you the ability to find software developers from around the world. You can do so without breaking your budget. Plus if you are looking for a programmer who specializes in a niche technology you have more hope of finding them using this approach.
Optimize your operational costs
Renting developers from a staff augmentation company will help you optimize your operational costs. You are gaining talent on demand to fill the skill gaps in your organization on a project basis.
You are only paying them for the work they do as opposed to a full-time annual salary like you would with permanent hires. If they work for you for only three months, then that’s all you pay.
Plus the cost of the hiring process using staff augmentation does not fall on your lap, saving your company money there as well. As we mentioned previously the cost of hiring can take a huge toll on a company’s budget and therefore, make it difficult to survive the recession if you are not using IT staff augmentation.
Hire top-notch developers due to the influx of talent after tech layoffs
A trend that we have noticed currently is the number of software developers applying for tech jobs. There are more job seekers than ever before which is alarming. Also, it is just further proof of economic uncertainty.
The staffing industry will pick up a lot of these programmers to rent to tech companies to add to their existing workforce on a temporary basis. It gives client’s more choices and access to top-notch tech talent. You do not have to go short on highly skilled talent just because there is a recession.
In fact, you can use this recession to your advantage and snap up amazing talent via IT staff augmentation services.
Reasons to use IT staffing during an economic downturn
I have four reasons for you to use IT staffing during an economic downturn in order to survive the financial hardship.
Flexibility when taking on projects
When you hire developers from a staffing company you can take on more projects. This is a great idea when you have access to an abundance of projects. You can add augmented staff members to help complete them and increase your revenue.
This flexibility also exists when you do not have enough projects to go around. You let go of any augmented staffers and keep your in-house team minimal. This allows you flexibility and to save funds.
Build more income for a rainy day fund
Speaking of funds, in order to survive the upcoming great recession you need to build a reserve of money. You need to control your company’s cash flow. Instead of putting all the profits you make off additional projects back into the business as an investment, put some of it away.
When you have an influx of projects, take that money and create a rainy day fund. This way in times of crisis you can keep your business going as opposed to spending it all and then having to close shop.
Do not pay to keep coders on the bench
Staff augmentation prevents you from having to pay for a developer to sit on the bench in between various projects. The vendor will pay for a developer to sit on the bench in the event that they do not have a project for him or her. This is one less expense for your business which can make a huge difference long term.
Predictable costs when hiring augmented staff
When your hire temporary workers from staffing agencies you have predictable costs. You know how much you need to pay for the rented software developer. There are no hidden fees or additional costs.
Here at Swyply, we cover sick leave, vacation leave, etc. You do not have to worry about this expense. You also do not have to worry about taxes, health insurance, etc. Your role as the customer is to only pay the daily rate of the developer you hire and that’s it.
This 👉 pricing model 👈 is much easier to fit into your budget and work around, as opposed to one with permanent full-time workers.
TL;DR: Summary of how to recession-proof with staff augmentation providers
Many businesses struggle when heading into a possible recession with three things:
- hiring full-time employees because of hiring freezes
- a reduced hiring budget
- plus struggling to retain current full-time workers
These struggles are a result of cutting costs to survive the recession. But even in times of market volatility your company still needs to be able to stay afloat and with some luck even grow. A way your business can survive the coming recession is by using staff augmentation services. This hiring model enables you to:
- Access programmers with advanced skills
- Avoid bloated HR fees
- Increase your team flexibility with temporary staffing
- Decrease the need for permanent hires
- Access to a wider talent pool with more affordable options
- Optimize operational costs
- Hire top-notch developers that were laid off and now seeking a job
Now hiring developers for temporary roles can help your business take on more projects when they arise. This way you can increase your revenue to create a rainy day fund for your company when those dark clouds come rolling in. Plus when you no longer have enough projects to go around, you can let augmented staff go. You have more flexibility to expand and collapse your business with the use of staff augmentation.
This model also makes budgeting really easy. The cost of hiring a developer from a staff augmentation company is predictable. You are only paying one daily rate, which gets multiplied by the days worked and then you get an invoice for the whole month. There are no hidden costs or surprises. It’s easier to allocate money for temporary workers than a full-time employees. Also, you no longer have to pay to keep coders on the bench when between projects. So you have more money in your pocket.
So, are you interested to learn more about how staff augmentation can help you survive the recession? 👉 Drop us a line 👈 and let’s have a no-obligation chat as to how we can recession-proof your business.