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DCR Trendline September 2013 – Contingent Worker Forecast and Supply Report


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We bring you the Trendline Report for September 2013, offering key insights into the temporary staffing industry. Our up-to-date research and in-depth analysis of industry trends ensure that you have a pulse of the market. Rigorous examination of contingent workforce supply and demand provides you with predictive forecasts of wage trends and market status.

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DCR Trendline September 2013 – Contingent Worker Forecast and Supply Report

  1. 1. “ “ As we approach the final quarter of 2013, Trendline is here once again to bring you key insights into the temporary staffing industry. Our up-to-date research and in-depth analysis of industry trends ensure that you have a pulse of the market. Rigorous examination of contingent workforce supply and demand provides you with predictive forecasts of wage trends and market status. The DCR National Temp Wage Index focuses on wage trends over the year and analyzes the usage of temp workers and related developments in the economy. This month, we look at the significant recovery of the temporary help services sector as compared to the country’s overall employment index. We also discuss the hot industries for employment today. Our next article researches the trends and factors that are driving a new human capital model that companies are turning towards – the open talent economy. We then shift our focus to a topic on everyone’s mind – the upcoming Affordable Care Act mandates. In this segment we explore the penalties that companies may face if they fail to comply with the regulations. Keep an eye out for the impact of the definition of “employee” and what this may mean for organizations that engage contingent workers. Our final article this month throws the spotlight on the new generation of workers – the Millennials. We closely analyze what drives these workers, and why this makes them a great fit for temp employment. Ammu Warrier Ammu Warrier, President Inside this Issue Note from the Editor DCR National Temp Wage Index The New Employment Model: Open Talent Economy ACA:Fewerthan95%=95%Penalty Millennials: Who are they? And Why They Make Great Temp Workers? Methodology 1 2 5 9 11 15 “The trend that we’re seeing is that they’re not really tem- porary anyway. It’s not just a situation anymore where you have some peak need period and you want to bring in extra help to supplement your normal workforce. What we’re seeing is that temp help workers are being used year-round. They’re part of the standard workforce” ~Patrick Reilly, District Director, Wage and Hour Division of the U.S. Department of Labor REPORT # 18 | September 2013 TRENDLINEContingent Worker Forecast and Supply Report Note from the Editor Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 1
  2. 2. For the rest of 2013 we expect to see a promising upward trend for temporary worker wages. Year-over-year, the temporary help services category has seen the largest growth in the economy at 6.7% compared to other sectors. Temp help services is one of the largest contributors to professional and businesses services, a category that has grown significantly at 3.5%. Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 2 DCR National Temp Wage Index Powerful Recovery of Temp Workforce Bypassing Overall Employment Index Total nonfarm payroll employment increased by 162,000 in July. Unemployment fell to 7.4% in July from 7.6% in June, the lowest since December 2008. Sectors where employment rose include retail trade, food services, financial activities and wholesale trade. With the manufacturing industry slowly picking up the pace, other sectors such as construction, wholesale and retail trade, leisure and hospitality, and mining and lodging have also shown indications of revival. Month-over-month, full-time employment increased by 92,000 jobs, whereas part-time jobs increased by 174,000. The number of self-employed jobs also maintained high growth with 241,000 jobs added. Temporary help services jobs rose by 7,700 in July with a penetration rate of 1.98 percent. The temporary penetration rate measures temporary employment as a percentage of total jobs in the United States.
  3. 3. DCR National Temp Wage Index Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 3 The Composition of the Temporary Workforce Changes in Professional and Business Services Sector Powerful Recovery of Temporary Help Services Year-over-Year Changes in Professional and Business Services Employment by State Changes in the percentage or volume of worker population signify the impact of a particular super sector on the geographic location. While some states have a noticeable change in volume over the year (in the chart below, the bubble shoes the relative size of the population), it is not remarkable when taken in conjunction with the percentage change in employed population.
  4. 4. DCR National Temp Wage Index Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 4 Hot Industries for Employment “Major Industries, by Volume and Percentage Growth The same criteria of year-over-year change in volume and percentage can be used to determine which industries are growing in employment. Data indicates that professional and business services and leisure and hospitality are the top industries to look at for employment opportunities. The fact that temp help services is a major contributor to professional and business services with a 6.7% year-over-year growth reinforces temp employment becoming a major part of the economy and job market. In the leisure and hospitality sector, the largest year-over-year change is seen in performing arts and spectator sports employment.
  5. 5. The New Employment Model: Open Talent Economy Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 5 HR experts have a new term for the employment model that organizations are shifting towards – the open talent economy. While the classical employment model relied on HR departments hiring full-time employees who work eight-hour shifts on location, the new open talent economy model is a collaborative, technology-enabled, fast-paced way of sourcing workers through networks and communities. Deloitte coined this term to refer to the currently evolving workforce, which is a “mixture of full-time employees, contractors and freelancers”. A new generation of workers has a different focus from generations before them who sought job security and benefits. The worker of today is looking for freedom, with the ability to shift from role to role and organization to organization without any geographical boundaries. And global markets and products align to the desires of workers with a need for talent models that are agile, scalable and fast. Employers are looking for the right skills to be available to them as and when they need them. In this article, we explore some of the market trends and factors contributing to the rise of the open-talent economy. According to MBO Partners, the number of freelance workers (both independent contractors and agency contractors) in the United States is continuing to increase. In 2012, there were 16.9 independent workers in the country, which MBO forecasts rising to 23 million in 2017 and reaching 65 to 70 million (approximately half of the U.S. workforce) by 2020. The growth of online marketplaces that provide services to connect freelancers with employers also supports this trend. A report from the freelance-staffing platform Lance showed that businesses spent 335 percent more on network and security jobs through their services this year than one year ago. According to a recent survey, 35 percent of freelancers chose to remain independent, as they believe they will obtain more work taking this route. And 25 percent are attracted to the potential for higher pay. The Increase of Freelancers “There’s a very high demand and low supply of the talent that’s required within the workforce. They’ve been forced to look at other ways to meet that supply.” ~Andrew Liakopoulos, Human Capital Principal at Deloitte. “ “
  6. 6. The New Employment Model: Open Talent Economy Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 6 The growing ability to digitize many different types of work opens up the opportunity to source skilled workers from anywhere in the word. Crowdsourcing is springing up as an alternative channel to source talent. Employers are increasingly engaginginopen-sourceprojectswhereworkerscontributedifferentskills,information,andinsightstosolving a wide-range of business problems. Mechanical Turk, a crowdsourcing internet marketplace by Amazon, is leading the way for a business model where projects are divided into small components, and the work is executed remotely on a piece, project, or hourly basis. According to the Labor Department, a record number of 2.7 million workers held temp positions in July, up from 2.5 million last year. Recent data shows that almost 12% of all employed people in the United States hold temporary or contractual positions. Experts say that economic uncertainty and a shortage of consumer demand are just some of the reasons why employers are reluctant to hire full-time employees. The upcoming health care reform mandates along with the changing talent motivations are causing more companies to turn to temp workers to fill their talent pools. Temporary help services sector is growing at a faster pace than any other under professional and business services. Recruitment agencies remain a popular job source destination for temporary workers. Temp agen- cies have become some of the largest employers in the country; Kelly Services is second in size to Walmart. Certain geographical regions in the United States have seen tremendous growth in the num- ber of temporary workers. Georgia, for example, has seen a 40 percent increase in temp jobs over the past four years, particularly in information technology positions and office and cleri- cal help. In New Jersey, where there state’s gross domestic product (GDP) has grown slowly at 1.3 percent compared to the national average of 2.5 percent, employment in the temporary job market accounted for 15 to 22 percent of gains in the private sector. And according to the U.S. Bureau of Labor Statistics, Ohio has seen an increase of 43% in temporary staffing employment. Crowdsourcing Talent Surge in Temp Employment “What this is going to start causing is a lot of virtual work. If you hire freelance talent [they] can go through an entire project without being in the same room together. Creating this collaboration will be a challenge.” ~Andrew Liakopoulos, Human Capital Principal at Deloitte. “Employers are even more reluctant than usual to commit to full-time employees. They like the flexibility.” ~Harry Holzer, Professor of Public Policy at Georgetown University “ “ “ “
  7. 7. The New Employment Model: Open Talent Economy Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 7 Out of the 162,000 jobs added to the economy in July, 65 percent were part-time positions. According to some analysts, part-time work has made up approximately 70 percent of job growth so far in 2013. The Bureau of Labor Statistics defines part-time work as being less than 35 hours per week. More Part-Time Workers Professional and Business Services New Jobs in 2013: Full-Time vs. Part-Time Source: Mercatus Center at George Mason University
  8. 8. The New Employment Model: Open Talent Economy Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 8 A recent survey by Gallup indicated that 1 out of 5 workers is part-time, and the percentage is ever increasing. A study by the American Enterprise Institute finds that in the first half of 2013, 4.3 part-time jobs were created for every one full-time job. The study also shows a 2.7 percent increase in the number of people working 25 to 29 hours per week. Experts believe that employers are offering more part-time positions to avoid being hit by the new health care law that will require them to provide medical coverage for full-time permanent workers. HR analysts argue that companies are simply getting smarter on evaluating their hiring needs and becoming more flexible with the composition of their workforces – many companies have come to realize that the traditional Monday to Friday, 9 am to 5 pm worker model does not fulfill their business needs. Employers are becoming more sophisticated and savvy about using analytics to forecast their hourly staffing needs, and are scheduling workers accordingly. Looking closely at the 195,000 jobs added in June, a total of 75,000 were in the leisure and hospitality sector. Workers in this sector average about 26.1 hours per week. With top-level talent increasingly demanding more work-life balance, companies are starting to realize that workplace flexibility is a solution to meet needs on both sides. HR executives have known for a long time that the best way to drive productivity is to have happy and engaged workers. Gallup’s 2013 State of the American Workplace Report showed that only 30 percent of employees are engaged and inspired at work, and 18% are actively disengaged. These disengaged employees cost the United States up to $550 billion in lost economic productivity annually. It has been proved that flexible work options reduce worker absence and turnover. The Bureau of National Affairs estimates that over $11 billion is lost annually due to turnover. A 2011 paper by the Global Workplace Analytics and Telework Research Network shows that almost 80 percent of U.S. workers want to work off-site at least part-time and 64 million employees hold a job that can easily be configured to telework, at least part-time. From 2005 to 2011, telecommuting grew by 73%, with a 424% growth for federal workers. Based on these trends, telecommuters are forecasted to total 4.9 million by 2016, a 69% increase from 2011. According to the study, transforming compatible jobs to telework positions could lead to a national savings of over $700 billion per year, where a typical business would save $11,000 per person per year. Remote workers themselves would save between $2,000 to $7,000 per year in transportation and work-related costs, not including cuts in after-school care and eldercare costs. A Greater Demand for Workplace Flexibility The Bottom-Line Impact of Employing Remote Workers “With recruiting costs running approximately 1.5 times annual salary, the ability to engage and retain valuable employees has a significant impact on an organization’s bottom line.” ~Bureau of National Affairs. “ “
  9. 9. Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 9 ACA: Fewer than 95% = 95% Penalty Even though the Affordable Care Act (ACA) has delayed its shared responsibility penalties to 2015, employers need to develop a clear understanding of the mandate and start acting now. Under the new legislation, employers with 50 or more full-time employees or full-time equivalent employees will be required to offer at least 95% of their full-time employees (and their dependents) health coverage meeting government-defined minimum standards. Those who fail to do so must pay employer shared-responsibility penalties. For some companies, the “Play or Pay” mandate becomes a question of weighing the cost of either playing by offering such coverage or paying the penalty, leading to a strategic choice about benefit structure and workforce composition. The “no coverage” penalty is set at $2,000 per year multiplied by the total number of full-time employees in excess of 30. Let’s take a look at an example to demonstrate the possible costs of the penalty. If XYZ Corporation has 100 full-time employees, and provides health coverage for 90 of them; they would be faced with paying the penalties as they fall below the 95% mandate. The penalty of $2,000 per employee, which in this case would be 70 (subtracting the thirty not included in the penalty calculation), would equal a total fee of $140,000. Because penalties can be incurred if an employer does not offer coverage to its full-time employees, it is important for an employer to identify who its employees are for these purposes. The proposed regulations implementing the penalty provide that “employee” refers to a common-law employee. The IRS defines the term worker saying “anyone who performs services for you is your employee if you can control what will be done and how it will be done.” To identify which workers are common law employees, the IRS takes the position that determination can only be made by “examining the relationship of the worker and the business.” To do this, the IRS looks at three aspects of the relationship: 1) Behavioral Control A company has behavioral control over a worker when it has the right to direct or control how the worker does the work, including the types of instruction given, degrees of instruction, evaluation systems and training. 2) Financial Control A company has financial control over the relationship if the company has the right to control the economic aspects of the worker’s job. 3) Type of the Relationship This criterion refers to how the worker and the company perceive their relationship to each other, and involves written contracts, employee benefits, permanency of the relationship and services provided as a key aspect of the business. “73% of employers do not know enough about the play or pay mandate to make an informed decision” “ “
  10. 10. Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 10 ACA: Fewer than 95% = 95% Penalty This determination of a common-law worker is important for companies that use third-party agencies to handle parts of their staffing needs. If a company uses a staffing agency, leasing company, or other third-party to secure workers, it must consider the implications of the new employer penalties. Even though the third-party handles payroll and benefits and may have initially hired the worker, under the common-law criteria determination, the client company may be considered the common law employer of the contingent workers. In the definition of “employee” as set forth by the proposed regulations for the “play or pay” requirement, the treatment of contingent workers merits special attention. The question is which entity is responsible for offering coverage – the temporary staffing organization or the client organization. Some issues worth considering are: A recent survey shows that 45% of surveyed companies are concerned about their staffing suppliers’ ability to meet their ACA obligations. As for costs, 31% cited non-compliance penalties as their largest concern, while another 31% were worried about increased administrative burdens. In order to fully comply with the Affordable Care Act and avoid unnecessary penalties, employers who work with third-party agencies for staffing needs must look closely at their current workforce composition to make strategic preparations for when ACA goes into full effect. • How are the contingent workers likely to be classified? Looking at the criteria set by the IRS for identifying a common-law employee can help companies assess which contingent workers would likely be classified as a common-law employees of the client company versus the third-party. • Terms of the contingent worker agreement Companies and staffing agencies both will want to consider the “play or pay” requirement when negotiating the terms of the contingent worker agreement, to minimize potential exposure and assign clear responsibili- ties. • Full-time employee reporting requirements Beginning in January of 2016, employers will be required to report to the IRS who their full-time employees were in prior calendar years and whether they were offered health coverage. • Rehired Retirees Often, a company’s retirees are rehired through a third-party process, thus possibly making them common- law employees. Companies need to look at their retiree plans to determine how to classify and cover these workers. What This Means for Companies Who Engage Contingent Workers “The Affordable Care Act is a perfect example of how companies can be affected by the different types of relationships, from full-time to part-time to contracting.” ~Stephan Millard, Vice-President of Ventana Research. “ “ “
  11. 11. Being the first generation to have been immersed in technology throughout their lives, these workers are constantly connected. Baby Boomers and Gen Xers wanted job security, while Millennials seek flexibility. These workers seek more than just income and have a higher focus on personal enrichment and work-life balance. A recent study by Mercer found that top three career priorities for Millennials are compensation, flexible work schedules and the opportunity to make a difference. The values of this generation also vary. A comparison of views on factors that indicate career success differed greatly between Millennial workers and their older generation managers. While the workers viewed meaningful work as the most important factor to career success, managers pointed to high pay as the key indicator. The U.S. Bureau of Labor Statistics defines “Millennials” as the nearly 80 million young adults born between 1977 and 1999, who are already starting to join the workforce. Analysts estimate that by 2014, 36 percent of the U.S. workforce will be made up of this generation of workers, and this number will grow to 46 percent by 2020. With this new generation poised to comprise a large portion of the country’s workforce, HR departments are starting to delve into what the values, desires and needs of these workers are, and how to keep them engaged. What are Millennials Looking for in the Workplace? Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 11 Millennials: Who are they? And Why They Make Great Temp Workers? “Millennials are described as an ethnically diverse generation who are team-players, optimistic, confident, trusting of authority, rule-followers, achievers in school, and generally achievement-oriented in everything they undertake. They are also the most affluent and well-educated generation in history.” ~Center for Work and Family at Boston College. “ “ What do Millennials Want from Employers? Source: Boston College
  12. 12. Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 12 Millennials: Who are they? And Why They Make Great Temp Workers? “Differences in Work Habits” View of Factors that Indicate Career Success: Millennials vs. their Managers Source: University of North Carolina, Kenan-Flagler Business School Source: Forbes A survey conducted by Harris Interactive for CareerBuilder in 2012 reveals disparities in the work habits and preferences of those workers aged 25 to 34 compared to those 55 and older. The findings indicated that Millennials are more impatient about career advancement or switching jobs, are more open to flexible work schedule, are disciplined about their work, and prefer shorter working hours. A survey by Harris Interactive for the University of Phoenix discovered that roughly 80 percent of workers aged 20 to 29 said they wanted to change careers. And MSN Money reported that 53% of Millenials are not engaged in their current jobs. Face to face Stay in a job for at least 3 years E-mail/Text Stay in a Job Until You Learn Enough to Move Ahead Should Be Promoted Every 2-3 Years Work 8 Hours or Less per Day Arrive Before 8 AM Leave by 5 PM Work after Leaving the Office Arriving on Time Does Not Matter as Long as Work Gets Done 28% 38% 35% 47% Phone 12% 43% 58% 53% 41% 62% 20% 10% 61% 64% 43% 38% 69% 29% Communication Style Preference Perspective on Career Path Hours of Work { { { 60% 62% Ages 55+ Ages 25 to 34 55% 53%
  13. 13. Based on the workplace characteristics and values of Millennials, they’re a great fit for the growing trend of temporary employment. Their choice of job type and availability indicates a huge potential towards their interest in joining the temporary workforce. Economic factors also steer Millenials to seek temporary work assignments. Often, due to their young age and lower level of experience, Millennials are among the first to be eliminated during company downsizing. The unemployment rate for the generation is 11% as compared to the national unemployment rate of around 7%. And with their substantial student loan debt (the U.S. Census Bureau estimates that graduates of the class of 2011 had an average debt of $27,547), it’s no wonder they’re looking for those temporary positions where they have a higher earning potential. Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 13 Millennials: Who are they? And Why They Make Great Temp Workers? Millenials Make Great Temp Workers You can choose your time and work bothIndependence in choosing the work You can have more than one positionMultiple earning sources Companies are looking for motivated ready-to-use talentAbility to use their self-starter mentality Temporary Jobs OfferMillennials Want You choose what suits your interestMeaningful work
  14. 14. Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 14 Millennials: Who are they? And Why They Make Great Temp Workers? Millennials Unemployment Trends What Does this Mean for Employers? Temporary work provides these workers with a source of income, while allowing them to build their resumes with work experience and skills. Also, the nature of temporary positions allows Millennials to enjoy the work-life balance, flexibility and freedom that they seek in a job. Deloitte, in a 2013 study, found that 34 percent of U.S. employees are planning on postponing their retirement age. The combination of an aging workforce still actively employed and an influx of new younger talent means that employers need to find a way to continue to derive value from older workers without holding the younger workers back. With over 80 million Millenials entering the workforce, companies have to learn how to recruit, grow, and train these workers. And given the importance of the contingent workforce, employers must understand how they can address the needs of Millennials, who are looking for greater flexibility in their schedules and career paths, while still meeting business needs. Leveraging Millennials as contingent workers can provide companies with more control over variable costs, and enable a flexible and dynamic workforce that can be scaled up or down to meet their evolving needs.
  15. 15. Methodology Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 15 The DCR Wage Index is developed to assess the relative movements of temporary wage rates in the U.S. economy. The wage rates for temporary workers or contingent workforce are based on payments made by staffing firms to these workers based upon hours worked. Data collected from sources such as Bureau of Labor Standards (BLS) and other government sites as well as an internal pool of staffing companies and consultants, is aggregated and classified based on regions and skill categories, to arrive at an aggregate index. The baseline for the index is set at 100 for January 2007. Index value for a particular month indicates relative wages with the said baseline and is representative in terms of direction and scale of change. Five years of data has been included to observe seasonal patterns and distinguish seasonality from long-term wage movements. The data and the model has been further refined over last six months. DCR Wage Index combines the exhaustive data from BLS with practical and more recent developments and data from on-field consultants and clients, to provide timely near-term indications of trends and consistent long-term actionable and objective information. Source Data DCR Work Index uses multiple economic variables to ensure the robustness of its forecasts and cross-validation of trends. Key data sources and parameters of interest included and influencing the index are: Unemployment data Gross Domestic Product Prime rate of interest New and seasonal Job openings Non Form employment Job Opening All Export All Import Average Hourly Earnings of All Employees Total Private Aggregate consultant data on job market parameters References article_297a01c2-034c-5cd8-9bf8-49685d20c9ac.html
  16. 16. About DCR Workforce Trend Line: Contingent Worker Forecast and Supply Report. © DCR. All Rights Reserved - 16 DCR Workforce is an award winning, best-in-class service provider for contingent workforce and services procurement management. Our proprietary SaaS platform (SMART TRACK) assists in providing customizable VMS and MSP Solutions to manage, procure and analyze your talent with complete transparency, real-time control, high performance and decision-enabling business intelligence. DCR Workforce serves global clientele including several Fortune 1000 companies. Customers realize greater efficiencies; spend control, improved workforce quality and 100% compliance with our services. For more information about DCR Workforce and its Forecasting Toolkit (Rate, Demand, Supply and Intelligence) including Best Practice Portal, visit For more information call +1-888-DCR-4VMS or visit Public Relations: Debra Bergevine 508-380-4039 7815 NW Beacon Square Blvd. #224 Boca Raton, FL 33487 | | | © 2013 DCR Workforce, Inc. All Rights Reserved. DCR Workforce and Smart Track are Registered Trademarks. CCO — 082912