Leave Bill: Temp-Firm Windfall?
Federally mandated family-leave benefits promise to boost the temporary-help business
THE family-leave bill was made for people like Suzanne Moore.
No, Mrs. Moore is not pregnant, planning to adopt children, or hoping to aid an elderly relative. Moore owns a "temp" agency, Alterna-track. The business finds short-term replacements for professional jobs, such as portfolio managers, strategists, and vice presidents.
"The family-leave bill makes our business much more active, I would think, as firms recognize that this is going to be part of the fabric of society," says Moore, formerly a bond trader.
The temp industry is expected to be one of the beneficiaries of the new legislation, which is expected to be passed by Congress shortly. It passed the House of Representatives earlier this week. The Clinton administration supports the measure.
According to a report by the Senate Committee on Labor and Human Resources, the new legislation will affect about 44 million employees. A significant number of women will be affected since female participation in the work force is projected to reach 66.1 percent by the year 2005.
The Senate committee estimates it will cost employers less than $236 million annually. This cost stems from the continuation of health insurance coverage for employees on unpaid leave.
Once a worker takes a leave, employers must decide whether to replace them temporarily. With so many companies tightening their belts, it has become more difficult to merely add the work to another employee's load. "You get two jobs done poorly," says John Thompson, the chairman of IMCOR Inc., a Stamford, Conn., company that finds short-term replacements for executives.
Instead, companies sometimes turn to temp agencies. An agency has a cost advantage in that it does not provide health and retirement benefits to the "temps" it sends to a company. Temp agency executives figure benefits add 30 to 40 percent to the cost of an employee.
The traditional type of temp agency is Manpower Inc., located in Milwaukee, Wis. Last year Manpower sent out about 560,000 workers to fill clerical, administrative, and secretarial jobs. Mitchell Fromstein, president, estimates that about 60 percent of Manpower's business is the result of businesses wanting "flexibility" in hiring. "They want the ability to have the workers when they need them," Mr. Fromstein says.
In corporate turnaround situations, executive recruiters have often provided consultants, in effect on a temporary basis, says David Lord, editor of Executive Recruiter News.
But he says it's possible executive recruiters will gear up to provide family-leave replacements. This may require a change in the way recruiters bill, since executive recruiters normally receive an up-front fee before beginning a search for a full-time position.
Moore's business has geared itself more toward family-leave replacements. She only charges after she has filled a job. She charges what the replacement worker would normally make on an annual basis. For example, if a portfolio manager makes $100,000 per year, the fee is $400 per day plus a 30 percent fee. Most of the people in her pool are women, many of whom had left professional jobs to raise a family.
THE temp industry is unsure about the degree its business will be helped. "There could be an increase in temporary-help usage, but we are not expecting any major surge in business," says Edward Lenz, general counsel for the National Association of Temporary Services in Washington.
Fromstein figures the new law will "probably increase the amount of usage of services like ours," but he says he can't quantify the effect. He says Manpower has already benefited from similar laws enacted in 30 states and policies adopted by most major corporations. "For us, it is an important part of our business," he says. Fromstein estimates about 10 percent of Manpower's business stems from planned absences such as those included in the federal act.
Many of the state laws are new and not understood by employees. Marion McGovern, president of M2, a San Francisco firm, says new business stemming from a 1992 California law "has not been dramatic."
Ms. McGovern suggests, however, that the federal mandate "will enhance the law's credibilitiy - people will think it's OK to take this leave," as opposed to leave based on state laws. She predicts that it will take a while to educate the public about the fine points of the law. For example, the law allows leave for parental care, which is sometimes a forgotten part of family care.