The usage of contingent labor in the commercial sector is expected to grow for a 10th straight year in 2017. Employers value the ability to more easily manage the size of their workforce, says Andrew Deutsch, ARM, Executive Vice President, Commercial Division, at Nesco Resource.
“Emerging from the 2008/2009 recession, companies have outsourced a larger percentage of their workforce,” Deutsch says. “This gives them greater flexibility to grow or shrink their headcount while avoiding many costs. Even with as strong as the economy got in 2014 and 2015, they have continued to use contingent labor for that flexibility.”
Contingent labor makes up about 10 percent of the overall American workforce, but that figure could rise to 25 percent in the next four years, Deutsch says.
Smart Business spoke with Deutsch about what this trend means for the staffing industry, employees, and companies.
How is 2017 shaping up for contingent labor in the commercial sector?
Changes to or the elimination of the Affordable Care Act (ACA) could have a profound impact on commercial staffing. Traditionally, the ACA has been a driver of growth for the commercial staffing sector. Companies outsourced more of their staffing needs to different staffing companies to defer ACA compliance costs, so any changes to the law will definitely impact those businesses.
We’re also at the end of the typical six- to eight-year cycle that began with the recession, which would typically cause a slowdown in staffing usage. For 2017, staffing industry analysts are looking at 2 percent growth in light industrial staffing and a 1 percent downturn in staffing spend on the clerical and administrative side.
With all that being said, companies may use more staffing in 2017. There is still uncertainty in the economy that would lead companies to continue to shy away from commitment and stick to contingent labor to fill personnel needs. If there are fluctuations in the economy, it’s easier to offload headcount and not worry about paying unemployment.
How do these changes affect the labor pool?
Employees want the ability to get additional job experiences at multiple employers and have the flexibility to change jobs, whether it’s for geographic reasons or for a career change. In many cases, employees looking to further their careers don’t do it at the same company through promotions as was typical in the past; they do it by changing companies.
These employees want a true employment experience. Through most staffing companies, employees can expect the benefits normally associated with direct employment such as medical and dental coverage, 401(k), vacation and holiday pay. They may work at various locations, but the employment experience is with the staffing company.
What does this change mean for the staffing industry?
Staffing firms are becoming more creative in their use of social media and mobile technologies for all levels of staffing. The low unemployment rate, coupled with an increased usage of smartphones by everyone, means that more people are using social media and texting as their primary source of communication.
Technology is increasingly being used to facilitate communication in staffing.
What are some of the trends impacting employers in 2017?
With national unemployment numbers dropping to under 5 percent in 2016, and further declines expected in 2017, many companies will continue to increase wages for entry-level light industrial jobs to entice employees.
Companies struggling to fill entry-level jobs are finding they have to increase wages in order to fill these positions with qualified employees in a timely manner. Staffing companies must consider wages as well as other benefits, such as flexible hours and opportunities for full-time work, to attract the skills needed. This has helped reduce turnover at some clients by 20 percent or more. ●
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