Way back in the olden days, around 2000, it was clear that a recession was coming when temporary staffing stalled. In those days, temp staffing was like a canary in a coal mine. Companies used us as a way to get projects done, and a drop in staffing was a drop in new projects.
Today, the decrease in temp staffing is something a bit more alarming. In the last 8 years, many companies started using contractors as way to replace permanent staffing and bypass onerous regulations. Managers got that laying off contractors was a lot easier than laying off employees, and as contractor rates dropped to match employee salaries, the value of being a contractor turned into a less desirable position for candidates, but sometimes the only way to get steady employment.
It varies by city and region, and your corporate lawyer, but there's little doubt that staffing is going through a rough patch, especially in terms of the larger publicly traded firms.
Gregg Dourgarian looks at the recent election results, and says good news is on the way for the staffing industry with the election of Obama. The likely passage of the Employee Free Choice Act, otherwise known as card check, will electrify the working environment. Basically the EFCA takes away the ability of companies to union bust, and puts it to a simple majority collection of signatures to unionize a business.
There are a lot of questions you should be raising about taking away a secret ballot from workers and forcing companies and union workers into collective bargaining positions, and I've made them clear on other blogs, but I wanted to take a look at Gregg's thesis.
A draconian expansion of FMLA, passage of the Employee Free Choice Act, and strengthened NLRB will be just the start. Soon it will be easier to hire a $10/hr banker than it will be to fire someone. All this will drive employers to creative solutions like outsourcing employment.
Look at France as an example of what's to come - black market employment, little or no 'permanent' hiring, and employment contracts of undetermined length. Agencies that can get their sales teams to sell solutions that mitigate big-brother employment law will do well.
Basically, Gregg is saying that increased regulation and risk of permanent employment will drive companies to turn to contractors, which means more temp staffing revenue.
I agree. The expense of having an employee instead of a contractor has been leading us this way for some time. Contractors qualify for medical benefits, and though they pay more than regular employees and have less stability, the tightening economy means a lot of people have less recourse.
I'm not sure this is such a good thing for temp firms. More employees brings in more revenue, but margins will be cut. If contractors are essentially payrolled, the value of using a temp staffing lies in the 15-20% markup instead of the 50-60% markup enjoyed by most firms. Add healthcare costs into that, and all you've done is shift the problems onto the staffing firms, who have the least amount of negotiating power when they're at their biggest.
I'm with Gregg. I see a short-term benefit as companies seek to avoid the hassles of hiring full time employees by turning to their staffing partners. The headaches of doing so, and the blatant attempt to shift risk to the staffing industry, I think will backfire. Expect new regulations of contractors and freelancers to impact us heavily in 2010.
