Throughout the first half of the 1900’s, in the early days of the old employment agency business (the forerunner of the modern Temporary Staffing Industry (TSI)), agencies charged workers a direct fee for job placement. The workers then became the employees of the companies where they performed their jobs. The agency’s work was done as soon as the worker was connected with an employer.
But this system of temporary staffing bred corruption. Agencies and employers frequently conspired to continuously hire and fire workers, so fees could be collected over and over again. This arrangement was known as “fee-splitting” as the charges to workers were divided between agency and employer. Workers who used for-profit employment agencies were often forced to pay what was essentially a ransom for the right to work in certain areas and professions.
Government regulation of the employment agency business tried to stop “fee-splitting” and other serious abuses. In the decades after WWII, many states set ceilings on the fees that could be charged to workers. “One of the most important reasons for regulating private employment agencies is to protect applicants against excessive fees,” the U.S. Department of Labor stated in 1960. However, the emerging Temporary Staffing Industry (TSI) found a way to avoid the regulation and ensure the continued growth of its revenues.
Throughout the 1960’s the TSI successfully organized lobbying efforts in all 50 states. The lobbying most often targeted state legislatures, and instead of changing the legality of direct hire fees, the industry changed the legal definition of a temporary staffing agency. No longer did the agency provide a service connecting workers with employers. The new legal definition of a staffing agency was as a direct employer, now leasing its own employees to work under the direction of other companies. Regulation no longer applied to these “new” types of businesses. This put temp workers in the position of being legally employed by a staffing agency, rather than the company where they performed their work on a daily basis.
Under the this legal arrangement, with direct fees to workers eliminated, temp workers are paid an average of 22% less for the same work as direct employees and are much less likely to receive benefits of any kind. The savings from the reduction in compensation to workers is essentially split between the agency that legally employs the worker, and the client business that uses the worker’s services. Thus, the “fee-splitting” arraignment has taken a new form, but remained intact.
Today, the main lobbying group for the staffing industry is the American Staffing Association (ASA). The ASA is based just outside of Washington, DC, but has 29 local chapters in individual states and regions. They represent the interests of staffing agency ownership and management, not the millions of temp agency workers. They continue to protect the unique legal status of the industry.
For more detail on the history of the Temporary Staffing Industry, Read George Gonos’ Fee-Splitting Revisited: Concealing Surplus Value in the Temporary Employment Relationship.
Types of “Temp” Jobs
The temporary staffing industry is perhaps best known for its earlier years and placing female clerical workers and day laborers/farm workers. But the industry has grown to place workers in nearly every occupation in the US.
Temporary staffing agencies place more workers in industrial jobs (blue collar, manufacturing, construction) than any other area.
The phrase "Contract Worker" has become increasingly popular in recent years for describing some of the higher skilled groups of temporary staffing agency employees included lawyers and IT professionals. The relationship is the same. "Contract" is just another word for "temp.”
Average Daily Employment
Approximately three million Americans work through a temporary staffing agency on any given workday. That's about 2% of the total non-farm US workforce. 1 out of 50 employees works for a temporary staffing agency.
Since the recession, 20% of all jobs gained back to the US economy have been temporary jobs. It has marked a trend of losing "good" jobs, and gaining back "bad" jobs.
Most economists expect the growth of the temporary staffing industry to strongly continue into the future, with the economy on track to reach its greatest numbers of temporary workers.