SIC 7363 Help Supply Services

 
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SIC 7363

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 because 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, the early 1990s, and the early 2000s. 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 $63.3 billion in 2004, a 12.5 percent increase $56.3 billion in 2003 and almost equal to the $63.6 billion record previously set 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. The decline continued with daily average temporary employment numbers falling to 2.06 million in 2002 before rising slightly to 2.16 million in 2003. The average jumped to 2.55 million in 2004 and reach record levels of 2.8 million in the third quarter of 2005.

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 contributed to the shrinking temp market, where many agencies were under increasing pressure to fill fewer slots with more qualified workers.

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, sizable markets also emerged for information technology (IT) and professional temps—everything from programmers and engineers to accountants and lawyers. During the early 2000s the IT industry dropped off significantly, leaving those employment firms that specialized in IT hardest hit. However, by the mid-2000s, demand for IT personnel was beginning to return to the marketplace.

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. In 2004 approximately 25 percent of all firms with over 100 employees used temporary employment services.

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.

Approximately 6,000 temporary employment firms in the United States, operating approximately 20,000 offices. 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.

Geographically, temporary staffing agencies are fairly evenly distributed throughout the United States. They tend to be located near their customers, and thus agencies are clustered in large metropolitan areas with strong white-collar employment bases.

BACKGROUND AND DEVELOPMENT

The need for temporary or emergency employment presumably has existed ever since industry and commerce in the United States reached substantial proportions; employees have always fallen ill, businesses have always experienced surges of growth and spasms of decline, and a certain percentage of the national labor pool has always been idle. On a theoretical level, therefore, the maturity of the U.S. economy should have induced the emergence of a class of workers willing to satisfy the sometimes fleeting employment needs of corporate America.

The genesis of the temporary employment industry, however, lagged far behind the establishment of the national economy. Although distant progenitors of the industry began emerging as early as 1910, the basic, modern structure of the industry as it exists today did not develop until after World War II. Undoubtedly, businesses and industries had relied on temporary help in some form much before this time, but the industry, as a definable and organized entity, did not appear until the immediate post-war years when two temporary employment companies integral to the industry's organization and growth, Kelly Girl Service and Manpower, Inc., first formed.

Once a need for temporary employees had been identified by these two early entrants in the industry, other similar business were formed in rapid succession. Entry into the industry required little capital investment, with costs incurred from recruiting, advertising, and rent standing as the only significant financial exigencies for the would-be owner of a temporary employment agency. Consequently, with virtually no initial need for fixed investment, and the latent demand for the type of service provided, a majority of the companies that would lead the industry for the next 20 years—Olsten based in New York, Employers Overload in Minneapolis, and Western Girl in San Francisco, in addition to Manpower and Kelly Girl—were already established by the early 1950s.

As the number of industry participants proliferated during the early 1950s, by infiltrating new, untapped markets, the range of services offered by the industry also broadened. Initially, temporary employment agencies provided employees to perform primarily office and clerical duties, the one notable exception being Manpower's industrial niche, but other companies began operating in the early 1950s that focused on providing technical workers, such as engineers, designers, and draftsmen, on a temporary basis. This trend prompted the creation of a new breed of temporary employees that would prove to be a highly lucrative component of the industry. Moreover, some temporary help companies added sales divisions during the decade to perform marketing and promotional assignments, further widening the scope of the industry's services.

The industry received its greatest surge of growth, however, from geographical expansion, as companies already established in the industry...

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