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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

8.3 Screening Workers for Regular Positions

Another reason employers may use flexible staffing arrangements, particularly agency temporaries, is to screen workers for regular, permanent positions. There are several reasons why firms may choose to screen workers through temporary help and other staffing agencies. First, these agencies may have a comparative advantage owing to economies of scale in finding and screening workers with particular types of skills. Second, the firm will save on record keeping costs if it chooses not to hire an employee. An employer who directly hires an employee on probation and chooses not to keep him will still have to maintain tax records on that employee for a long time. However, if the firm uses a staffing agency, the worker is the staffing agency's employee during the probationary period and, should the client firm choose not to hire the individual, the staffing agency will have to maintain those tax records. Finally, employers may seek to limit their exposure to law suits brought by disgruntled, dismissed employees by hiring through a staffing agency. Some speculate that the rise in employment litigation has spurred employers to rely more on staffing agencies to screen workers for regular positions (Lee 1996).

In the Upjohn Institute survey, about 21 percent of employers using agency temporaries cited screening workers for permanent positions as important (Table 7). The Conference Board (1995,) Abraham (1988), and Kalleberg, Reynolds, and Marsden (1999) report similar findings. A survey of agency temporaries conducted by the National Association of Temporary Staffing Services (NATSS) found that a substantial minority, 29 percent, found jobs with a customer: in 16 percent of the cases it was arranged by the temporary help agency and in 13 percent of the cases it was not arranged in advance (Lenz 1996).

The Upjohn Institute survey also provides some evidence that screening workers for regular positions is an important factor underlying the growthin temporary help employment. Among employers increasing their use of agency temporaries relative to regular employees, about half cited greater use of agency temporaries to screen workers for regular positions or difficulty finding qualified workers on their own as reasons for the increase.

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