Understanding the Staffing Industry

The staffing, recruiting, and workforce solutions industry is larger than you probably think. According to the American Staffing Association, there are more than 17,000 staffing and recruiting companies in the United States, which operate more than 35,000 branch offices. These companies range from small mom and pop shops with one office, to multinational organizations with hundreds of offices and tens of thousands of employees.

Staffing companies offer a wide range of employment-related services, which can be broken down into four main categories:

• Temporary and contract staffing
• Recruiting and permanent placement
• Outsourcing and outplacement
• Human resource consulting

Of these four categories, temporary and contract staffing is by far the largest, accounting for about 89% of the industry’s total sales in 2013. For those who prefer numerical values to percentages, that 89% represents annual revenues of over $106 billion.

During the course of a year, staffing companies in the United States hire more than 11 million temporary and contract employees. In 2013, temporary employees worked in virtually all occupations in all sectors. According to the American Staffing Association, 37% of all temporary employees worked in industrial positions, 28% in office/administrative positions, 13% in professional/managerial positions, 13% in technical, information technology, and scientific positions, and 9% in health care positions. These positions range from janitorial employees making minimum wage to project managers making more than $100 per hour.

So why would a company hire a staffing company for these services, when their own HR departments are already tasked with finding qualified candidates to fill open job requisitions? Well, the reasons are plentiful. Oftentimes companies need to fill a position on short notice and for a short time period- anywhere from one day to several months. Rather than having your HR department spend weeks or even months recruiting and interviewing candidates, a staffing company can have a qualified employee at your job site within just a couple of days from your request. Additionally, you might just want to try to see how an employee will do at your company before extending them a full time offer. Most staffing companies will work with you to staff temp-to-perm employees, where an employee will work a certain number of hours through the staffing company at which point you can decide to convert them to your company’s payroll. No matter what the request, most staffing companies will have the experience and pool of qualified candidates to find a fit for your need.

Because HR departments do so many of the same things that a staffing company offers, it might seem practical to task an HR employee with selecting the staffing company that your firm will use for years to come. However, that may not always be the best idea. Working with your company’s procurement department to select a staffing company can lead to significant cost savings. This is partially because procurement has a 360 degree view of purchasing, and might be able to share efficiencies across multiple departments and locations. Additionally, as HR is not normally involved in selecting suppliers, they may not know how to best approach negotiating contracts with multiple potential suppliers. Once again, procurement can step in and help evaluate multiple suppliers and offers and help to negotiate with multiple suppliers in order to receive the lowest possible price for staffing services.

But with more than 17,000 companies throughout the United States claiming to all provide the same service, how do you know which company to go with? Although on the surface their service offerings might seem identical, that is not the case. Some companies specialize in specific sectors or industries while others may be able to fill any position within your company. Additionally, some companies may charge you supplementary fees to conduct services such as background checks and pre-employment drug screens, while other companies will include these services at no charge. And last, but certainly not least, staffing companies’ payment structures vary greatly throughout the industry. For a company that utilizes the services of staffing companies regularly, this can amount to hundreds of thousands of dollars of savings opportunities if your company is not being charged fair market rates.

There are service providers who can consult with HR and procurement to source ideal staffing agencies and negotiate best-in-class contracts and pricing. These procurement consultants often have worked across multiple industries and understand how to optimize temporary labor service providers, and can tell whether or not there are savings opportunities that your company is not taking advantage of.

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