Companies Reaping Savings With Temporary Workers : Businesses Shift Employment Costs and Uncertainty to Outside Agencies; Employees Face Life Without Benefits, Security

Jay Finkelman has sifted through the economic rubble left by the recession in Southern California, and thinks he has found a model for the future of employer-employee relations.

A former professor of industrial psychology who is now director of the Kelly Services temporary employment agency for Los Angeles County, Finkelman envisions that companies will keep cutting their staffs until they consist of little more than core groups of employees performing essential tasks.

The rest of the work force, he says, will then belong to vast employee clearinghouses--such as Kelly--who will pay their salaries and benefits, and dispatch them to factories, plants and offices that need them . . . temporarily.

To some, Finkelman’s vision may be a blueprint for success in the global economy. To others, it’s a chilling undoing of the American dream.

But before you dismiss Finkelman’s vision as self-serving, take a look at your workplace: from banking to biotechnology, temporary workers are playing an increasingly important role.

Health Net, the big health maintenance organization in Woodland Hills, has 100 temporary workers now, up one-third from a year ago and still rising. Health Net figures it saves up to half the total cost for each position by relying on temporary workers.

Packard Bell Electronics, a personal computer maker in Westlake Village, employs 800 to 1,000 temporary workers, up from just 50 in 1989. Most of the temps, who are one-third the work force at Packard Bell, do packing or loading jobs, or other light industrial tasks. Debbie A. Blum, human resources manager at the company, said temp agencies can better handle the recruitment of vast numbers of employees, and Packard Bell does not want to be stuck with a massive permanent staff if business ever falters.

Across the San Fernando Valley, and across the country, other companies are making similar moves.

Data from the state Employment Development Department shows that in Los Angeles County, employment at temporary help services jumped 14% between 1991 and 1993, while total non-agricultural employment in the county fell 7%. Nationwide, about 15% of all jobs created during the economic recovery have been at temp services.

Orders have tripled over the past two years at the Glendale office of Manpower Inc., where manager Cheryl Storms said about 30 applicants a week file through the office.

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Manpower applicants go through a gantlet of tests that often take up to two hours. In a corner room, secretarial applicants type away at computers to demonstrate typing speed and familiarity with word processing programs. Behind a large window in the back of the office, laborers are given 10 minutes to complete “coordinated rapid movement tests” that include filing tiny cards into mailboxes with corresponding seven-digit codes, and plugging transistors, diodes and capacitors into mock computer circuit boards.

One applicant in Manpower’s office Monday was Suki Ewers. She does temp work to support her “regular” job as a keyboardist with a local band called Mazzy Star. Her rock group often takes off for monthlong tours, and next week she says her band will appear on the Conan O’Brien late-night TV show. But “there are big blocks of time when nothing’s happening,” Ewers said, and temporary secretarial work for $10 an hour can help pay the bills.

Increasingly in Southern California, temp agencies are being inundated with applicants who lost well-paying, “permanent” jobs during the recession, or are looking for career changes.

“The caliber of temps has changed because a lot of people with great skills lost jobs,” Manpower’s Storms said. “Once it was people looking for . . . a flexible schedule. But now 85% of the people coming in are looking for 40-hour-a-week work.”

The trend can be seen as part of the overall squeeze felt by the middle class. Pay for temporary jobs ranges from minimum wage to as much as $20 an hour for technical positions, but even higher-salaried temps typically have little job security, rarely receive health insurance, get little or no paid vacation, and often are paid less than full-time workers who might otherwise be hired to do the same jobs.

Besides relying on temporary workers, companies contract with outside firms for payroll, security and others services once handled by in-house employees. Businesses are also farming out more of their work to independent contractors who work on specific tasks. Some companies, including Health Net, are even experimenting with “employee leasing,” in which whole groups of employees are transferred, on paper, to an outside firm. For a fee, that outside firm takes over administrative tasks including paying them and providing benefits.

Daniel Mitchell, a labor economist at UCLA, says it’s all part of the most dramatic labor market shift since World War II, and that many workers will suffer during the transition. “There is a reluctance to make commitments to employees,” Mitchell said.

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This transformation has meant booming business for many temporary employment agencies.

“This year has been a bonanza,” said Hank M. Hinse, regional manager for Manpower Inc. With 640,000 employees nationwide, Milwaukee-based Manpower now ranks as the largest private employer in the United States. Sales have jumped 35% this year at its local offices in Glendale, Van Nuys and Santa Clarita.

Perhaps not surprisingly, Kelly Services says the number of job applications they’ve received in the Valley area has tripled over the past five years. AppleOne CQsaid sales at the temp division of its Glendale office has quadrupled in four years. Select Temporary Services, a Santa Barbara-based company with offices in the Valley area, said to manage its growth its own staff has shot from three employees in 1985 to 125 last year.

At On Assignment, a Calabasas-based temp agency that specializes in providing laboratory technicians and other highly skilled temps, profit zoomed from $166,000 in 1989 to $2.5 million last year, while its revenue rose from $7 million to $38 million. And the company’s roster of temps at its 32 offices nationwide has grown from 180 to 1,400.

On Assignment recruits heavily at local colleges, trying to line up science majors who have the education, but perhaps not enough experience, to land a permanent job. David Foerstner, 32, took science courses while pursuing a fine arts degree, and turned to On Assignment when he lost his production manager job at a clothing company in Los Angeles last year. Foerstner was placed almost immediately as an assistant in the test kitchen at a Van Nuys laboratory owned by Nestle, the Switzerland-based food conglomerate. Foerstner has been at the lab more than a year now, earning $12 an hour alongside temps from other agencies who are earning $7.50 an hour.

Nestle saves 30% of the cost of each position by using a temp and not paying for health or retirement benefits, vacation, insurance and other payroll costs, said Lloyd Miller, manager of the Van Nuys lab.

American Pacific State Bank in Sherman Oaks uses temporary agencies to cut through the red tape of hiring.

When local college students apply for summer jobs at American Pacific, “We refer them to our temp agency,” said Frank J. Ures, chief executive of the bank. “Unless we plan on hiring them permanently, it’s a lot less hassle to run them through the temp agency.”

With five temps working at the bank as tellers and secretaries, Ures estimates the bank saved 10% of the cost of each position by letting the temp agency file tax forms, take employee fingerprints and write paychecks.

If the bank converted to a temporary and part-time work force it could trim 20% from its $6-million annual payroll, mostly through lower wages and reduced benefits, said Tamara Gurney, the bank’s chief administrative officer.

But the bank won’t switch because it worries customer service would suffer without full-time workers who know the business and the customers, Gurney said.

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Local temp agencies also benefit from Southern California employers’ reluctance to make permanent hires after undergoing painful downsizing during the recession. Even when business picks up, some companies feel safer making temporary hires.

To capitalize on this, Kelly has a new program selecting its most experienced and talented workers and putting them into jobs--mostly secretarial or clerical--that are expected to become permanent positions.

If the employer gets nervous, or is unhappy with the Kelly nominee, the worker can be returned any time within the first three months.

Temp agency sales pitches also play on employers’ anxieties over the future of health care reform, the rise in fraudulent worker’s compensation claims and fears of wrongful termination or discrimination lawsuits. Because temps are employees of their agencies, the burden of liability falls to the temp service.

For most employers, however, the bottom line is still the most compelling reason to use temps.

“The temp option presents the perfect solution to holding down the overhead costs while acquiring talent on an as-needed basis,” said James J. Wilk, vice president of human resources at Health Net, an HMO with 1,300 permanent workers.

Health Net’s use of temps during the summer has quadrupled in the past four years, Wilk said, mostly because it can find enough temps for high-skill positions. Almost half of Health Net’s temps work as graphic artists, technical writers and in other skilled positions.

Health Net saves money, Wilk said, not because the temps earn less that a permanent worker would, but because the company can unload the temps when the peak season passes.

The rise in temporary employment has been, at best, a mixed blessing for workers.

Temp agencies are quick to point out that the service they provide helps employers to make temporary hires when they might have made none, and that they continue to provide an important service for students and others looking for part-time work or extra income. Further, temp agencies say one-third of their employees find permanent work at their assignments.

Valerie Rosas, a receptionist at CareAmerica, an HMO in Woodland Hills, hopes her job will soon be converted from temporary to permanent status.

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At CareAmerica for six weeks now, Rosas earns $3 less an hour than she did as a secretary at an accounting firm in Brentwood. But she doesn’t have to worry about health care because she’s covered by her husband’s policy, and she no longer spends 10 hours in her car each week commuting from her Woodland Hills home.

Still, for generations of Americans who were raised on the middle-class promises of secure jobs and good benefits in exchange for hard work and loyalty, the temporary employment trend points to an unsettling future.

Foerstner, the lab technician placed at Nestle by On Assignment, considers himself among the luckier temps in Southern California because he’s worked steadily and been paid well for the past year.

But life without benefits, vacation and job security has begun to wear on Foerstner. And he’s learned that full-time technicians who do the same thing he does, at Nestle and other labs, are earning 40% more.

Worse yet, Nestle has announced plans to shut down its Van Nuys lab in the fall, and Foerstner will be out of a job.

“Once again I’m back in the same position,” Foerstner said. “I feel helpless. It’s like it’s this big Monopoly game and the big companies are winning and we’re the little pieces that get bought and sold.”