Employment services include companies that specialize in providing human resource solutions to other companies. Employment service providers take the form of employee and executive recruiting firms, professional employer organizations (employee leasing companies), and temporary employment companies. While various employment services are sometimes referred as "employment agencies," this term will be avoided since it can include any number of services and thus can cause confusion. Employment services either locate and select workers who become the employees of their clients, as with employee recruiters, or they assign workers to their clients who are their employees, as with professional employer organizations. Businesses rely on employment services to supplement their existing workforce, to expand their workforce, and to take responsibility for managing their workforce.

To recruit employees, employment services use a number of methods including classified ads, employee referrals, college interviews, trade associations, job fairs, and the Internet. Most employment services rely on a variety of recruitment methods.

Fueled by the outsourcing trend of the 1990s that caused companies to farm out work to other companies or independent contractors, demand for employment services such as employee recruiters, temporary employment firms, and professional employer organizations skyrocketed during this period. Furthermore, new regulations, higher benefit costs, and employee litigation also provide an impetus for using employment services.

The rapid expansion of technology-related jobs and the subsequent demand for skilled workers also acted as a catalyst for companies placing greater reliance on employment services. Traditional methods of recruitment such as classified ads, word of mouth, and job fairs failed to draw nearly as many workers as needed in the 1990s for such high-tech positions as computer programmers, as well as information-technology and information system jobs. Instead, more and more companies turned to various employment service providers during this period in order to continue growing and retain their clients.


Employee recruiters specialize in finding and selecting employees for their clients. Sometimes referred to as "headhunters," employee recruiters begin by responding to the requests of their clients who need to expand their workforce. Once job openings have been identified, the recruiter uses a job description to identify key information about the job such as job responsibilities, required education and experience, hours, and compensation. By integrating this information with specialized knowledge about recruitment channels and other factors, recruiters locate potential applicants. Interested applicants complete a job application or submit a resume to signal their candidacy for a position. Job applications and resumes identify applicants according to a consistent and formal information-gathering process and within legal and ethical boundaries that protect the applicant from discrimination in the selection process.

Recruiters benefit companies because they can concentrate on their core business instead of on hiring new employees. Recruiters often have a larger geographic presence that allows them to attract more applicants and more qualified applicants than many companies can. Recruiters who receive payments after they place new workers in companies are called contingency recruiters. Other recruiters work on retainers and receive payments for their services prior to launching their search. In addition, some recruiters calculate their fees by charging 10 to 30 percent of the salaries of the workers they place, while others charge set fees for various kinds of candidate searches. Estimates indicate that there were approximately 7,500 recruiting firms in the United States during the late 1990s.

Executive recruiters function in the same way as employee recruiters, except they concentrate on locating executives and technical expertise. Since World War II, executive recruiters have played an increasingly important role in helping companies find and hire the best qualified executives. Unlike some employee recruiters, however, executive recruiters do not usually post job announcements or accept unsolicited resumes. Instead, they search for qualified candidates, screen them confidentially, and make arrangements for interviews between the promising candidates and clients. Furthermore, executive recruiters often charge fees upwards of 30 percent of an executive's salary. Executive recruiters save the executives from their client companies immeasurable time that would have been spent on recruiting, which allows executives to focus on company operations. Moreover, executive recruiters, like employee recruiters, can search larger geographical expanses than most in-house recruiters can. Executive recruiters locate and help place a wide range of executives from CEOs to college deans.


Professional employer organizations (PEOs) are companies that provide human resource services to other companies, allowing them to save money on labor expenses and forgo the complicated task of maintaining a workforce. Also known in some circles as employee leasing companies, PEOs establish contracts with other companies, agreeing to assume most employer responsibilities for workers assigned to their clients. Therefore, PEO responsibilities include assigning employees to clients, paying wages, reporting and collecting taxes, and hiring and firing employees. Because of the complexities surrounding employment —for example, employee benefits, personnel management, and workers' compensation claims—companies hire PEOs to handle their human resources needs, while they concentrate on their business operations.

Unlike temporary employment agencies, PEOs offer permanent, comprehensive employment services, not supplemental or temporary services, and assume responsibility for most, if not all, of a client's workforce. Consequently, PEOs strive to establish long-term relationships with their clients. Small businesses with around 16 employees make up the majority of PEOs' clients; yet larger companies also find PEO services advantageous.

PEOs in particular have grown quickly in the 1990s. By the late 1990s, there were 2,500 PEOs throughout the country, whereas there were only 38 in 1984, according to the National Association of Professional Employer Organizations. The South has the highest concentration of PEOs. In addition, PEOs employ some 3 million workers nationwide with an annual payroll of $18 billion.


Temporary employment services began with the need of companies to fill positions for short periods because of employee absence as a result of illness, injury, or other excusable reasons and because of tight production or project schedules. Temporary employment agencies generally provide supplemental or short-term services, supplying their clients with workers for a specific period or a specific project.

The U.S. temporary employment service industry began in 1946 when William Russell Kelly launched his clerical support company, Kelly Girls. Kelly Girls, which became Kelly Services, initially provided substitute clerical workers to companies as temporary help. Temporary employment services have since become a significant industry and have expanded to offer temporary workers skilled in accounting, engineering, law, and computer programming. Nonetheless, the focus of temporary employment services remains the same: to provide short-term human resource assistance to companies understaffed for any number of reasons.

The hourly wages for temporary positions range from $5.50 an hour for unskilled jobs to $15 an hour for skilled jobs—and even over $50 an hour for highly skilled jobs. Temporary job assignments last anywhere from one day to several months. In addition, some companies also hire temporary workers as permanent employees and some temporary employment agencies offer workers benefits such as health insurance and retirement plans.

According to the Bureau of Labor Statistics, about 1.2 million workers had temporary jobs through employment agencies in the mid-1990s. Furthermore, revenues from the industry grew to $20.8 billion, according to the National Association of Temporary and Staffing Services. Temporary employment agencies also report that roughly 90 percent of all U.S. businesses hire temporary employees.

SEE ALSO : Hiring Practices

[ Karl Heil ]


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