George Erickcek
Susan Houseman
W.E. Upjohn Institute for Employment Research
300 S. Westnedge Ave.
Kalamazoo, Michigan 49007-4686
May 1997
The research for this report was partially funded under contract no. 41USC252C3 from the U.S. Department of Labor. The analyses and conclusions presented herein do not necessarily represent the offical position of the U.S. government.
Temporary help agency workers: Individuals who work at the establishment but who are not paid through an employment agency and are not on the organization's payroll.
Short-Term Hires: Individuals who are employed directly by the organization for a limited and specific period of time. Short-term hires include workers hired for the December holiday season or during the summer and they may work part-time hours.
Regular Part-Time Workers: Individuals on the organization's payroll who work less than a full work week and who are not short-term hires. "On-call" workers who are used only on an as-needed basis are also excluded from this definition.
On-Call Workers: Individuals, who are often part of an on-call worker pool, who are called in to work only as needed. They can be scheduled for several days or weeks in a row. Regular workers who are "on-call" for possible work during unusual hours are not included.
Independent Contract Workers: Individuals who are employed by another organization to perform tasks or duties as specifically contracted by the organization. Independent contract workers may be used for carrying out administrative duties or providing business support such as security, engineering, maintenance, sales, data processing, and food service. Independent contractors may also be used to perform activities that are core to the business's operations.
This study is the first employer survey on flexible staffing arrangements to be representative of private sector practices across the nation. We surveyed a stratified random sample of establishments with five or more employees. As shown in Table 1, the employment-size distribution of the establishments surveyed closely matches that of private sector employers across the country. In addition, as shown in Table 2, the surveyed establishments represent all sectors of private industry.
| Establishment Size | Private Sector Employment |
Establishments in Survey |
|---|---|---|
| 5-9 employees | 9.6% | 11.5% | 10-19 | 12.0 | 12.2 |
| 20-49 | 17.4 | 17.1 |
| 50-99 | 13.5 | 14.2 |
| 100-249 | 16.6 | 15.8 |
| 250-499 | 9.6 | 9.3 |
| 500+ | 21.4 | 20.0 |
According to our estimates, in 1995 agency temporaries added 1.5 percent to regular employment and short-term hires added 2.3 percent to regular employment among private sector establishments with five or more employees. Eighteen percent of regular workers worked part-time. These figures are in line with available estimates from government data, which suggests that the information collected in our survey is representative of flexible staffing practices in the United States.
| Number | Percent | |
|---|---|---|
| Agriculture | 8 | 1.5 |
| Mining and Construction | 18 | 3.3 |
| Manufacturing | 78 | 14.2 |
| Transportation, Utilities, Communication | 28 | 5.1 |
| Trade | 164 | 29.8 |
| Service | 225 | 40.9 |
| Not Available | 29 | 5.3 |
Forty-six percent of surveyed establishments use workers from temporary help agencies, 38.2 percent use short-term hires, 71.6 percent employ part-time workers, 27.3 percent use a=on-call workers, and 43.5 percent use independent contract workers (Table 3). Excluding part-time workers (which the vast majority of establishments use), 78 percent of the establishments in our survey use at least one of the other types of flexible staffing arrangements.
| Use | Don't Use | Don't Know | Sample Size | |
|---|---|---|---|---|
| Temporary Help Agency Workers | 46.0 | 53.5 | 0.5 | 550 |
| Short-Term Hires | 38.2 | 61.5 | 0.4 | 550 |
| Part-Time Workers | 71.6 | 28.4 | 0 | 550 |
| On-Call Workers | 27.3 | 72.4 | 0.4 | 550 |
| Contract Workers | 43.5 | 54.7 | 1.8 | 550 |
The use of different types of flexible workers varies across industries, as shown in Table 4. Manufacturers are heavy users of temporary workers; 72 percent of all manufacturers surveyed use temporary workers. A high percentage of service establishments and retailers hire part-time workers (82 percent and 78 ercent, respectively).
| Percent of Survey Extablishments that Use: | ||||||
| Industry | Temporary Help Agency Workers | Short-Term Hires | Part-Time Workers | On-Call Workers | Contract Workers | Number of Observations |
|---|---|---|---|---|---|---|
| Agriculture | 50 | 63 | 38 | 13 | 25 | 8 |
| Mining/Construction | 56 | 33 | 33 | 11 | 61 | 18 |
| Manufacturing | 72 | 23 | 41 | 13 | 54 | 78 |
| Transportation, Public Utilities & Communications | 50 | 39 | 79 | 21 | 54 | 28 |
| Trade | 37 | 38 | 78 | 16 | 34 | 164 |
| Services | 44 | 42 | 82 | 44 | 47 | 225 |
2. The flow of themporary jobs during the year is much greater than the number of temporary jobs that exist at any point in time.
By their very nature, temporary jobs are short-lived. Our data suggest that over the course of the year, employers create seven to eight times the number of jobs for temporary agency workers and five to six times the number of jobs for short-term hires as would exit at any point-in-time. Although individuals may hold multiple temporary jobs, it is likely that many more individuals experience a spell of temporary employment during the year than are identified in government establishment and household surveys, which measure temporary employment at a point in time.
3. Employers report using flexible workers for a variety of reasons, the most common being to accomodate workload fluctuations and to fill positions that are temporarily open due to permanent employees' short-term absences.
Employers most often use flexible work arrangements in order to accomodate fluctuations in their workload over the day, week or year and to fill positions for regular employees that are temporarily absent. The three most frequently given reasons for hiring workers from temporary help agencies are to provide needed assistance at times of unexpected increases in business, cited by 52 percent; to fill vacancy until a regular employee is hired, cited by 47 percent; and tot fill in for an absent regular employee who is sick, on vacation, or on family medical leave, cited by 47 percent (Table 5).
Seasonal needs, cited by 55 percent of employers using short-term hires, appear particularly important in the use of that type of flexible staffing arrangement. Among those using part-time workers, 62 percent use them to provide needed assistance during peak-time hours of the day or week and 49 percent use them to provide needed assistance during hours not covered by full-time shifts. Among employers using on-call workers, 69 percent use them to cover for absent regular employees and 51 percent use them to provide needed assistance at times of unexpected increases in business.
Employers may raise productivity and thus lower labor costs by more effectively screening the workers they hire into regular positions. Screening candidates for regular jobs was cited as important by 21 percent of employers using temporary help agency workers. It was also cited as important by 15 percent of employers using part-time workers.
Interestingly, 54 percent indicated that accomodating employees' wishes for part-time hours is important in their use of part-time workers, suggesting that in many cases employers offer part-time hours to hold onto valued employees.
Finally, 12 percent of employers using workers from temporary help agencies and 21 percent of employers using part-time workers indicated that the potential savings on wage and benefit costs is an important reason for hiring workers.
| Temporary Help Agency | Short-Term Hires | Part-Time Workers | On-Call Workers | |
|---|---|---|---|---|
| Reasons Concerning Staffing Levels | ||||
| Fill vacancy until regular employee is hired | 46.6 | 20.5 | -- | 26.0 |
| Fill in for absent regular employee who is sick, on vacation, or on family medical leave | 47.0 | 30.0 | -- | 69.3 |
| Seasonal needs | 28.1 | 54.8 | -- | 29.3 |
| Provide needed assistance during peak-time hours of the day or week | 14.2 | -- | 62.4 | 37.3 |
| Provide needed assistance at times of unexpected increases in business | 52.2 | 31.0 | -- | 50.7 |
| Special projects | 36.0 | 37.6 | 20.8 | 26.0 |
| Provide needed assistance during hours not covered by full-time shifts | -- | -- | 48.7 | -- |
| Other Reasons | ||||
| Screen candidates for regular jobs | 21.3 | 9.0 | 14.7 | 8.0 |
| Save on wage and/or benefit costs | 11.5 | 8.1 | 21.3 | 6.0 |
| Provide needed assistance during company restructuring or merger | 7.5 | 6.2 | -- | 6.0 |
| Fill positions with temporary agency workers for more than one year | 5.1 | -- | -- | -- |
| Save on training costs | 5.1 | -- | -- | -- |
| Special expertise possessed by this type of worker | 10.3 | 15.7 | -- | 16.0 |
| Accomodate employees' wishes for part-time hours | -- | -- | 54.1 | -- |
| Unable to find qualified full-time workers | -- | -- | 11.4 | -- |
| Sample size | 253 | 210 | 394 | 150 |
4. Companies often save on hourly labor costs by hiring flexible workers. These savings occur primarily becasue of lower fringe benefit costs associated with workers in flexible staffing arrangements. Companies that offer generous benefits to regular workers are more inclined to use workers in flexible staffing arrangements and/or to use these workers more intensively.
Respondents were asked to compare the hourly wage and the hourly wage plus the hourly benefit costs of short-term hires, part-time workers, and on-call workers with those of regular workers in similar positions. For workers from temporary help agencies, respondents were asked to compare the billed hourly rate of agency temporaries with the hourly wage costs and the hourly wage plus the hourly benefit costs of workers in similar positions.
While only a small percentage of establishments indicated that the hourly wage csots (or hourly billed rate) of workers in flexible staffing arrangements are lower than the hourly wage costs of regular workers in similar positions, a large percentage responded that the total of hourly wage plus benefit costs is lower for workers in flexible staffing arrangements than for regular workers in similar positions (Table 6).
| Higher | Lower | About the Same | Don't Know | |
|---|---|---|---|---|
| Temporary Help Agency Workers¹ | 19.4 | 38.3 | 38.3 | 4.0 |
| Short-Term Hires | 2.9 | 59.4 | 29.7 | 8.0 |
| Part-Time Workers | 2.8 | 62.9 | 31.5 | 2.8 |
| On-Call Workers | 5.3 | 72.7 | 19.3 | 2.7 |
Three of the five categories of flexible workers are direct employees of the establishment: short-term hires, part-time workers, and on-call workers. Employees in these positions are much less likely to receive fringe benefits such as paid vacations and holidays, paid sick leave, pensions, and health insurance than are regular, full-time workers (Table 7).
| Part-Time Workers | ||||||
|---|---|---|---|---|---|---|
| Short-Term Hires | To Any Part-Time | To 50% or More | On-Call Workers | Regular Full-Time Workers | ||
| Paid Vacation & Holidays | 11.0 | 53.7 | 48.3 | 15.3 | 95.8 | |
| Paid Sick Leave | 5.7 | 35.8 | 32.0 | 11.3 | 83.5 | |
| Pension Benefits | 3.8 | 37.6 | 30.2 | 14.0 | 78.5 | |
| Profit or Gain Sharing | NA | 16.0 | 13.1 | 6.0 | 37.6 | |
| Health Insurance | 9.5 | 38.9 | 34.2 | 13.3 | 89.8 | |
| Any of the Above Benefits | 16.2 | 66.7 | 60.2 | 24.7 | 96.5 | |
The large gap in benefits occurs not because flexible workers are concentrated in firms providing few benefits, but rather because firms distinguish between flexible workers and regular, full-time workers in determining benefits eligibility. Statistical analysis shows that establishments offering good benefits to regular, full-time workers are more likely to use various flexible staffing arrangements and/or are more likely to use flexible staffing arrangements more intensively.
5. Although there is evidence of some mobility of workers in flexible staffing arrangements into regular positions, relatively few employers report "often" promoting these workers.
For most types of flexible workers, a majority of employers report seldom or never moving them into regular positions and relatively few report often promoting them. Still, 43 percent of employers using agency temporaries, 43 percent of employers using short-term hires, 54 percent of employers with regular part-time workers, and 46 percent of employers with on-call workers report often, occasionally, or sometimes moving these workers into regular positions (Table 8). Moreover, there is a positive and significant correlation between the degree to which employers promote agency temporaries into regular positions and the intensity of their use of these workers.
| Often | Occasionally/ Sometimes |
Seldom | Never | Don't Know | |
|---|---|---|---|---|---|
| Temporary Help Agency Workers | 11.5 | 31.3 | 19.0 | 36.8 | 1.6 |
| Short-Term Hires | 9.0 | 34.3 | 17.1 | 38.6 | 1.0 |
| Part-Time Workers | 14.7 | 39.6 | 16.0 | 28.9 | 0.8 |
| On-Call Workers | 9.3 | 26.7 | 27.3 | 32.7 | 4.0 |
6. Our survey provides evidence that use of some types of flexible staffing arrangements has grown in the 1990s.
Slightly more employers indicated that their use of temporary agency workers, short-term hires, and on-call workers had increased than said their use decreased. A much larger number of establishments increased their use of part-time workers relative to full-time workers than decreased their use.
A substantially greater number of establishments also reported contracting out work previously done in-house than reported bringing work back in-house. Since 1990, 18 percent of all establishments in our sample have contracted work out previously done in-house, while 10 percent brought work back in-house that was previously contracted out. the large number of respondents indicating some change in the use of contract workers just since 1990 suggests substantial restructuring of production and employment relations in our country. Together with findings from earlier surveys, our data suggest that there has been a trend toward contracting out at least since 1980.
7. Most businesses foresee an increase in the use of flexible staffing arrangements in their industry.
About two-thirds of the survey respondents predicted that businesses in their industry would increase their use of flexible workers--such as workers from temporary help agencies, short-term hires, part-time workers, on-call workers, and contract workers--in the next five years.
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