BUSINESS/ECONOMY

A temporary workforce

RICHARD KELLY HEFT November 30 1987
BUSINESS/ECONOMY

A temporary workforce

RICHARD KELLY HEFT November 30 1987

A temporary workforce

BUSINESS/ECONOMY

When the crippling recession of 1982 rolled across Canada, it cleared the path for a new growth industry. Companies had to provide expensive layoff and career-counselling pack-

ages for thousands of redundant workers—from janitors to senior managers. That cost was seared in the memory of many of the executives who survived the downturn. Then, in 1983, when the economy began to recover and they started rehiring, many bosses turned to temporary rather than fulltime workers because they could lay off such employees more easily if necessary. As a result, the business of brokering part-time workers took off in Canada. Now, hundreds of agencies are sending roughly 74,000 men and women to work across the country each day in temporary positions. And, said Edward Turner, president of the Toronto-based Hunt Personnel/Temporarily Yours placement agencies, the socalled “temps” play a critical role in the postrecession economy. “Companies do not need to staff entirely on a permanent basis,” said Turner, who founded his company in 1967.

“They can use temps as shock absorbers against change and uncertainty.”

The temporary services industry began in the United States in the late 1940s mainly to supply workers for short-term projects or to replace permanent staff during vacation periods. At that point, the temp business was fuelled by the thousands of women who wanted to stay in the labor force following the Second World War. But in recent years it has grown into a multibillion-dollar industry with hundreds of firms located in North America and others based in Europe and Japan. In the process, it has made multimillionaires of two Canadians who pioneered in the field—William Russell Kelly, founder of Troy, Mich.based Kelly Services Inc., and Winnipeg-born William Pollock, who started Drake International Inc., now one of the biggest placement companies in the world.

But such rapid expansion has also produced some unwelcome side effects, including lawsuits over alleged corporate raiding and charges that some agencies are exploiting and

underpaying workers. Said Austin Thorne, secretary-treasurer of the Canadian Federation of Labour (CFL): “They have created ghettos of secondclass workers.” Added Richard Martin, vice-president of the Canadian Labour Congress (CLC): “The temps are being exploited because they do not receive the benefits of full-time workers.”

In 1980 the temp industry had an estimated payroll of $292 million in Canada. And when the recession hit, the sector did not escape unscathed. But by 1984, as the demand for parttime workers surged, the industry’s payroll reached $559 million, a 35per-cent increase over 1983. And over the first nine months of 1987 the payroll, fed primarily by continuing demand for workers in southern Ontario, totalled an estimated $890 million. Similarly, in the United States, where nearly one million people work as temps, payrolls rose to $10.2 billion in 1986, an increase of 137 per cent from $4.3 billion in 1982.

Competition among the agencies to fill 74,000 part-time positions is fierce, with an estimated 300 to 400 firms operating in Toronto alone and another 600 across Canada. The battle over temp placements in Toronto is so intense, said Turner, that none of the industry’s established players— including Kelly Services Inc., Manpower Temporary Services, Olsten Corp. and Drake International—has been able to capture even eight per cent of the market.

But business is so brisk that many agencies have to turn away potential employers because there are more jobs—mainly in clerical and professional areas—than there are temps to fill them. Said Garfield French, vicepresident of Canadian operations of Westbury, N.Y.-based Olsten Corp.: “We could double the volume of our company tomorrow if we had the people.” Even so, Olsten, with more than 400 offices in the United States and Canada, saw its profits for the first nine months of 1987 jump by 38 per cent to $12.1 million compared with the same period last year. And Milwaukee, Wis.-based Manpower, which was bought by a British employment agency, Blue Arrow PLC of London, for $1.8 billion in September, earned a profit of $43 million in 1986 after losing $40 million the previous year.

Despite such successes, the agencies have remained aggressive. They swamp corporate personnel offices

with direct mailings, telephone calls and visits by high-pressure sales representatives. Susan Williams, co-ordinator of temporary placements at Imperial Oil Ltd. in Toronto, said that the agencies besieged her office when she started at her job six years ago. Said Williams: “It was almost like by some sort of grapevine. Everyone and his brother found out I was new. I still get about six calls a week.” And Williams says she now has about 80 agencies on file.

Companies save money when they hire temporary employees because they do not have to pay such expensive benefits as health care and pension plans. As well, the employer can dismiss temporary help if there is no work to be done. But the hourly rates are still high, and, at least initially, the efficiency of a temporary employee is relatively low. However, from the employees’ point of view, the agencies can be a useful source of income despite the lack of security and benefits. Toronto actor Robert Malcolm, for one, has been working as a temporary word processor off and on for seven years to see his way through the financial highs and lows of his profession. “Temping is perfect because you can make money easily,” said Malcolm.

Temporary agencies generate revenues by operating as middlemen, channelling workers from their offices to employers looking for part-time

help. The agencies hire the workers, then rent them out to clients at a higher fee. The agencies’ earnings— the difference between what they charge a client and what they pay the employee—vary widely from agency to agency and job to job. Different agencies signing a contract to supply a word processing temp at $20 an hour may pass on anywhere from $10 to $15 an hour to that employee. Said one industry representative: “We try to stay around the 34-per-cent return level [to the agency], sometimes more, sometimes less. It depends on the demand.”

Secretarial and office help accounted for about 90 per cent of the revenues that the industry initially generated in the 1950s, but that figure has fallen to about 65 per cent as the temp business diversified into other areas such as light industrial workstuffing advertising inserts into newspapers or packing chocolates—and more specialized tasks such as word processing and accounting. For its part, Montreal-based Staff Services International Inc. left the officeplacement business in 1985 because it was too competitive, and the firm now handles only industrial workers. According to Robert Zizian, general manager of Staff International, scores of other firms are now moving into the industrial sector. “I see new ones every two weeks,” he said. “Business has been pretty good for the last five years and booming in the last year and a half.”

But the cutthroat competition in almost every major Canadian centre has led to some lawsuits over the pirating of staff and major corporate accounts. In one such case last week, Turner said that a Quebec franchise of Temporarily Yours was seeking an injunction against three former employees to prevent them from using client and applicant lists from the franchise.

Meanwhile, another alternative, in which permanent employees are leased to companies, is breaking new ground in the United States and Canada. Indeed, about 300 firms in the

United States and a handful in Canada are now leasing entire

employee groupings, from sen-

ior executives to floor sweep-

ers. These companies are expected to become popular with small employers who do not

want to take responsibility for personnel administration or pay high benefit costs, but who

still want to maintain a cohesive, productive workforce.

CFL’S

But according to the CFL’S Thorne, the temp industry has been built at the expense of hard-won union contracts that have included health and welfare benefit packages. He described Canada’s army of temporary employees as “ghettos, because most people do not want to be in that situation.” And legislators, he added, are ignoring the issue. Said Thorne: “I do not see any humane legislation on the table dealing with this matter.” But industry executives counter that they provide an important service to both employers and employees. Still, Thorne predicts that the booming temp industry of the 1980s will become a major labor issue of the 1990s.

RICHARD KELLY HEFT

in Toronto