Building a resilient staffing firm: Best practices for effective recruiting in a recession

Recession makes recruitment a game of whack-a-mole – Talents are there; you just need to be quick to snag them. Learn how here!

Are we heading for yet another recession? Or are we already in one?– honestly, it’s difficult to determine.

While we have witnessed a decline in GDP  for two consecutive quarters, along with rising inflation, and steadily increasing interest rates – all signs of a recession, the demand for labor remains exceptionally high, and unemployment rates have hit a 50-year low – indicating a boom.

Despite this uncertainty, savvy staffing firms understand they cannot simply sit and wait for an official announcement. Instead, they must take proactive steps to weather any economic downturn.

So, are you ready for recruiting in a recession? If not yet, don’t worry! 

After this article, you will be attuned to the ebbs and flows of job market fluctuations. Read on.

Understanding the recession and its impact on staffing firms

Recruiting in a recession

Whether we talk about the most devastating recession of 2007-08 or the very recent Covid-19 pandemic, famous for its sharp economic contraction and huge job losses in early 2020, the one common thing in both is their significant impact on recruitment

Both (and many other recessions) brought upon some very similar results, including:

  • Massive job losses, particularly affecting low-wage workers
  • Decreased hiring demand from businesses due to economic uncertainty
  • A considerable dip in the labor force participation rate
  • A shift toward temporary staffing solutions
  • An unexpected increase in job applications and competition for available positions
  • A greater emphasis on upskilling and reskilling to meet changing job demands
  • A need for staffing firms to adapt and innovate to remain competitive in a challenging market.

When it comes to staffing firms, recessions are notoriously difficult periods for them- with jobs declining dramatically and candidate numbers increasing to the point employers don’t need to outsource their searches

Although recruitment agencies may still be needed to screen a high volume of applicants, the profit margins from such services are generally lower than that of full-cycle hiring.

However, the positive news is that advancements in recruitment technology have the potential to aid in the shift towards client-focused activities while also enabling success in temporary staffing sectors. 

With AI-powered HR solutions like applicant tracking systems and automated candidate screening tools, recruiters can streamline their processes, increase efficiency, and focus more on building relationships with clients. (More on this in the next section!)

Now, the question is can you recession-proof your agency?

Honestly no! You can’t 100% protect your staffing firm from recessions, but you can cushion it to make it through. How? Let’s see! 

5 ways staffing firms can survive (and thrive) during a recession

1. Recognize the indicators

Fighting the recession calls for knowing when and why it may occur. Unfortunately, predicting these factors is next to impossible. 

However, by examining the factors that contributed to previous recessions, you can gain valuable insights:

  • Economic bubbles – Excessive speculation in a specific market beyond its intrinsic value often leads to large-scale ramifications. 

For example, the collapse of the dot-com bubble and the U.S. housing bubble contributed to separate recessions as their markets plummeted, causing widespread panic. 

Currently, speculation about the next bubble persists, but no clear catalyst exists.

Here is an interesting read- A painful recession to strike as ‘everything bubble’ bursts 

  • Interest rates – Certain interest rate patterns can signal an impending recession. The yield curve, which displays the interest rate paid for bonds of different securities, can serve as a warning sign. 

A standard yield curve indicates economic expansion, while an inverted yield curve signifies stagnation. Though not definitive, most recessions since 1975 have coincided with low or negative yield spreads.

  • Phillips curve – Another economic indicator is the Phillips curve, which demonstrates an inverse relationship between unemployment and wage rates. As the economy approaches full employment, inflation increases. 

Although not foolproof, the Phillips Curve provided warnings for the Great Recession and the 1981-82 Recession. Examining long-term and short-term Phillips curve projections can reveal potential warning signs.

  • High debt levels – Some economists who predicted the last recession argue that high debt levels could indicate future recessions. 

Their findings reveal a synchronization between employment levels and credit relative to GDP. While debt in the U.S. market has stabilized since the Great Recession, the Chinese economy is at bubble levels, which could have global repercussions when it bursts.

It’s important to remember that an economic slump only becomes a recession after persisting for two consecutive quarters. 

So if some of these signals appear, there’s no need for immediate panic. 

While staying aware is crucial, staffing firms should focus on their day-to-day operations rather than reacting to every potential warning sign.

2. Develop a contingency plan

A contingency plan is your safety net in an unexpected downturn. 

What strategies would you employ if sales dropped suddenly and significantly? How would you respond if the sector you serve is hit especially hard? How can you support your team if their personal lives are affected by the recession?

Addressing these questions before they become a reality is vital to navigating potential storms. So brainstorm a list of “What ifs,” and remember, even if it makes you feel like a worrywart, being prepared is half the battle.

But before getting started, you must know that each recession contingency plan differs based on the size of the staffing firm, industry verticals, and geographic location. However, all firms should consider the following while preparing for a recession:

  • Evaluate possible scenarios – An effective recession contingency plan examines various scenarios and formulates potential solutions. 

For instance, what if your biggest client reduces temporary placements, causing a 45% decrease in revenue? What if demand for vertical staffing plummets, threatening the closure of one of your divisions? What if 30% of your clients cut vendors to reduce costs? 

Preparing for each scenario enhances response time and mitigates the financial impact. (And yes! Your questions must be as detailed as possible.)

  • Maintain positive cash flow – Determine how long your staffing firm can operate with reduced revenue. Run projections to estimate how many months you can cover individual employee and program costs. 

By establishing a contingency fund and understanding your budget limits, you can better control expenses and maintain solvency throughout the recession.

Remember: A well-structured recession contingency plan not only prepares your staffing firm to respond effectively at the moment but also enhances its performance in the present. 

Early planning allows your leadership team to concentrate on refining talent pipelines, reducing submittal times, and strengthening client relationships – all of which boost your staffing firm’s resilience in the face of a recession.

Here are some bonus strategies for preparing an effective contingency plan:

  • Risk assessment: Identify potential risks and their impacts on your business operations.
  • Identify critical functions: Determine the most crucial aspects of your business that must continue to operate during a crisis.
  • Develop response strategies: Create detailed strategies to maintain or quickly resume critical functions.
  • Test and review the plan: Regularly test your contingency plan to identify weaknesses and make necessary adjustments.
  • Communicate and train: Ensure all team members are familiar with the contingency plan and understand their roles within it.

3. Build your cream-team

During a recession, staffing firms rely heavily on their top performers to continue making placements and protect profit margins. And never in a million thoughts would they opt for losing their cream recruiters. (They must not, right?)

That is why effective recession planning involves identifying the ROI of each recruiter, whether onshore or offshore, to prioritize retention strategies and ensure any future workforce restructuring is as objective as possible. 

But the unfortunate reality is that some staffing firms may make emotionally charged decisions when faced with the necessity to downsize their onshore workforce. 

They might retain junior recruiters with low KPIs and let go of offshore recruiters with high KPIs to maintain team morale. 

However, such decisions can backfire as profit margins continue to dwindle and remaining top performers feel the pressure to compensate for the shortfall.

Let’s take a hypothetical case to understand this situation better:

ABC Staffing, a prominent player in the staffing industry, was preparing for a potential economic downturn. As part of their recession-proofing strategy, they extensively evaluated their resource allocation, specifically comparing the performance of their onshore and offshore recruiters.


ABC Staffing initiated an in-depth analysis of its recruiting resources. They compared the revenue contribution and costs associated with their onshore and offshore recruiters to assess their ROIs. They also examined the performance metrics and contribution of each recruiter to the overall earnings of the firm.


The results of the analysis were eye-opening. They revealed that their offshore recruiting program accounted for 25% of their margin dollars while only contributing 12% to their overall costs. On the other hand, their onshore resources, while accounting for 75% of margin dollars, contributed to a significant 88% of their costs.

These results implied that the offshore resources provided more than double the ROI compared to their allocated budget. In contrast, while contributing significantly to the margin dollars, the onshore team was more cost-intensive, affecting their ROI.

Outcome and learnings

This analysis provided ABC Staffing with valuable insights into its resource allocation strategy. Given the higher ROI provided by the latter, they realized the importance of maintaining a balance between onshore and offshore resources.

In response to this insight, ABC Staffing expanded its offshore team, leveraging its sourcing, screening, administrative support, and even full-cycle recruiting expertise. This move aimed to supplement their top onshore recruiters and ensure the firm’s resilience during an economic downturn.

The key takeaway from this exercise was the importance of making data-driven decisions, especially during challenging economic times. ABC Staffing successfully prepared their firm to weather a potential recession by focusing on ROI and avoiding emotionally charged decisions.

Here are some top tips for balancing resources and optimizing your cream team:

  1. Focus on ROI: Evaluate the return on investment each recruiter brings to your firm. It will help you make better decisions about workforce restructuring if needed.
  2. Avoid emotional decisions: Making choices based on emotions rather than data can adversely affect profit margins and team morale.
  3. Analyze and balance resources: Regularly compare the performance and costs of onshore and offshore resources to maintain an optimal balance.
  4. Invest in high ROI solutions: In tough economic times, investing in solutions that provide a higher return on investment is wise.
  5. Leverage offshore expertise: Consider expanding your offshore team to handle various aspects of the recruiting process, thereby relieving some pressure from your onshore recruiters.

Now that we have been discussing ROI a lot, would you like to evaluate your applicant tracking system?

4. Don’t stop marketing

In times of economic downturn, the immediate instinct for many businesses, including staffing firms, is to find ways to cut costs. Unfortunately, a common casualty of this cost-slashing exercise can be the marketing budget. 

However, this is not the most strategic move to recession-proof your firm. Why? Because visibility is the lifeblood of your agency. 

If potential clients can’t find or hear about you, they can’t engage with your services.

Cutting marketing budgets in a recession is akin to erasing your footprint in the business landscape. The repercussions can be detrimental, limiting your reach and diminishing your client base.

You must be extra thoughtful about your marketing expenditure during a recession. Rather than eliminating marketing efforts, consider reshaping them. 

Explore cost-effective avenues such as social media, content marketing, or targeted email campaigns instead of investing in large-scale, high-budget campaigns.

In essence, the key to recession-proofing your staffing firm is not to go silent but to speak more strategically. Remember, a voice heard, even if softer, is far better than silence in businesses.

5. Employ a good recruiting software

This one goes without saying. If you face any XYZ hiring challenge, get a good recruiting software. (Lol! No kidding)


Here are some ways a CRM+ATS can help you recession-proof your staffing firm:

a. Maintain an updated candidate database: The built-in candidate engagement tool of a robust ATS automates the process of collecting and updating candidate information, allowing you to efficiently maintain an accurate database and react quickly to the job market’s fluctuations during a recession.

b. Efficient candidate search: Most modern-day software offers an advanced Boolean search function that lets you quickly filter your extensive candidate database and identify the most suitable candidates for job openings. This efficiency is crucial during a recession when job seeker numbers increase dramatically.

c. Streamlined onboarding: Efficient onboarding is vital for timely placements. A top-performing AI recruiting software automates the collection of mandatory candidate information, ensuring a faster and smoother onboarding process.

d. Effective marketing and CRM: In a client-driven market, retaining existing clients and attracting new ones is essential. CRM software supports seamless client communication through personalized email templates, SMS, and VoIP integrations, helping you maintain fruitful relationships during a recession.

e. Enhanced client communication: Most ATSs have a document generator that allows you to create professional, template-based documents showcasing your strongest candidates to employers. Its mass email functionality lets you send these documents to multiple recipients, giving your top candidates maximum exposure.

f. Increased client transparency: The client transparency portals provide clients with an insightful overview of recruiter activity, allowing them to track progress and participate in the candidate selection process. This increased transparency helps build trust and strengthen client relationships during tough economic times.

In short, utilizing cutting-edge recruiting software can help your staffing firm navigate the challenges of a recession. 

By automating and streamlining various aspects of the recruitment process, you’ll be better equipped to adapt to the changing market, maintain strong client relationships, and ultimately secure your firm’s success.

Looking for an ATS that works for your business? Check out Recruit CRM


Last but not least, maintain a positive mindset!

“A possible recession can also present an opportunity for recruiters. Recruiting may be even more crucial in a bad economy where companies need any competitive edge to weather the storm and best position themselves for success after it.” – Henry Goldbeck, Recruiter.com.

9 challenges you may face while recruiting in a recession and how to overcome them

Challenge #1: Increased volume of applications

During a recession, job losses lead to a surge in the number of applications for each job opening, making the screening process much more time-consuming.

Mitigation steps:

💡 Best practice: Regularly update your job requirements to ensure you’re attracting the right candidates and not wasting time on unqualified applications.

Challenge #2: Budget cuts

Most staffing firms often reduce their recruitment budgets in a recession, making it harder to source and attract top talent.

Mitigation steps:

  • Optimize your recruitment strategy for cost-effective channels like social media, referrals, and job boards.
  • Consider hiring interns or trainees who can be trained and promoted internally.
  • Take advantage of free job posting websites and social media platforms to reach more qualified and diverse candidates.

💡 Quick tip: Keep an eye on your cost-per-hire metric to ensure your recruitment efforts remain cost-effective.

Challenge #3: Retaining top talent

A recession leads to increased job security concerns which in turn causes high employee turnover.

Mitigation steps:

  • Foster a positive work culture to increase employee engagement.
  • Implement employee development programs to offer career progression opportunities.
  • Offer competitive compensation and benefits packages to retain top talent.
  • Implement flexible work arrangements to accommodate employee needs.

💡 Best practice: Regularly communicate with your employees about the company’s situation and plans to alleviate their concerns.

Challenge #4: Hiring for cultural fit

With remote and hybrid work models becoming more common during a recession, assessing a candidate’s fit with your company culture can be challenging.

Mitigation steps:

💡 Quick tip: Use video interviews to better understand the candidate’s personality and communication style.

Challenge #5: Market uncertainty

Recessions bring market uncertainty, making it more complicated than ever to predict hiring needs.

Mitigation steps:

💡 Best practice: To anticipate your future hiring needs, stay informed about current market trends and forecasts.

Challenge #6: Shifting job market dynamics

Recession may cause certain industries to face a more significant impact, leading to a surplus of candidates from those sectors, while other industries may experience a boom.

Mitigation steps:

  • Stay updated about market trends and be open to candidates from varied backgrounds.
  • Train your recruiters to identify transferable skills that may be valuable across different industries.
  • Partner with schools and training programs to identify and recruit candidates with relevant skills and experience.

💡 Best practice: Invest in continuous learning and development for your recruiters to understand evolving market dynamics.

Challenge #7: Maintaining employer brand

In tough times, negative news or layoffs can impact your employer’s brand, making it difficult to attract top talent.

Mitigation steps:

  • Maintain clear and consistent communication with current employees and potential candidates about the state of the business.
  • Demonstrate empathy and support for all employees, including those leaving the company.
  • Develop and communicate a clear and compelling employee value proposition that highlights your company’s culture, mission, and values.
  • Encourage employee advocacy by creating opportunities for employees to share their experiences and stories about working for your company.

💡 Quick tip: Use social media to share testimonials, positive stories, and job updates, reinforcing your commitment to your employees and company values.

Challenge #8: Attracting passive candidates

During a recession, passive candidates often prefer to remain in their current roles due to the perceived risk of changing jobs.

Mitigation steps:

💡 Best practice: Invest in employer branding initiatives that showcase your company as a stable and supportive workplace, even in challenging economic times.

Challenge #9: Increased competition for top talent

While there might be more candidates in the market, competition for top talent becomes stiffer during a recession as all companies aim to maximize the efficiency of their hires.

Mitigation steps:

  • Speed up your hiring process to make quick offers to standout candidates.
  • Personalize your recruitment approach to show candidates they’re more than just numbers.
  • Use data and analytics to identify and target high-potential candidates who are most likely to succeed in your organization.

💡 Quick tip: Consider implementing a talent pipeline strategy to continuously engage with potential candidates, ensuring you have a ready pool of qualified talent when roles open up.

Remember, while a recession can make recruitment more challenging, it can also present opportunities. With the right resources and practices, you can continue to attract and retain top talent, positioning your company for success when the economy recovers.

Is the gig economy the ultimate solution?

Ultimate, you say? No! 

The gig economy is not a panacea for all the challenges of recruiting in a recession. Still, it is an effective tool that businesses can leverage to minimize the impact of the economic downturn on their workflow. 

You need to understand that while harnessing the power of gig workers – independent contractors, freelancers, part-time workers – can be one of the promising strategies to fight recession, it comes with its benefits and challenges. 

Some of which are:


1. Cost-effectiveness

Hiring gig workers can be a more cost-effective option during a recession, as these workers are typically not entitled to benefits and are paid only for the work they complete. 

While hiring full-time employees comes with fixed costs such as salaries, benefits, and overheads, gig workers do not require office space or benefits, reducing overall staffing costs.

2. Flexibility

During a recession, economic fluctuations can lead businesses to freeze hiring, cut jobs, or reduce working hours. 

In such cases, companies can hire gig workers on a project-by-project basis, adjusting workforce size and costs based on current needs, giving them the flexibility to scale their hiring practice up or down whenever needed. 

3. Access to specialized skills

Recessions often necessitate a pivot in business strategy, which may require skills not available in-house. 

Gig workers, with their wide range of specialties, offer employers access to these niche skills on an as-needed basis without committing to a long-term contract. 

This strategy allows companies to stay agile and adaptive, key attributes for survival in a recession.


1. Lack of employee loyalty 

Gig workers may not feel as committed to a company as full-time employees, potentially impacting productivity and the quality of work. Further, it may also lead to legal and compliance issues. 

2. Increased management complexity 

With gig workers often spread across geographies and time zones, businesses need effective strategies for communication, collaboration, and project management. 

Utilizing technology tools for virtual meetings, project tracking, and communication can help you manage your gig workforce efficiently.

3. Potential loss of company culture 

With a higher reliance on gig workers, you may struggle to maintain a cohesive company culture and sense of shared purpose. 

What can you do? You should strive to include gig workers in team meetings and company events, provide them with regular feedback, and recognize their contributions to make them feel part of the team.

To conclude, while the gig economy can help address some recruitment challenges during a recession, it is not the ultimate solution for every company. 

Instead, a more balanced approach that combines gig workers with full-time and part-time employees, tailored to your organization’s unique needs and circumstances, may do wonders.

Expert advice you were looking for successful recruiting in a recession


“Well, it’s no secret that recessions create tougher competition for the best candidates. When times are hard, companies want to ensure they get the most bang for their buck, so they look for high-quality hires who can wear many hats and cover multiple needs. And, of course, that makes it even more challenging to find the right fit. But here’s the thing: in the long run, it’s better to invest in a few top-notch employees than to hire a bunch of people who may not quite cut it. That’s especially true in industries like financial services, where certain skill sets can make a big difference. For instance, if you’re an advisor with a lot of fee-based businesses, you’ll likely be a more valuable hire than someone who mostly deals with brokerage business. So my advice for recruiting in a recession would be to focus on quality over quantity and be ready to offer a competitive compensation package for the right person.”

▶️ John Pierce, Forbes Human Resources Council member and financial services recruiting professional


“When times get tough, cutting costs is often the first thing that comes to mind. And honestly, it can be one of the easiest things to do. Take a good look at where your money is going. Check out your profit and loss statements, go over your credit accounts, and ask yourself: are you spending on things that you don’t really need? Maybe there are recurring charges that used to make sense, but now they’re just a waste of money. Or perhaps you’re splurging on nice-to-have stuff that’s not essential to your business. The point is it’s worth auditing your expenses and getting the most out of it. Every dollar counts, especially in a recession. So take the time to review your spending and make sure you’re optimizing your returns.

▶️ David Searns, Founder and CEO of Haley Marketing


“As someone who worked as a recruiter during the Great Recession, I can attest that even in times of economic hardship, high-demand positions can still be difficult to fill. There’s a common perception that top performers are less likely to be affected by layoffs or unemployment, which is why some leaders still prefer to focus on passive candidates rather than active ones. However, it’s crucial for each company to have robust interviewing and assessment practices in place to ensure they’re hiring the right person for the right role at the right time and with the right set of values, abilities, and skills. It’s not just about finding someone who can do the job; it’s about finding someone who can thrive in your company culture and contribute to your long-term success.”

▶️ Leslie Aument, Head of People at construction start-up Kojo


“As we navigate through the Great Resignation, it’s crucial to remember that the power dynamic has shifted. Job seekers have more options than ever, and they’re looking for more than just a paycheck. They want meaningful work, a positive company culture, and a sense of purpose. To succeed in this environment, companies need to be proactive and transparent in their hiring practices. That means building a strong employer brand, creating a positive candidate experience, and focusing on diversity and inclusion. It also means being flexible and open-minded when it comes to remote work and other non-traditional arrangements. The companies that can adapt to these changing expectations and deliver on their promises will be the ones who come out on top.”

▶️ Sean Mallapurkar, CEO of Recruit CRM

Were these pieces of advice helpful? Let us know in the comments! 

To wrap up this article, we have curated a list of eBooks and guides you can use to recession-proof your business: (Hope you find them informative!)

  • Rock the recession: How successful leaders prepare for, thrive during, and create wealth after downturns by Jonathan Slain (Link)
  • Recession-proof yourself! By Elizabeth Lions (Link)
  • The perfect labor storm 2.0: Workforce trends that will change the way you do business by Dr. Ira S Wolfe (Link)
  • New loss prevention: Redefining shrinkage management by A. Beck and C. Peacock (Link)
  • Unlock the hidden job market: 6 steps to a successful job search when times are tough by Duncan Mathison and Martha Finney (Link)
  • Untapped talent: How second chance hiring works for your business and the community by Jeffrey D. Korzenik (Link)

Disclaimer: None of the links given above are affiliated!

Happy recession-proof recruiting~

Frequently asked questions (FAQs)

Q1-How can I adapt my recruitment strategies to succeed in a challenging economic environment?

In times of economic uncertainty, fine-tuning your recruitment approach is critical to attracting and securing top talent. Here are some best practices you may consider:

  • Highlight the company’s value proposition to attract talent.
  • Target passive candidates who might be more open to opportunities in a tough job market.
  • Leverage recruitment technologies for efficient sourcing and candidate tracking.
  • Implement flexible employment models like temp-to-hire or contract roles.

Q2-How can I measure the success of recession-proofing efforts for my staffing firm?

It’s simple! By tracking the crucial metrics and analyzing them regularly. Here are some tips for you:

  • Monitor KPIs such as client retention and candidate placement rates.
  • Track cost per hire and time to fill metrics to assess efficiency.
  • Evaluate revenue stability and profitability to gauge financial resilience.
  • Assess the stability of business operations in the face of economic downturns.

Q3-How can I manage and motivate my staffing team during a recession?

Effective leadership and transparent communication can ensure team resilience during challenging economic periods. Make sure you follow the below pointers:

  • Maintain transparency about the company’s financial situation and plans.
  • Provide regular feedback and recognize the team’s hard work.
  • Invest in training and development to improve skills and morale.
  • Foster a positive work environment to keep the team motivated.

Q4-What is the impact of remote work on recruitment during a recession?

Remote work offers new opportunities and challenges for recruitment practices during a recession. 

When on the one side, it allows hiring beyond geographical constraints, broadening the talent pool. It also makes team management very difficult. 

But don’t worry, here is what you can do to minimize its negative impact:

  • Adapt interviewing, onboarding, and management processes to suit remote work.
  • Invest in technologies and tools to facilitate effective remote collaboration.
  • Develop strategies to maintain company culture and engagement in a remote setting.

Q5-Can you suggest some tips for effective communication with clients and candidates during a recession?

Maintaining trust through clear and empathetic communication is essential during economic downturns. Here are some hacks for you to follow:

  • Maintain regular and open communication channels.
  • Be transparent about the economic impact on your operations.
  • Show empathy and support, addressing their concerns and anxieties.
  • Offer reassurance by sharing your strategies for navigating the recession.

Q6-What are the best practices for managing a staffing firm’s cash flow and finances during a recession?

Prudent financial management is paramount to navigating a staffing firm through recessionary times. Here are some tips you must implement for effective cash flow management of your business: 

  • Implement cost-saving measures and maintain lean operations.
  • Prioritize working with profitable clients and sectors.
  • Regularly review financial reports to track performance and make necessary adjustments.
  • Focus on maintaining a positive cash flow to ensure financial stability.

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