As Competition Grows, More Employers Using Temporary Workers

To potential employers, Bill Heaton of Orange has just two rather unusual stipulations: He won’t wear a tie and won’t keep regular hours.

Demands such as that are enough to make even a benevolent employer blanch. But Heaton is an independent computer systems analyst, designer and debugger, and he typically works for several companies at one time--none of which seems to be troubled by his requirements.

Heaton has been operating on his own for five years and says he thrives on the freedom and independence: “It allows me to work a variety of technically challenging jobs . . . to move around. The things that would get me fired as an employee are the same qualities that are sought after in consultants.”

A decade ago, independents like Heaton were rare, but today he is part of a sweeping trend in business and industry--the increasing use of temporary workers in just about every field.

Whether they are called free-lancers, consultants, temporaries, contingency workers, contract workers, independents or disposable employees, there are more of them than ever before and their numbers seem likely to swell in the 1990s.

Seen as Necessities

“You have to have them,” says Vic Barruga, employment specialist with Newport Beach-based Far West Savings & Loan Assn.

But even as their numbers are growing, the use of temporary and independent workers is raising ethical questions about the responsibilities of employers. And government officials are concerned about a potential drop in payroll tax revenues.

Certain industries such as farming and food processing, construction, retailing and other service businesses have by the nature of their work always used large numbers of temporary workers.

Now the ranks of disposable workers are swelling with accountants, engineers, medical personnel, nuclear maintenance specialists, airline employees, lawyers, manufacturing workers and even government workers.

Their numbers are growing for three primary reasons: the restructuring of U.S. business to meet increased competition, an expansion of laws that protect and provide benefits for permanent workers and rapid technological change that renders some job tasks obsolete while creating new ones.

To remain competitive, U.S. companies have been forced to get the most from their work force, and temporaries can be brought in for specific tasks only when needed.

Competition Cited

The increased use of independents “is related very much to the restructuring of manufacturing companies and corporations in general,” says Jim Doti, dean of the School of Business and Management at Chapman College in Orange.

In particular, he says, it reflects the “tremendous global competition” U.S. companies face.

While business has become more competitive, it also has become more complex, and today’s useful skill could be eclipsed by tomorrow’s technology. At the same time, the narrowing of some skills has created opportunities for independent specialists to service a number of companies, rather than each company maintaining a specialist that it perhaps could not fully use.

Archive Corp., a Costa Mesa-based maker of memory units for computers, says it has increased its use of temporaries to give it greater flexibility in the volatile computer business.

“Life is becoming tremendously complicated,” says Larry Ball, Tustin-based regional manager for the Merchants and Manufacturers Assn., a statewide nonprofit group that claims 800 member companies. “A company must be able to handle peaks and valleys.”

Huntington Beach-based Mercury Savings and Loan Assn. has been using more temporaries in recent years to handle the additional staff needs brought on by rapid growth. “We hire temps to fill in gaps,” says Rowena Chan, a compensation analyst with the company. “It’s effective because it is very quick.”

Plus, Ball says, “a whole set of new legislation has made it extremely difficult to hire and fire. (Using) temporary workers avoids that.”

Recession Brought Changes

For many companies, the recession of the early 1980s brought all these factors sharply into focus. Skittish about taking on regular, full-time employees, many employers opted instead to meet their staffing needs with temporary workers of every stripe, thus avoiding the possible trauma of furloughs and the high costs of severance pay.

When the nation began pulling out of the recession in 1983, many employers kept their networks of temporaries and independents, preferring to remain “leaner and meaner,” Doti says.

“We use temporaries for overload situations,” says Scott Rayburn, a spokesman for Hughes Aircraft Co., which employs 14,000 workers at its Ground Systems Group in Fullerton.

Overlaying the increased competition and changing skill demands has been a growing legal presence in the personnel department.

Wrongful-discharge suits are a growth industry, and expanded protection for workers in areas ranging from maternity leave to back strain has prompted employers to cast approving eyes on temporary workers who can be dismissed as quickly as they were summoned.

By adjusting its personnel needs with such workers, a company often saves money, stays out of court and avoids the negative publicity that results from the dismissal of permanent workers. Because a company uses its independents and temporaries to adjust its work force, job security for the permanent workers actually is enhanced.

U.S. Department of Labor studies indicate that most forms of non-traditional employment--part-timers, independents, those who work at home--are increasing at both small and large companies. Most contingent workers are women, the department says, and part-time employment actually is growing faster than full-time employment.

Use of ‘Temps’ Growing

At Caremark Inc., a Santa Ana-based provider of health-care products and home nutrition, the use of temporaries is increasing “across the board,” says Terrie Jacobssen, who started as a temporary at Caremark.

Jacobssen is an example of another benefit to employer and employee from temporary work--both sides get a chance for close evaluation before making a commitment to a permanent relationship.

At Fluidmaster Inc., for example, everyone starts as either a temporary or a part-timer before graduating to full-time status with the Anaheim-based maker of toilet components.

Alta Yetter Gale, Orange County labor market analyst for the state Employment Development Department, says the number of disabled people who are able to work at least part time at home has been greatly increased by personal computers.

Many temporary workers and independents depend on a growing number of increasingly specialized placement agencies.

Volt Temporary Services of Anaheim says it places an average of 12,000 people a month through its four Orange County offices, up 24% from last year. “I can’t see anything that indicates it will slow,” says Carol Sneed, Volt’s area manager.

Pool of Workers Available

Volt and other temporary agencies say they can call on a pool of workers who thrive on the different challenges of short-term work.

But there is some concern that the expanding army of temporaries and independents is becoming a second-class work force, a body of workers without the benefits and protections that permanent workers receive.

“One of the basic issues is what kind of benefit coverage do you provide (for temporaries and independents),” says Frank McArdle, education director for the Washington-based Employee Benefits Research Institute, a nonprofit research group.

Besides the generally lower wages paid to independents, a company also avoids such payments as the 7.15% Social Security tax, disability fund payments and contributions to pension and benefit packages.

It is the loss of these payments that increasingly is attracting the attention of the state Employment Development Department and the Internal Revenue Service.

“Government is very sensitive to the problem,” says James Urquhart, an Irvine-based attorney who specializes in independent contractor law. “The state and federal governments think they are not getting their fair share of income and payroll taxes.”

More Regulation Foreseen

Urquhart and other experts predict increasing scrutiny of the way companies use independents and temporaries, a closer look that will lead to more stringent regulation of their use.

For some independents, the closer look has already come.

A law that took effect Jan. 1, aimed at independent engineers and technicians in the electronics industry, has the effect of making them employees of either the agency that places them or the company employing them.

Because there are thousands of such workers nationally, the IRS figures it will be able to collect an additional $60 million in tax revenue from the change, says Jeff Jacobs, president of the Los Angeles chapter of the national Independent Computer Consultants Assn.

Despite such legislation, experts seem to be unanimous in their belief that the use of independents and temporaries of every persuasion will continue.

Some companies are opting to get out of the personnel business entirely by, in effect, handing over their employees to a leasing company.

Most companies will maintain at least a core of traditional, full-time employees for reasons that go beyond the measurable variables of salary and benefits.

“All companies need a core that reflects their corporate culture,” says Bonnie Nash, president of Irvine-based Thomas Temporaries, which plans to add another office later this year to the four it already operates in Orange County.

But, says Chapman College’s Doti, the balance clearly is shifting toward disposable employees, which means that Bill Heaton, the computer wizard, probably will not have to invest in either a tie or a wake-up clock for the foreseeable future.