SIC 7363 Help Supply Services

Encyclopedia of American Industries | 2005 | Copyright

SIC 7363
HELP SUPPLY SERVICES

This classification includes establishments primarily engaged in supplying temporary or continuing help on a contract or fee basis. The help supplied is always on the payroll of the supplying establishments but is under the direct or general supervision of the business to which the help is furnished. Establishments providing both management and staff to operate a business are classified according to the type of activity of the business. Also excluded from this industry are establishments primarily involved in furnishing personnel to perform a range of services in support of the operation of other establishments, which are classified in SIC 8744: Facilities Support Management Services. Establishments supplying farm labor are classified in SIC 0761: Farm Labor Contractors and Crew Leaders.

NAICS Code(s)

561320 (Temporary Help Services)

561330 (Employee Leasing Services)

Industry Snapshot

Temporary employment is viewed by many economists as a leading economic indicator due to the fact that businesses can instantly correct changes in demand by stepping up or scaling back their temporary help. Typically, demand for temporary works has slowed in periods of economic recession, including the mid-1970s, the early 1980s, and the early 1990s. After a decade of phenomenal growth—with industry revenue tripling between 1990 and 1999 and reaching an all-time high in 2000—growth in the help supply industry slowed in the economic recession of the early 2000s.

Annual revenue of temporary help services was $56 billion in 2001, a 12 percent drop from $64 billion in 2000. After a record-setting daily temporary employment of 2.54 million in 2000, jobs were reduced 14 percent, or 360,000, to 2.18 million in 2001, the lowest since 1996. Although in the late 1990s and 2000 temp agencies struggled to recruit and keep enough staff to fill a growing amount of demand, the economic slowdown and unemployment rates rising alarmingly high have contributed to the shrinking temp market, where many agencies are under increasing pressure to fill fewer slots with more qualified workers. While fewer temps were being hired for full-time positions, employee turnover at temp agencies dropped to 341 percent in 2001 from 418 percent in 2000. There were 9.6 million people employed by temporary staffing companies in 2001, with over half eventually moving into permanent jobs.

Staffing agencies have made work more attractive, offering benefits and other perks that were not traditionally associated with temporary employment. Though the industry's core markets lay in clerical and light industrial personnel, during the 1990s sizable markets emerged for technical and professional temps—everything from programmers and engineers to accountants and lawyers.

The industry has also been able to build revenues faster than net placement levels. Several trends contributed, including rising wages, greater numbers of higher skilled placements, and, most recently, value-adding human resources services offered by staffing firms. For example, the use of vendor-on-premises services, in which the agency places a coordination staff on a large customer's site to manage temps in person, grew from 2,000 worksites in 1995 to 4,500 in 1999. The same year, even though average placement levels edged up just 3.9 percent, industry revenue increased 9.5 percent.

Leading reasons cited by companies for hiring temporary employees included unexpected increases in business, to fill a vacancy temporarily, to fill in for absent regular employees, for special projects, for seasonal needs, to screen job candidates, for assistance in peak times, to save on wage and benefit costs, and to gain special expertise.

Organization and Structure

Companies contract with staffing agencies to obtain personnel on a contingency basis. Typically the temp earns less than his or her in-house counterparts and receives benefits, if any, from the agency rather than the host employer. The company requiring temporary help usually pays anywhere from 25 percent to 50 percent of a temp worker's hourly wage to the agency to cover its fees. Although this may make temps more expensive than in-house workers on an hourly basis, in the long run companies figure they save from the flexibility and reduced administrative burdens of having a smaller in-house labor force.

More than 23,000 temporary employment establishments in the United States were in operation in 1997, more than twice the number that were operating in the early 1980s. The companies managing these operations were primarily small, independent, one-office concerns, with a handful of companies operating on a national, and sometimes international, level. The relatively low investment required to establish a temporary employment business has encouraged small operators to enter the industry since its inception and accounted for the large representation of such companies in the 1990s.

Compared to the average number of employees per...

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