• For most of 2008 it continued to be a candidates market due to two predominant factors within the Health Care sector:
1. The Extreme skills shortage
2. Unemployment sitting at around 4%.
• For clients it meant that attraction and retention had become priorities for most businesses as ways of dealing with the 'war for talent'. Flexibility surrounding packaging, flexibility, candidate experience and the consideration of transferable skills across sectors had enabled companies to expand the pool of available candidates. You can read more about this in our “War on Talent” article series in the Resources section of our website.
• For candidates it meant that there was room to move on salary negotiations but they had to beware the trap of being caught in the process of counter offers and reputation of job hopping. It was not uncommon for candidates to be made multiple job offers and to be counter offered by their current employer. This tight candidate market saw salaries increase over the past 12 months.
• The events and subsequent fallout from the Global financial crisis has seen the recruitment and employment market change quite dramatically since October 2008.
• We noticed a slow down in employment in June 2008 which is normal for the end of financial year but the demand never significantly picked up and then the financial crisis hit.
• Many businesses could see potential problems emerging and started to slowdown their recruitment efforts.
• Initially clients focussed on internal recruitment and bolstered their HR teams but when the crisis hit, some internal HR teams were made redundant because businesses were not hiring and therefore had no need for these individuals. (HR recruitment is down over 30% from the previous 6 months).
• This shake up from the financial crisis has meant both jobs and candidates have dried up in the short term. Businesses, because they are taking a wait and see approach and candidates because they are concerned about job security and what might happen if they leave their current employer.
• The early indicators are that the employment market will swing in favour of the client as the unemployment rate rises to a projected 6% in the next twelve months and that this will see salaries stabilise for the next twelve months for the majority of employees. The exception to this will be for specialised roles where the skill sets are specifically required. This is very evident in the health Care sector.
• The client needs to be mindful that there will be more candidates in the market as unemployment rises but the level of passive candidate activity has not dropped off in spite of the uncertainty associated with the fallout from the financial crisis.
• The three main job boards in Australia have 1.4 million unique browsers viewing their job boards each month and with only 200,000 job ads posted (down over 22% from last year) obviously a number of actively employed candidates are passively seeking employment. This means existing employees are still looking and clients need to ensure they secure their top performers.
• The top performers will continue to be difficult to attract and retain in this changing marketplace. On one hand they want job security but also want to be recognised for their hard work and some of these individuals will be working harder because of redundancies within their businesses. Competitive salary will continue to be a key determinant for these top performers.
• With a slowdown in recruitment at many businesses we should see salaries remaining at consistent levels for at least the next six months for all but the most specialised roles.
IN A RECENT GLOBAL SURVEY
• Nearly half of businesses in Australia and New Zealand are axing employees or freezing staffing levels - three times more than eight months ago - on expectations that business conditions will worsen.
• According to a worldwide survey of pay and staffing at more than 2,500 organisations by global consultancy Hay Group in November, 17% of organisations in Australasia are decreasing staff numbers, and 27% are freezing them.
• Twenty-seven per cent expect business results to be significantly worse than targeted levels, compared to 7% in March.
Nonetheless, 64% of local organisations expect results close to targeted levels in 2008.
• The global survey found that Africa and the Middle East have been the least affected by the economic downturn, with only nine per cent of African companies and 12% of Middle Eastern companies reporting business results significantly below target.
• Local results were in line with the overall global trend.
The oil and gas sectors had weathered the downturn better than other industries, with 19% of respondents expecting business results significantly better than targeted.
• The retail sector was one of the hardest-hit sectors globally, with 63% of respondents expecting poor business results due to lower consumer spending and tighter credit markets.
• The survey also found that organisations were concerned about retaining top talent and critical skills, maintaining and affording competitive pay, and maintaining employee motivation.
• Fifty-three per cent of local respondents were changing or considering changing their budgets for base salary increase for 2009, with 24% freezing or considering freezing salaries for all employees.
Frontline Health will focus on a number of specific sectors within the Health Care Industry over the coming months and would like to start this series with an overview of the Australian Medical Devices Industry.
AUSTRALIA’S MEDICAL DEVICES INDUSTRY
The Australian medical devices industry is an industry that is heavily dependent on specialised skill sets and the current trends would indicate that the industry is expected to face significant challenges in the future.
The industry represents a substantial growth opportunity for the Australian economy, both in terms of potential export revenue and highly skilled jobs creation. Close to 90 per cent of local production is estimated to be exported and employment is estimated to be roughly 11,500 persons domestically. In 2006, the global industry was estimated to have revenues of approximately US $176billion and has been estimated to be growing by 10 per cent per annum.
• The industry is complex. Sub-sectors are distinguished by product focus, life cycle and enterprise type. Skill needs vary by industry sub-sector.
• The medical devices value chain is highly reliant on science, engineering and technology (SET) skills.
• The industry is distinguished by its strong growth potential, significant R&D requirements, high levels of regulation, significant export-propensity of domestic manufactures, increasing reimbursement requirements, and technical channels to market.
• The industry is highly concentrated in NSW and Victoria, but lacks the maturity and depth of skills of medical device clusters observed in some overseas markets, such as the US and Ireland.
EMPLOYMENT IN THE MEDICAL DEVICES INDUSTRY
• On average, the largest areas of employment for the industry (in absolute and percentage terms) are in sales, marketing and manufacturing occupations, which account for more than half of all jobs in the industry.
• Pre-manufacturing enterprise employment profiles shows heavy reliance on product R&D professionals (including clinical), which account for 54 per cent of all jobs in the Pre-manufacturing sub-sector. Business development personnel account for 23 per cent of all jobs in the Pre-manufacturing sub-sector.
• Manufacturing enterprises employ people across the value chain, with the majority of employees in sales, marketing or manufacturing (55 per cent of all jobs in the sub-sector).
• Importing only enterprises are comprised predominantly of sales, marketing and business management personnel, which account for 70 per cent of employment in this sub-sector on average.
• The level of education required by the industry is high. Approximately 33 per cent of the industry have an undergraduate degree or above compared to a national average of 22 per cent in 2005-2006.
RECRUITMENT BARRIERS
• Recruitment challenges are a function of:
- Lack of ‘job readiness’ of new entrants
- Perceived riskiness of industry for graduates, employees in other industries
- Significant competition from other industries
- Poor industry profile among graduates
- Low wage, lifestyle issues for some occupations
• Capacity to recruit is strongly influenced by company profile, and correlated with life cycle.
FUTURE SKILLS SHORTAGES AND GAPS
• The Australian medical devices industry expects to grow at a compound annual growth rate (CAGR) of nine per cent per annum over the next five years provided a sufficient skills base is available (~50 per cent increase in turnover by FY2012).
• Approximately 27 per cent growth in Australian employment required to support this growth.
• Skills gaps are expected for:
- Sales and marketing professionals, particularly export market development
- Product R&D engineers
- Business development and management personnel
- Regulatory affairs personnel
- Reimbursement specialists
ECONOMIC IMPACT OF SKILLS SHORTAGES
• Currently skills gaps are having a significant impact on a substantial proportion of companies within the industry.
• These skills gaps are greatest for pre-manufacturing enterprises and firms at the start-up and mid-size end of the industry.
• Industry expects growth to slow to a CAGR of six per cent if employment needs cannot be met (~35 per cent increase in turnover by FY2012), compared to a CAGR of nine per cent if skills needs are met (~54 per cent increase in turnover by FY2012).
IMPACTS OF CURRENT FINANCIAL CRISIS
Australian firms should be careful not to throw away their recent investments in workers. They will need a skilled workforce to remain strong and productive, both to sustain themselves over the downturn and take advantage of growth and new opportunities.
Earlier this year businesses within the Health Care sector identified availability of skilled employees as the number one constraint on growth. Australia’s underlying skills shortages and ageing population are long-term problems and will not be affected by economic slowdowns in the US and Europe. Employers need to recognise this skills shortage in spite of the turmoil that the financial crisis has brought and continue to focus on retaining their top performers and attracting candidates with the right skill sets. As some companies start to slow down and potentially cut staff, excellent quality candidates will come into the market and it’s a good time to recruit.
With cuts in employment in overseas markets there has been a huge influx of ex-pat Australian professionals returning home and a huge increase in the number of overseas applications for immigration into Australia. These two situations could provide the necessary skilled candidates that the Health Care sector needs.
In the next newsletter we will publish a story about Immigration and how you may be able to access this talent pool.
Please feel free to contact us at Frontline Health with any recruitment requirements - we are here to help.