SIC 7361 Employment Agencies

 
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SIC 7361

This category pertains to establishments primarily engaged in providing employment services, except theatrical employment agencies and motion picture casting bureaus. Establishments classified under this code may assist either employers or those seeking employment. Establishments primarily engaged in operating theatrical employment agencies are classified in SIC 7922: Theatrical Producers (Except Motion Picture) and Miscellaneous Theatrical Services; those operating motion picture casting bureaus are classified in SIC 7819: Services Allied to Motion Picture Production; farm labor contractors are classified in SIC 0761: Farm Labor Contractors and Crew Leaders; temporary help services are discussed in SIC 7363: Help Supply Services.

NAICS CODE(S)

541612

Human Resources and Executive Search Consulting Services

561310

Employment Placement Agencies

INDUSTRY SNAPSHOT

An employment agency's major function is to place people into short- or long-term positions. The industry has been positively affected by the boom in technology, the government's efforts to get more people off welfare and into employment, the shift from corporate paternalism to the independent portability of employment skills, and the growing need for professionals on short-term bases. One cannot discount the role of temporary employment firms as a try-before-you buy means of finding full-time employees.

Employment agencies employed a daily average of 2.87 million temporary and contract workers in the United States in the third quarter of 2005. During the 1990s staffing services was one of the fastest growing segments of the U.S. economy, and temp agency jobs grew from less than 1 million average per day in 1990 to 2.54 million in 2000. The financial impact of temporary placement services is evidenced by Adecco, the world's largest employment agency, which posted revenues of $23.35 billion in 2004. By the mid-2000s, nearly one in six young workers was expected to use an employment agency before the age of 35.

Employment agencies are susceptible to changes in the economy. In a strong economy, with low unemployment rates, candidate numbers tend to be lower, but many businesses come knocking, in need of help to identify high quality employees in a tight job market. Agencies may even have difficulty filling a customer's request for employees. When the economy slumps, however, the number of people looking for work increases, and candidates flood the employment offices in search of work. With so many available workers vying for so few new jobs, in a recessive economy employment agencies tend to find themselves with too many potential employees and not enough business clients.

An economic recession, which began in 2001 and was exacerbated by the terrorist attacks of September 11, threw the employment industry into a tailspin. Both temporary and permanent placements fell off significantly, leading many employment firms to leave the industry as profitability disappeared. However, as the economy recovered in the mid-2000s, the employment industry began to show significant improvement, turning robust by 2005.

ORGANIZATION AND STRUCTURE

Employment agencies are defined by the National Association of Personnel Consulting as "offering an orientation of finding jobs for people; building a back log of screened candidates by consistent advertising and by referrals from satisfied candidates and employers." Placement fees are paid by either the job-seeking candidate or the employer and are contingent upon an offer by the employer and acceptance by the job seeker. Fee structures vary but are generally based on a percentage of the annual salary of the job being filled. These fees are also known as contingency fees.

Employment agencies are also called personnel placement firms, personnel consulting firms, and personnel service firms. Executive search, recruiting services, "headhunters," and other firms that help employers fill higher level executive and management positions and place qualified candidates for these particular jobs are sometimes also known as employment agencies. Private agencies are more likely to combine career counseling and placement as one service. Applicants are more "job-ready," whereas public agencies deal with people who are deemed in great need of supportive services before being considered job ready.

Licensed employment agencies are paid by job seekers that come to them for placement. These agencies generally serve hourly workers, first-line supervisors without degrees, clerical workers, and entry-level technical and professional workers. Recruiters locate candidates for positions. Professional search consultants conduct in-depth searches for potential candidates to fill specific job openings.

Search consultants can work on either a contingency or retainer basis. A contingency search typically costs 20 to 30 percent of the hire's salary, paid once the search is completed. Retained searches, usually for top-level jobs, cost a third of the placement's first year pay package, a third of which must be paid up front. For both types of searches, however, other fee arrangements are possible. Some firms will cut their fees if they are guaranteed several assignments. Other recruiters have begun charging on a per-hour basis. With so many start-up firms looking for talent, recruiters, like accountants and lawyers, before them, have received equity stakes in lieu of cash compensation.

BACKGROUND AND DEVELOPMENT

The business of serving as a broker between employers and those seeking employment has existed for centuries, beginning perhaps as early as the fifteenth century. The English practice of indentured servitude would fall under this definition because it involved men acting as employment brokers or agents of free workers. These brokers acted on behalf of employers who did not have easy access to laborers. They negotiated the contracts that bound these free people to work for a specified period. Indentured servants agreed to work in exchange for benefits that ranged from free passage to the New World to food and lodging.

The first known private employment agencies were called "intelligence offices," which began sometime in the early nineteenth century. In his book, Martinez cites the "Employers and Servants Protestant agency"—established in 1819 for the "better regulation of Domestic Servants"—as the earliest reference to a bona fide employment agency. Martinez also notes that the first large scale employment agency appeared in 1863 as the American Emigrant Company, created to "secure laborers and skilled workers for a number of American employers." Fees were collected from employers and registration fees exacted from European job seekers. The agency paid for transportation to the United States then was reimbursed via future deductions from the immigrant worker's wages.

Private employment agencies appear with more frequency in the latter nineteenth century as evidenced by classified advertising in newspapers of the period. Before World War I, private employment agencies recruited manual laborers or female domestics. Almost anyone could be an employment agent—the middleman and often the only source of information between employers and prospective workers.

Immigrants were valuable commodities to employment agencies because they provided cheap, capable, and, to their detriment, naive labor. Because of this imbalance, many immigrants were abused by unscrupulous employment agencies. Employment agencies were often located in poor neighborhoods, saloons, and pool halls, usually as part of patronage systems in big cities like Chicago and New York. People who "got out the vote" were rewarded with jobs.

Agencies specializing in hiring women as domestic servants also concentrated on hiring African American and immigrant women. But there was a difference, states Martinez: "Male employment agents sold jobs to the applicants, while the domestic employment agents sold servants to the housekeepers. In each case, the object being sold was scarce and the buyers were plentiful. Thus the buyer or the party paying the fee was not given as much service as the more precious marketable commodity."

Private employment agencies often had less than stellar reputations. Besides instituting a form of legalized indentured servitude, many often trafficked in providing houses of ill repute with immigrants and minority women who were often unaware of the actual type of employment to which they were applying.

Specialization in the industry did not occur until after the turn of the century, when agencies began serving teachers, nurses, barbers, and engineers. But the...

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