Employers Cutting Temps, Contractors


By Michael Liedtke — AP Business Writer

The massive layoffs piling up in corporate America paint a harrowing picture of a maimed economy, but the job-cut numbers reported by struggling companies are really just a snapshot of the recession's carnage.

As they hand out pink slips to thousands of full-time workers, major employers are also jettisoning temporary workers and outside contractors who handle a wide range of jobs — everything from programming computers to scrubbing toilets.

Just how many temporary workers are getting swept out in corporate housecleanings is unclear, largely because regulators don't require the same disclosures as they typically do when at least 50 full-time workers are let go. (There were 21,137 of these mass layoffs recorded last year, up from 15,493 in 2007.)

The looser rules have allowed prominent employers like Google Inc. and Microsoft Corp. to trim contractors and temporary workers without quantifying how many people are being shown the door.

The phenomenon has happened in other downturns, but never to this extent, said Sung Won Sohn, an economics professor at California State University, Channel Islands.

The main reason: Employers have been relying increasingly more on temporary, or "contingent," workers during the past two decades to save money on payroll taxes and benefits. Analysts believe the trend will accelerate in the years ahead. If it does, even more people may be forced to accept temporary jobs even after the economy recovers.

Here are some questions and answers about the temporary work force and how the recession is affecting it.

Q: How many people go to work every week without being classified as a full-time worker?

A: Nearly one-third of the work force — about 42.6 million people, according to a 2006 report from the U.S. General Accountability Office. About 21.5 million of these workers either specialized in temporary assignments, were independent contractors or were self-employed.

Q: How many of these contingent workers have been laid off?

A: Based on government data, Moody's Economy.com estimates U.S. companies ended 2008 with 2.1 million workers from temporary employment agencies, down from a peak of 2.65 million in 2006. This indicates at least 550,000 people have lost temporary jobs in the past two years.

Most companies also rely on independent contractors. This group is a subset of the 8.9 million self-employed workers in the country, which has fallen by 1.2 million since November 2007, according to Moody's.

Most of these self-employed workers are counted among the roughly 5 million full-time jobs that evaporated between November 2007 and last month. (Not all self-employed workers were necessarily doing their duties full time when they lost their jobs.)

Q: Do temporary workers qualify for unemployment benefits?

A: Generally, workers placed through a temporary employment agency can collect unemployment payments, as long as the job loss wasn't triggered by some kind of wrongdoing and they remain willing to accept another "suitable" job.

It gets tricker for outside contractors. As a rule of thumb, they don't qualify because they aren't brought in by a temporary placement agency that pays for their unemployment insurance.

But sometimes contractors who have been working for the same employer for years can make a case that they should receive unemployment benefits. These long-term contractors, sometimes called "permalancers" or "permatemps," must prove they were doing the same jobs as workers on the regular payroll.

As the number of contingency workers has swelled, activist groups like the Freelancers Union have been fighting to reform the unemployment system so independent contractors can automatically qualify for benefits when they lose their jobs.

Q: Which companies are cutting temporary workers?

A: Just about every employer trying to lower its expenses — a definition that seems to fit most companies in these tough times.

When companies are pinching pennies, contingent workers are usually dumped before full-time employees. That's why the number of temporary employees began to dwindle in 2006, about a year before companies began to prune their permanent payrolls, said Sophia Koropeckyj, a labor economist for Economy.com.

When an employer decides to trim temporary jobs, workers imported from abroad are often the first to go, said Robert Kennedy, a professor at the University of Michigan's Ross School of Business. This often happens because companies decide they can no longer afford the time and expense of securing work visas for foreign contractors.

By cutting temp workers first, employers can signal they are doing everything possible to avoid laying off their full-time employees.

To underscore that point, specialty glass maker Corning Inc. let it be known it was already in the process of letting go 1,400 temporary workers when it disclosed plans to lay off 3,500 full-time employees earlier this week.

"We wanted to make it very clear to that we have taken pains to avoid laying off our full-time employees," said Corning spokesman Dan Collins.

Other companies like Google and Microsoft haven't been as forthcoming. Both have confirmed they are cutting ties with contractors without being more specific.

The purge could be cutting a wide swath. Google, the Internet's search leader, had 10,000 contractors as recently as October. Microsoft hasn't even specified the size of its contingent work force, but analysts believe the world's largest software maker has somewhere between 40,000 and 60,000 contractors working for it.

A long list of other technology firms, including IBM Corp. and Advanced Micro Devices Inc., have been trimming contractors without disclosing the number of cuts.

Q: Is there any upside to being a temporary worker?

A: Well, there is this: They probably will be among the first to land new jobs when the economy shows enough signs of life to encourage employers to expand again.

"You never know how strong the recovery is going to be, so the last thing most employers are going to want to do is bring back full-time workers only to have to let them go again," Sohn said. "So they are probably going to stick their toes in the water by hiring temporary workers first."

If that happens, more people who had full-time jobs before this recession may find themselves joining the contingent work force, whether they like it or not.


AP Technology Writers Jordan Robertson in San Francisco and Jessica Mintz in Seattle contributed to this story.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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