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U.S. Department of Labor Futurework
  Trends and Challenges for Work in the 21st Century
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Flexible Staffing Arrangements

A Report on Temporary Help, On-Call, Direct-Hire Temporary, Leased, Contract Company, and Independent Contractor Employment in the United States

Susan N. Houseman
August 1999

6.2 Benefits

Workers in flexible staffing arrangements are also far less likely to receive benefits such as health insurance or a retirement plan from their employers than are regular workers. Table 6 shows the incidence of health insurance and retirement benefits by work arrangement. Because many employees who are eligible to participate in an employer provided health insurance or retirement plan decline to do so, it is interesting to look not only at the fraction of workers who receive these benefits from their employer, but also the fraction that are eligible to receive them. Among wage and salary employees--which include agency temporaries, on-call workers, contract-company workers, direct-hire temporaries, and regular workers--those in flexible staffing arrangements are much less likely than regular workers to participate in and be eligible to participate in a health insurance and retirement benefit plan.

Table 6. Percent of Workers with Health Insurance and Retirement Plan, by Work Arrangement [Text Version]

Health Insurance

     
 

Health Insurance

Health Insurance through Employer

Eligible for Health Insurance from Employer

Agency Temporaries

48.1

7.3

23.8

On-call or Day Laborers

68.5

20.0

29.6

Independent Contractors

74.6

NA

NA

Contract Company Workers

83.1

51.3

68.8

Other Direct-hire Temporaries

74.1

27.1

35.9

Other Self-employed

82.3

NA

NA

Regular Employees

85.9

63.9

75.0

Retirement Plan      
  Covered by Employer Pension Plan or has Tax Deferred Retirement Account

Participates in Employer Pension Plan

Eligible to Participate in Employer Pension Plan

Agency Temporaries

18.3

4.3

9.5

On-call or Day Laborers

37.0

22.2

25.9

Independent Contractors

39.8

NA

NA

Contract Company Workers

50.7

39.2

46.3

Other Direct-hire Temporaries

30.4

19.8

23.3

Other Self-employed

44.9

NA

NA

Regular Employees

62.8

56.1

60.7

Source: Author’s tabulations from the February 1997 Supplement on Contingent and Alternative Work Arrangements.

The incidence of these benefits is particularly low among agency temporaries. Whereas 64 percent of regular workers receive health insurance through their employer and 75 percent are eligible to participate in an employer health insurance plan, just 7 percent of agency temporaries receive health insurance through their employer and only 24 percent are eligible to participate in an employer health insurance plan. Only 4 percent of agency temporaries participate in an employer retirement plan and only 10 percent are eligible to do so, compared to 56 percent and 61 percent of regular employees who participate or are eligible to participate, respectively, in an employer retirement plan.

One might be less concerned about the absence of benefits if workers in flexible staffing arrangements generally had health insurance from other sources or saved for retirement through a tax deferred retirement account. However, agency temporaries, on-call workers, independent contractors, and direct-hire temporaries are much less likely to have health insurance coverage from any source compared to regular employees. Over half of agency temporaries have no health insurance from any source. Similarly, workers in all types of flexible staffing arrangements are much less likely than regular employees to have some type of retirement plan.

Using data from the February 1995 Supplement to the CPS, I have estimated models of the probability a worker is eligible to participate in an employer-sponsored health insurance plan, has health insurance from any source, or is eligible to participate in an employer-sponsored retirement plan (Houseman 1997). The results show that even controlling for age, education, race, geographic region, union status, industry and occupation, workers in all flexible staffing arrangements are significantly less likely to be eligible to participate in an employer-sponsored health insurance or pension plan or to have health insurance from any source. These estimates are consistent with evidence from the Upjohn Institute employer survey showing that while employers typically offer benefits like paid vacations and holidays, paid sick leave, health insurance and a retirement plan to their full-time regular employees, they rarely offer these benefits to employees who are on-call workers or temporaries.

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