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Special Report: Staffing Still Soaring

The staffing industry continues to enjoy growth, as the number of temporary workers reached an all-time high this year.

October 1, 2014
Related Topics: Contractors, Temporary Staffing, Talent Management(2), The Latest, Special Reports
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Staffing Special Report October 2014

At this time last year, staffing companies were enjoying a high demand for temporary labor and a record-high number of temporary jobs in the total workforce. Those trends have continued for the industry this year and should be on the same path for the foreseeable future.

High growth trends for the staffing industry started in the late 2000s as companies wearied by the Great Recession sought ways to balance increasing product demand with uncertainty about the stability of their workforces. Although the recession is over, the increased use of temporary labor remains.

“Following the recession, we’ve seen tremendous change in the industry, and the progression has accelerated in the last year. Employers are more strategic with their workforce planning,” wrote Jorge Perez, senior vice president of staffing company ManpowerGroup in North America, in an email. “Employers are finding the right mix of contingent and permanent and part- and full-time employees to drive their businesses forward most efficiently while harnessing as much productivity as possible.”

Hot List October 2014One explanation for the increased use of temporary labor is that many organizations are looking for more flexible workforces, said Paul McDonald, senior executive director for staffing firm Robert Half International. Temporary workers can lighten the burden placed on full-time staff by high demand for a product or service, reducing burnout and high turnover rates. On the other hand, a flexible workforce can ease an employer’s payroll costs if demand decreases.

High use of “temporary employment is the new normal,” McDonald said. “What we’re seeing is that many companies need temporary labor to meet their day-to-day goals. They don’t want to burn out the full-time staff. It’s an augmentation to the full-time staff that really is a strategic staffing play as the economy improves.”

Employers begin to turn temporary positions into full-time positions once demand stabilizes, experts said.

Temp jobs rose by 8,500 in July 2014 to a total of almost 2.9 million, according to the U.S. Bureau of Labor Statistics. In the same month, the temporary labor penetration rate — the percentage of the nonfarm workforce employed by temporary help firms — reached a record high of 2.07 percent. Further, year-over-year growth in temp jobs eased to 8.13 percent in July 2014 from 8.24 percent in June 2014. Although the growth rate slowed, it’s still higher than the predicted 6 percent growth rate for 2014 and the 7 percent predicted for 2015, said Jim Link, chief human resources officer at the Atlanta headquarters of staffing firm Randstad US.

Some experts argue the staffing industry is a leading indicator for economic growth. As such, the high penetration rate would forecast a drop in the overall unemployment rate. While the penetration rate continues to climb and the unemployment rate has declined in recent years, these two events can be interpreted as coincidental. In fact, other experts argue the industry is simply a coincident indicator that follows the ebbs and flows of the economy.

According to the American Staffing Association, “Temporary help employment is a particularly strong coincident economic indicator when the economy is emerging from a recession.”

Temp-to-Hire’s Trending

Temps Can Cause Legal Headaches

By Richard Hu and Rachel L. Schaller

In 2013, the staffing industry generated $122 billion in sales, with $109.2 billion coming from temporary and contract staffing, according to the American Staffing Association.

Companies often use temporary employees because they offer scheduling flexibility, potential savings in time and money and specialized skills.

As more employers use staffing agencies, they should pay attention to the possibility that their organization, and not the staffing agency, could be liable for the tortious conduct of a temporary employee.

1. A Tale of Two Employers: When a temporary employee, initially employed by a staffing agency, is assigned to work for a second employer, the employee can be found to have two employers: the former a “general employer” and the latter a “special employer.”

2. Determining Who Has Control: Legally speaking, the company “in control” may be liable for a temporary employee’s tortious conduct because that company is in the better position to take measures to prevent the tortious conduct or injury. To determine if your company is “in control,” consider the following factors: how the contract specifies which employer has control over the temporary employee; the degree of control your company has over the manner and method of the employee’s work; the degree of supervision customarily associated with the type of work performed; who has the ability to discharge the employee.

3. A Special Employer’s Actions Must Be Within the Scope of Employment:A special employer is not automatically liable for a temporary employee’s negligence simply because the conduct occurs during business hours or on business premises. In order for an employer to be liable for its employee’s actions, the action must be directly related to the employee’s work.

Richard Hu and Rachel L. Schaller are attorneys in the Chicago office of Taft, Stettinius and Hollister.

Aaron Green, president of the Professional Staffing Group Inc. said that while companies have turned to more temporary help to ensure greater workforce flexibility, the new trend of temp-to-hire practices has also driven the penetration rate to an all-time high.

“Coming out of the recession, it seems like a lot of organizations made the decision to use more temporary staffing, and moved away from building up large fixed workforces. We really haven’t seen that trend change,” he said. “But there’s also been a lot more temp-to-hire going on right now. Some of that penetration rate is driven by a method of getting someone hired on relatively quickly.”

In addition to a faster hiring process, like greater flexibility with more temps, the temp-to-hire trend affords organizations an extra degree of protection. In this case, though, organizations are protected from risky or unproductive employees rather than the vicissitudes of the economy. Organizations can use a temporary position as an audition for an open full-time job.Data Bank 4 October 2014

Temporary jobs “provide a company the opportunity to hedge its bets,” said Randstad’s Link. “You can hire a staffing company to find qualified individuals to come into your work site, and the risk is significantly less than if you hired a full-time staff. It mitigates costs and exposure an employer might have to economic conditions or even making a bad hire.” 

While organizations can benefit from the flexibility of a contingent workforce, temporary workers, especially recent college graduates, have taken to using short-term work as a way to build skill sets and gain professional experience.

“It’s a way to get your foot in the door at an organization, and it’s a way to build your résumé, which is a natural for people with fewer skills or less experience,” Green said.

Another trend that industry experts have noticed recently is baby boomers turning to temp agencies for part-time work after starting retirement.

“They’re boomeranging bacData Bank 2 October 2014k into the workforce after retirement. They’ve got a lot of brain power and energy, and they want to get involved in the workforce again,” McDonald said.

War for Talent

Industry experts agree that improved ecoData Bank 3 October 2014nomic conditions have led to a more competitive environment for talent. With a scarcity of jobs during the recession and the years closely following, employers held the upper hand in employment situations, even for workers with specialized skill sets such as information technology and health care. As the economy continues to improve, though, those with specialized skill sets are increasingly at an advantage and have more control over their professional lives. 

The competition for the best workers among organizations is commonly referred to as the war for talent.

“It’s a much more competitive landscape now. People who are looking for work tend to have multiple choices for their next opportunity. It’s not uncommon for somebody to get one offer, and then having the choice to takData Bank 1 October 2014e it or continue to look for work,” Green said. “That trend was probably just emerging about a year ago, but now that it’s fully in place, companies are having a harder time attracting good people.”

The unemployment rate for individuals 25 years and older with a bachelor’s degree or higher is 3.2 percent, much lower than the 6.1 percent overall unemployment rate, according to the BLS.

A specialized skill set not only typically leads to landing a job; it usually means earning a higher salary, too.

According to the Robert Half 2014 Salary and Hiring Outlook survey, starting salaries for technology sector workers are expected to increase by 5.6 percent. More specifically, salaries for mobile application developers, software developers and user experience designers are predicted to rise by 7.8, 7.7 and 7.5 percent, respectively.

Starting salaries for those in accounting and financial services (3.4 percent), creative and marketing (3.3 percent), administrative and office support (3.3 percent), as well as legal services (2.7 percent) are all expected to increase, the survey said.

At 4.8 percent, lawyers with at least four years’ experience are expected to see the highest salary increase out of all nontechnology-focused professions. Financial analysts with at least one year of experience are predicted to see the second highest salary increase of all nontech-related professionals at 4.3 percent.

“Salary increases for temporary workers are following what we’re seeing in the permanent placement market,” McDonald said. “In the high-demand areas, we’re seeing salary increases, and in the low-demand areas, we’re not.”

People with science, technology, engineering and math backgrounds — popularly known as STEM — are typically some of the most highly sought-after workers for temporary positions, Link said, who added that their desirability doesn’t make them harder to find, just harder to woo to a specific organization.

In addition to people with STEM skills, other highly prized workers include health care professionals as well as managing and professional services workers. Randstad has even seen an increase in lawyers turning to staffing firms for work, favoring the flexibility that contracted service offers over long-term responsibilities at one organization.

Staffing firms have started to confront the increasing challenge of attracting top talent. For example, Professional Services Group has added resources to aid its recruiting department as it grows and talent becomes more difficult to recruit, Green said. The company recently increased its recruitment staff, updated its recruitment software tools and partnered with Monster Worldwide Inc. to overhaul its website, all in hopes of gaining an edge in the war for talent.

A staffing firm’s success is dependent on the strength of its recruiting strategy in Link’s opinion.

“The attraction, attention and engagement in the recruitment of employees is going to have to become more and more central to the entire human management team of an organization,” Link said. “Paying more attention to how we pull people into our companies and keep them there is something that all organizations need to do.”

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