Note: This is part one of a two-part blog series. Click here to view part two.
Remember the Great Resignation?
The way time seems to blur these days, the era of hyper-churn in the job market may feel like a distant memory. But it wasn’t too long ago — two or three years, at most — when background screening businesses and consumer reporting agencies (CRAs) were drowning under a deluge of employment verification orders, struggling to keep ahead of the backlogs while dealing with labor shortages of their own.
How times have changed.
By all indications, the Great Resignation is over. The record quit rates have calmed to pre-pandemic levels. Workers have stopped searching for greener pastures and have instead settled in to enjoy the stability and security of their current jobs.
So, what does this all mean for CRAs? After all, while the Great Resignation had its challenges — namely, how to scale quickly to handle the volume — it was also a period of opportunity. Has the opportunity receded?
As we’ll show in this article, not quite.
The Great Resignation has given way to the “Big Stay,” but hiring trends remain strong. Employers will continue to rely on background screening companies to mitigate risk and help fill their seats with the most qualified and experienced people.
With the right mix of people, processes, and technology, CRAs and background screening companies can look forward to many more years of growth.
Goodbye, Great Resignation
About three years ago, we reported that, in the wake of the COVID pandemic, between 25% and 40% of all employees were considering changing jobs. Around that time, the monthly nationwide quit rate climbed to a sky-high 3.4%. This unprecedented job churn coincided with surging demand for pre-employment background screening.
Gradually, however, the quit rate leveled off, and by late 2023, it had returned to pre-pandemic levels. Over three months in 2023, the percentage of employees who were new hires dropped below 4%. It had been at 9% during the same months of 2022.
Experts cite multiple causes for the demise of the Great Resignation:
- Hiring has slowed somewhat, leaving potential job seekers with fewer options.
- Wage growth has also slowed.
- A wave of layoffs in certain industries (the tech sector, in particular) has workers spooked. Many believe a recession is still imminent.
The Big Stay? Not Exactly
The business world loves its buzzwords, so the current period of moderate — rather than stratospheric — job churn has been dubbed the “Big Stay.” But that is a bit of a misnomer.
Job churn has not stopped entirely. It has merely normalized to pre-pandemic levels.
Hiring continues at a robust pace. The U.S. economy added 353,000 jobs at the beginning of 2024 — far more than expected.
All this is to say, if employment verification represented a significant revenue source for your CRA or background screening business before the pandemic, it will likely continue to do so today. Employers still want to hire the most qualified employees.
In addition, two recent employment trends continue to drive demand for verifications:
1. Remote Work Has Outlived the Pandemic
Nearly two years after the start of the COVID pandemic, more than half of American workers were working remotely at least some of the time, according to a June 2022 McKinsey report.
For a brief period in 2023, it seemed as if the remote work trend might fizzle out. Several high-profile firms called for a return to the office, but those moves proved unpopular with employees. Furthermore, researchers found that return-to-office mandates do not improve company performance.
As of March 2024 (according to various surveys and studies):
- About 14% of all employed adults work remotely all the time.
- More than 20% of Americans will work remotely by 2025.
- Only 16% of office workers would consider a job that didn’t offer any remote work.
2. The Gig Economy Is Going (and Growing) Strong
Many people who left their jobs during the Great Resignation migrated toward “gig” work for the flexibility and independence it allows. In 2023, 38% of American workers performed freelance work, contributing $1.27 trillion to the national economy, reports the Upwork Research Institute.
As the gig economy matures, there will likely be even more opportunities for workers seeking flexible, independent employment. In fact, there are already signs that gig work is reshaping the American economy, taking some of the strain off unemployment insurance and reducing bankruptcies and debt among those who lose their full-time jobs.
Opportunities and Challenges for Background Screening Businesses: 2024 and Beyond
The takeaway here is that CRAs and background screening firms should be encouraged by the so-called Big Stay. There is still plenty of verification work to be had.
Employers are hiring, and thanks to remote work and the gig economy, they have less contact with job candidates and employees than ever before. Employers look to resume verification and other background checks to gain assurance in workers they may never meet in person.
And although the pandemic has subsided and the Great Resignation has tailed off, HR departments remain as overworked as ever. According to the 2023-24 SHRM State of the Workplace Report, released Feb. 8:
- 57% of HR professionals say they are working beyond normal capacity.
- 55% say their departments lack “sufficient staff to cover the workload.”
- 70% of HR pros say “finding workers with the skills their organization needs” is a high priority.
This is where your background screening business comes in. Employment verification is necessary yet highly labor-intensive. HR teams turn to CRAs to pick up the slack.
However, within that opportunity lies a challenge. As hiring declines to pre-pandemic levels, CRAs cannot rely on volume alone to sustain (and grow) their verification revenue. To stay competitive, background screening firms must provide the speed and accuracy HR teams require while maintaining a nimble, cost-effective, and scalable verifications operation ready to adapt to whichever way the tumultuous economy swings next.
Our next article will introduce a strategy for doing just that: outsourcing verifications. A trusted outsourced verifications partner can act as a release valve when the volume exceeds your internal team’s capacity. Or, it can replace your internal verifications team entirely, allowing your business to focus on other, potentially more lucrative operations.
Check out part two for more. If you'd like to be notified when new blogs are published, you can subscribe here.
