The number of employees working for staffing agencies reached an all-time high last year. According to the Bureau of Labor Statistics, on a seasonally adjusted basis, 2.944 million workers were employed in temporary or contract work by the nation’s staffing firms.
Contract labor has become a part of the strategic workforce mix of most large and many mid-sized businesses. By at least one estimate, temp and contract workers could make-up 50% of the workforce of the Fortune 100 by 2020.
Keep in mind that staffing agencies provide only a part of the nation’s contingent workforce.
Many staffing firms, especially those in major metros provide white collar professionals and specialized service sector workers to employers who need help for special projects or to meet short term needs. And many firms also have a full-time, permanent placement division.
What does the future hold?
Just slightly more than a generation from now the U.S. economy will be “scarcely recognizable.” Full-time, permanent employees will still exist, but they will be a minority of the workforce. So-called gig workers — today’s agency-employed temps and contractors, as well as independent contractors, and those affiliated with a company like today’s Uber and Lyft drivers — will be the majority.
Short term assignments will be common, with few workers taking a job and keeping it for their entire working life. Staffing firms will also be transformed, serving more as talent agencies, representing individuals with unique and special skills.
You can see the transformation already. By the freelancer placement platform Elance / oDesk and the Feelancers Union, 53 million Americans already work as freelancers — contractors or temps, moonlighters and freelance business owners. That’s 34% of the workforce already.
Stay tuned – there’s a lot more to come on this issue
The highly anticipated final rule change to the salary basis threshold goes into effect December 1, 2016. Most employers are focused on analyzing compensation data to determine whether it would be advantageous to adjust pay to meet the new threshold and retain the exempt status for those employees close to the mark. However, that may be a short-term view with potentially longer-reaching implications, as it could lead to pay compression throughout the entire salary structure.
Similar to throwing a stone in a puddle, the ripples could mean additional adjustments deeper into the organization making for a greater expense than perhaps initially calculated.
The final rule does not change the duties test for exempt employees, a potential blind spot for those who do not ensure both salary and duties meet the requirements of the regulations, as exemption is not an “either/or” but a “both/and” determination. Misunderstanding what actually qualifies an employee as exempt is common and could cost an organization considerably in the form of back wages, overtime, penalties, and, in some cases, attorney fees. For more detailed information, please feel free to contact us.
If you’re not fully familiar with the details of the final rule change – it is important to keep yourself and your company updated.
Hmm – interesting, eh? Are we looking at the “new normal” – is an increasing temporary workforce going to be the new way companies will hire?
Many think so ..
The fastest-growing sector of the labor market since the end of the recession says a lot about the type of sluggish recovery the economy is experiencing.
Since June 2009, the temporary help services industry, which is comprised of staffing companies and temporary agencies, has added 557,000 jobs, or 54 percent of all jobs created across all sectors of the economy, according to the Bureau of Labor Statistics. Roughly one in every 50 employed Americans held a temporary or contingent position as of the end of 2012.
Coming out a recession, employers typically hire temporary employees first, then begin bringing on full-time staff. This time around was no different. In September 2009, the staffing industry began adding jobs. Six months later, in March 2010, the private sector followed suit. But since then, job growth has been anemic, and the transition to permanent payrolls has been painfully slow. Cautious employers seem determined to add mostly temporary employees—or no employees at all—to their payrolls.
“If you look at the bigger picture … we’re moving toward a new reality in the way we work,” says Kathy Kane, a senior vice president at a major staffing firm in New York. “A lot of those companies are sitting on a lot of cash, but they’re uncertain with economic stability. They’re looking at contingent and temporary work as more of a risk-management strategy right now. They’re trying to put their toe in the water versus jumping back in with both feet.”
Employers view the workforce as more flexible than in the past. It’s expensive to lay off full-time employees during a slowdown then hire new ones when business recovers. So rather than take on a new batch of full-time employees, companies have opted to hire on a contingent basis. “Companies are migrating their workforce from 100 percent core down to 80 or 90 percent core, and then leaving 10 to 20 percent of their workforce as what I would call ‘perpetual contractors’ or ‘definite temps’ with no expectation to ever move those people back to their core workforce,” says David Lewis.
In the past, the bulk of hiring in the temporary services industry was commercial hiring, in relatively low-paying industries like construction and manufacturing. But a fundamental shift is taking place, labor market experts say, because temporary jobs are popping up across all sectors of the economy. Even employers in high-skilled, well-paying industries such as engineering, information technology, accounting, and healthcare are taking on more contract workers.
“What we generally estimate, in terms of revenues or sales for the staffing industry as a whole, more than half of it now comes from professional, technical, and other high-skill, high-wage occupations,” says Steven Berchem, vice president at the American Staffing Association (ASA) in Alexandria, Va. “So in other words, less than half of it comes from commercial staffing, which would be industrial and office clerical.”
For the 14 million unemployed, temp work may provide a new path to a permanent job. In this slow recovery, many employers are choosing to hire new employees on a part-time basis before extending a permanent offer—whether it’s entry-level positions for workers who are fresh out of college or higher-level positions for workers who have been in the labor force for many years. “More and more staffing clients are saying they’re turning to staffing firms as a way to find permanent help or permanent workers, so it’s a way for both the employee and a business to evaluate each other to see if it’s a good fit,” says Berchem.
According to a WSJ editorial last week – the National Labor Relations Board has now put the franchise business model in jeopardy.
In a decision with potentially devastating economic effects, the National Labor Relations Board’s general counsel this week ruled that McDonald’s Corp. could be treated, in labor complaints, as a joint employer of its franchisees’ workers. This determination directly threatens the franchise business model that has encouraged countless American small business owners, creating jobs and broad-based economic growth.
The NLRB’s three-decades-old joint-employer standard requires that employers meaningfully affect “matters relating to the employment relationship such as hiring, firing, discipline, supervision, and direction” to be considered joint employers. By contrast, the franchise business model is predicated on the idea that franchisers do not involve themselves in those aspects of employment. The owner of your local McDonald’s decides who mops the floors; the decision doesn’t come out of headquarters in Oak Brook, Ill. The franchising business model has succeeded because it allows franchisees to control costs, such as labor, and reap the benefits of running their businesses profitably.
The franchiser/franchisee relationship is built on a division of roles and responsibilities. The franchiser owns a unique system, which it licenses and protects as a brand. The franchisee operates an independent business under the brand’s trademarks at one or more locations as a licensee.
It’s a lose-lose scenario for everyone.
The NLRB’s attack on the franchise business model is especially unfortunate because franchising plays an integral role in the U.S. economy.
As of 2012, there were nearly 750,000 franchise establishments in the U.S. employing about 8.1 million people, according to the International Franchise Association. An IFA report on the industry in 2005 found that the total economic impact of franchising in the U.S. that year was to add 21 million jobs and $660.9 billion in payroll. That’s 15.3% of all private jobs and 12.5% of private payrolls. Franchising’s impact has grown in the nine years since that report.
Franchisers and their franchisees are not joint employers, and the NLRB is defying reality by pretending otherwise. Many budding entrepreneurs got their start as franchisees, and millions of young Americans have gained their first work experience in franchise restaurants. Killing a business model that has been such an American success would be one of the current administration’s most misguided moves.
According to the Staffing Industry Analysts, the number of U.S. staffing services jobs rose by 10,100 jobs in June for a total of almost 2.9 million jobs, according to seasonally adjusted numbers released today by the U.S. Bureau of Labor Statistics. The temp penetration rate — the number of staffing jobs as a percent of total employment —reached a new high of 2.0677 percent.
Other important statistics …
The U.S. added 215,900 temp jobs year-over-year; year-over-year growth has been easing since March.
The U.S. unemployment rate was 6.1 percent in June, down from 6.3 percent in May. The college-level unemployment rate edged up to 3.3 percent in June from 3.2 percent in May. College-level unemployment can serve as a proxy for professional employment.
Total nonfarm employment rose by 288,000 jobs in June to a total of approximately 138.78 million. Employment increased in professional and business services, retail trade, food services and drinking places, and health care.
“The labor market remains surprisingly and resiliently strong, as evidenced by the gain of 288,000 new jobs created in June,” according to The Conference Board. “This is not just catch up after a bad winter. It also reflects some gathering strength in the economy. More consumer demand could drive more investment in capital (to give workers the tools to get the job done) and more investment in human capital. One big question is whether there will be enough upside to continue to drive up wage gains.” We’ll see .
WOW – if you’ve had a ruling that affected your business in the last 2 years from the NLRB – you should read this …
The Supreme Court delivered a blow Thursday to President Obama, ruling that he went too far in making recess appointments to the National Labor Relations Board.
Hmmm … isn’t it interesting that some products and services increase in price so rapidly, while others continue to fall ..
The old adage that ” what is subsidized continues to grow; while what is competed for continues to decrease” is certainly true among items affected by the government.
Below is a re-tweet that shows a great chart – items that are subsidized by the government have soared in price, i.e. education, child care, housing .. while non-subsidized, i.e. computers, televisions, staffing services, etc., have continued to go down.. check out this chart