The good times are rolling for the local staffing industry as the county’s economy hovers near full employment.
Revenues both countywide and overall at the top 25 firms rose about 10 percent last year compared with 2015, according to the Business Journal’s annual list of temporary placement firms, ranked by local revenue.
Some companies said demand is shifting from temporary workers to full-time staff as the economy improves.
The industry appears to be going with the trend, with firms increasingly providing permanent hiring and consulting services.
Twelve firms on the list reported revenue increases, while only six reported decreases. The rest either stayed the same, didn’t provide comparative data or were new to the list.
“As the economy is flourishing, so is the (staffing) industry,” said Stacey Lane, executive vice president for field operations for Southern California for Staffmark, a Cincinnati, Ohio-based staffing firm that placed No. 4 on the list with local revenue of $69 million in 2016, up 20 percent from a year earlier. “We’re seeing growth in all areas.”
The demand from employers to fill positions has definitely stepped up, according to another local staffing firm executive.
“People that I have called on for years but did not have staffing needs are now saying they need staff,” said Amy Zimmerman, president of Amy Zimmerman & Associates Inc. in Torrance, which ranked No. 18 on the list with $4.4 million in local revenue last year.
Top-ranked Aerotek Inc. didn’t provide its 2016 revenue, but an estimate based largely on its 2015 figures still gives the Baltimore-based firm a wide regional lead, with $141 million in L.A. County revenue.
Turn around
There was a time when temporary firms benefited from economic downturns, which typically leave employers reluctant to hire full time.
“Back in 2012 and 2013, firms were relying heavily on temporary employment services,” said Robert Kleinhenz, economist and executive director of research at Beacon Economics in downtown. “You could see it in the payroll employment data, which showed robust increases for employment services firms.”
Temporary workers provided by staffing firms typically are recorded as payroll employees of those companies, not the businesses they work at.
Practices have shifted in the last year or two, however, as the local unemployment rate has dipped below 5 percent. Zimmerman and other local staffing company executives report that their client companies are now making more full-time hires – so-called direct hires as they are known in the industry. The employers are increasingly turning to staffing firms they once used only for the temporary hires.
“In this tight labor market, it’s hard to find good people because the best people are usually already employed,” Zimmerman said. “So that’s one reason why our employer clients are turning to us.”
Another reason, according to economist Kleinhenz, is that, many companies cut back on their internal full-time human resources staff during the recession, farming out the recruiting and hiring process to third party firms on an as-needed basis.
That has dovetailed with another trend: companies using staffing firms as a consulting resource, primarily to ferret out the industry pay levels for particular positions. This trend has accelerated as confident job applicants are now asking for salaries higher than companies had been paying.
“We’re having more companies now coming to us and asking us to find out for them what the pay rates are in a particular area,” Staffmark’s Lane said.
The rising pay rates themselves often contribute to staffing firm revenues as well, since agency fees – paid by the hiring employer – are typically a percentage of the salary earned by the hired employee. Median wages in Los Angeles County have soared more than 16 percent to $42,079 in 2016 from $36,206 in 2006, according to estimates from the U.S. Census Bureau.
Industry focus
It also helps to be in a hot sector.
No. 5 On Assignment Inc., based in Calabasas, focuses exclusively on placing job candidates with science, technology, engineering and math training. Most of those candidates fill positions in the rapidly expanding local tech sector (see related story, page 1), which helps explain why On Assignment’s L.A. County revenues more than doubled in 2016 to $64 million compared to the previous year. That makes On Assignment the biggest percentage gainer among the top 10 firms on the list.
“IT staffing is gaining greater adoption as an attractive model to perform the technology work,” said Peter Dameris, the company’s chief executive.
Dameris cited several reasons why many tech-centric companies eschew in-house information technology hires. These companies prefer the greater flexibility that comes with experts brought in by staffing firms like his.
Also, there are concerns about bringing in foreign workers on H1-B visas and using independent contractors instead of full-time employees.
