Temporary-help industry, after temporary slack, is back strong
Troy, Mich. — The temporary-help industry is as cyclical as they come. Its earnings were off seriously during the last recession, as is usual during a downturn. But for every step backward over the last several years, the industry has taken two steps forward. And those strides have been long enough to make for average annual growth rates of 17 to 22 percent over the last decade, despite recessional dips.
And business right now? ''It's excellent, superior, superb, may it never end, '' croons an executive at one temporary-help firm.
More important, perhaps, for the longer term, some industry officials expect significant growth to come as businesses learn to maintain increasingly leaner permanent staffs and augment them seasonally with ''temps.''
This development is seen as part of a larger trend toward more service employment, and also toward companies' contracting out all sorts of support services from pension fund management to watering the plants around the office.
In times past, says James F. Peil, senior vice-president at Kelly Services, managers ''could raise their price, declare an all-time high in sales and earnings, and pat themselves on the back for what was probably a lower share of market and declining unit sales. You can't do that anymore. You have to perform.''
This, he explained in an interview at Kelly's offices here in this Detroit suburb, means controlling costs.
Noting that ''layoffs are not healthy - they have frightful internal costs,'' Mr. Peil adds, ''Managers are looking to employ a base-line level of staff, the people they need to get out the business they've got. The overstaffing of the past has largely been set aside, for good, sound personnel reasons.''
''People are using temps on a seasonal basis, for planned conversions or word processing, instead of rushing around saying, 'Oh my gosh, my secretary's out sick, I've got to call for a temporary,' '' says James S. Miller, president of Employers Overload, a smaller temporary firm based in Minneapolis.
Harvey Hamel, an economist with the Bureau of Labor Statistics, says that about a year ago, while studying employment surveys, ''I started to notice that the temporary-help industry, though very small, relatively speaking, was growing very rapidly.'' He concluded that the growth was the result of employers hiring temps instead of recalling laid-off employees.
Could this not be the result of employers waiting until they are sure of the recovery before they increase their staffs? ''Next month will make 20 months of solid recovery,'' Mr. Hamel notes. ''Employers can't be that cautious. I think they're finding it's efficient to hire temps to level out the peaks and valleys.''
This ''lean-and-mean'' thesis is not, however, universally subscribed to. Mitchell Fromstein, president of Manpower Inc., dismisses it as ''an old bromide.'' He adds, ''You hear that in this industry after every downturn, when the pain of recession is fresh in the minds of management.
''But that theory starts to fall apart when the economy heats back up and they start hiring again. If the demand really is there for permanent employees, it's not cost-effective to use temporaries.''
On this last point, Mr. Peil concurs. ''Any company that uses temporary help as a substitute when they should have had full-time help ultimately will not be well served.''
And contrary to popular misconception, Mr. Peil says, the cost effectiveness of temporary help does not derive from lack of benefits to the temporary worker. ''The customer doesn't pay for the fringes - but we do.''
More precisely, Kelly, and other firms, pay what might be regarded as ''mandatory fringes'' - the employer's portion of social security tax, unemployment insurance premiums, and so on. And then, since the temporary firms are not there just for eleemosynary purposes, these extra expenses are then reflected in the hourly rates on the bills going to client companies. Estimates of nonwage labor costs range from 37 cents on every wage dollar (according to the US Labor Department) to more than 45 cents, when a more generous concept of ''overhead'' is used.
Where temporary-help firms save businesses money is in sparing them the overhead costs of hiring and firing in high-turnover situations: advertising for help, screening candidates, maintaining personnel departments, and related activities.
Temporary-help firms are also quick to point out that temps are generally ''productive'' 90 percent of the time. Permanent employees, however, involved as they are in office politics, coffee breaks, general schmoozing, and other social rituals of the contemporary workplace, tend to be ''productive'' as little as 65 percent of the time, according to figures the industry cites. ''Temps get in, do the job, and get out,'' one executive says.
Then, of course, temporary workers don't generally get much in the way of what we might call ''nonmandatory fringes,'' including vacations, pensions, insurance, and a spot on the company softball team.
On the other hand, Clyde Ramsey, vice-president of marketing for Olsten Temporary Service, based in Westbury, N.Y., maintains stoutly that ''we pay significant benefits,'' including holiday pay, vacation pay, bonuses for referring other temps, and a cash supplement for employees who are hospitalized. Other firms offer health insurance and even a credit union.
Mr. Peil concedes, however, ''Somebody who needs to work in an environment where benefits are important probably needs to be working full time.
''On the other hand, well over half of our skilled people are covered by someone else's benefits.'' These, of course, are largely women married to men with permanent jobs. Despite the occasional exception to prove the rule, the office/clerical sector, accounting for 65 percent of this $4.5 billion industry, is overwhelmingly female. And Mr. Peil argues unabashedly for the value of temporary work ''for people who have other goals,'' notably housewives who want to be home with their children in the summer.
Generally, industry people say a fairly experienced temp is paid on a par with an entry-level permanent employee. But temps with much-sought-after skills in word processing and other new office machines can earn as much as skilled permanent employees.