Orange County’s job market produced some apparent anomalies in the placement of temporary and permanent workers last year.
This week’s Business Journal list of employment agencies with a local presence shows temporary placements fell as permanent placements—also called “direct hires” in the industry—rose, at least for companies that reported 2016 numbers in the two categories.
Temporary placements were down 7%, and permanent hires were up more than 21%—though about a third of the 27 ranked companies didn’t provide complete data.
Annual revenue in OC—the criterion that produces our rankings—increased 5%; we get numbers from firms, public sources, and Business Journal analysis, and all ranked agencies are accounted for.
The three largest agencies with a local presence retained their top slots from last year’s list:
• No. 1, Select Staffing, based in Atlanta and with local offices in Irvine, had about $111 million in annual revenue, down about 5%.
• No. 2, Roth Staffing Cos., based in Orange, had about $93 million in annual revenue, up about 19%.
• No. 3, Aerotek Inc., based in Hanover, Md., and with local offices in Santa Ana, had roughly $69 million in annual revenue, a Business Journal estimate that we didn’t hike this year.
OC employment agency data and local employment numbers made for an interesting year.
Wage Issues
Therein lies the tale.
A strong job market suggests numbers would rise across the board—revenue, temporary placement and direct hire—as companies fill more roles at higher wages, producing more revenue for the companies that help them do it.
OC unadjusted employment stands at 3.7%, down from 4.2% a year ago.
Select Staffing hasn’t seen a corresponding boost in revenue, despite an improving local job market, said Regional President Gunnar Gooding in an email, because companies that used employment agencies last year resisted the pull of higher wages.
Amid “increasing pressure on companies to raise wages for entry-level workers,” some of Gooding’s clients have “steadfastly refused to keep pace with the market,” he said.
“We’re having a harder time filling their orders,” and some clients have gone to competitors, he said.
He said some of the difference also comes in Select’s use of E-Verify, an electronic employment verification system run by U.S. Citizenship and Immigration Services, that means a more rigorous selection process—one that can cut out some applicants, meaning Select can’t fill all of a client’s open positions.
Gooding said his industry’s trade group, American Staffing Association in Alexandria, Va., considers it likely that E-Verify “will soon become mandatory under the Trump administration, and that would put a great deal of pressure on companies that do not currently use [it].”
Low Unemployment
Other companies on the list say the decline in temp placements shown on the list is the anomaly by itself, and that all areas are looking up for their industry.
“We’re seeing local increases in temp and direct-hire,” said Oscar Navarro, co-founder and co-owner with Walter Reece of TeamQuest Staffing Service Inc. in Santa Ana. “When unemployment is down, you see strength in both.”
TeamQuest is No. 16 with about $16 million in 2016 annual OC revenue, up one-third year-over-year.
The partners have a second office in Corona and in January opened a Chino location.
It’s far smaller than the top three firms on the list—which combine for 30% of all 27 firms’ OC dollars—and that quirk is a powerful benefit to TeamQuest, Navarro said.
“Locally-owned staffing companies emphasize customer service” compared to larger firms, he said. “We can do that better.”
Navarro said TeamQuest works from “the three Rs”—which for employment agencies are “recruitment, retention, and risk management.”
He said it “goes out into the neighborhood” to recruit workers from nonprofit groups that include Goodwill of Orange County and Catholic Charities, both in Santa Ana, whose clientele include job seekers.
Retention comes from “taking care of our people,” and risk management is largely about worker compensation rates, he said.
XMod
A better reputation with insurance companies means lower worker comp costs for employment agencies. Insurers rate an agency via an “experience modification” or “XMod.”
“It’s a multiplier,” Navarro said, and similar to a credit score. “You start with ‘1,’ and lower numbers are better.”
Insurers cut an agency’s XMod for having fewer worker comp claims; Navarro said TeamQuest’s XMod is 0.82.
Temp workers are employees of the agency, so even if other factors contribute to a claim, the agency gets dinged.
“OSHA doesn’t care who the person works for,” Navarro said. “Workers compensation does.”
