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The Price of Profits

The temp industry is at an all-time high

Sarah Gardner Jun 17, 2016
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courtesy Flexographic Trade Services

Allegis, Adecco and RandstadThey’re not exactly household names, but these multibillion-dollar companies play a key role in the American economy. They are “staffing agencies,” commonly known as temp agencies, and along with firms like Kelly Services and Manpower, they supply temporary labor to the Fortune 500 on down. Temp hiring has leveled off recently, but it has been a key source of job growth since the recession.

The staffing industry has been capitalizing on what you might call “domestic outsourcing.” Jim Link, chief human resources officer for Randstad North America, said that after the recession, so-called “contingency workers” turned from stopgap measure to permanent corporate policy.

“More and more employers began to build models of getting work accomplished through something other than a full-time employee,” Link said.

Some companies hand over entire corporate departments to a staffing agency. It frequently happens in IT and human resources, especially with hiring. “We will come into a company, and they’ll quite simply hand over the entire recruiting operation to us,” Link said.

The staffing industry used to be mostly light industrial and clerical. Think Kelly Girls, those white-gloved office workers who typed fast and filled in when the boss’ secretary went on vacation. Now, temps are everywhere, and more of them are working in high-wage, high-skill jobs. Temps can be chief financial officers, engineers and doctors. Health care and IT have been among the fastest-growing categories.

Companies like using temporary labor. They can quickly staff up or down as markets change. They don’t have the hassle of handling worker benefits or the costs of hiring and firing. And it allows companies to launch new projects without raising employee headcount.

“I think investors, to some degree, pay attention to profit per employee,” Link said.  

The cost savings to business have always been a strong selling point for the agencies. A 1971 ad from Kelly Services features a young woman called the Never-Never Girl. “Never takes a vacation or holiday. Never asks for a raise. Never costs you a dime for slack time. When the workload drops, you drop her,” the copy read. 

The staffing industry is now at an all-time high. Nearly 16 million Americans worked as a temp or contractor for a staffing agency last year. Those temporary placements translated into about $120 billion in revenue. That’s $13 billion more than Amazon’s last year.

But it’s not as lucrative a business as you might think, according to Steve Berchem, chief operating officer of the American Staffing Association.

“Profits in the staffing industry are similar to those in the grocery industry, you’re talking pennies on the dollar, low single digits,” Berchem said. “So it’s not an extraordinarily profitable business, but there is high volume.”

Agencies typically make the most placing people in permanent jobs, but that is getting more difficult. Laquita Stribling, regional vice president for Randstad USA in the Nashville metro area, said companies now expect workers, both temp and permanent hires, to contribute and be productive from the get-go.  

“It used to be a time where if the person had good work ethic and good people skills, that companies were willing to bring them in and train them,” Stribling said. “We don’t see that very much at all anymore.”

Stribling’s company, Randstad, made a name for itself supplying 16,000 temp workers to the 1996 Olympics in Atlanta. Stribling said it has 15 offices in the Nashville region alone. It’s the fifth-largest employer if you count both Randstad internal staff and all its placements, temp and permanent.  

Temporary employment accounted for more than 2 percent of U.S. employment last year. According to a Department of Commerce report, temp workers tend to be younger than the average worker. They’re more likely to be women without an advanced degree, and typically earn less per hour than their permanent counterparts.

Correction: A previous version of this story misidentified Laquita Stribling’s position with Randstad USA. She is regional vice president. The text has been updated.

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