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February 26, 1996
Temporary Employment in Canada
It used to be the case that if you did your job well, got along with your boss and your co-workers, and were employed by a profitable firm, you could expect to keep your job for an indefinite period of time. Unfortunately, that is often not the case today. More and more people are employed in temporary jobs, including workers hired for short-term assignments through temporary help agencies, and workers hired directly by firms on short-term contracts.
This study assesses the growth of temporary employment in Canada and its implications for family security, employer-employee relations and public policy. It is based on extensive analysis of Statistics Canada data sets and review of government, academic and media publications.
The rise of temporary employment
The number of persons working in temporary jobs is increasing. For example, in the five years between 1989 and 1994, the number of Canadians employed on a temporary basis increased by 21 per cent, from 799,000 to 970,000 workers. Even these figures underestimate the real extent of temporary employment. They do not include workers who are legally defined as self-employed, such as those who are primarily working within one organization but are, in fact, classified as contract freelancers or consultants. Evidence from Great Britain indicates that about 15 per cent of temporary workers are self-employed. If that percentage held true in Canada, an additional 170,000 workers would be added to the ranks of the temporarily employed, meaning roughly one in 10 Canadians in the workforce who are employed are working in what would be considered temporary jobs.
These estimates of temporary employment in Canada are comparable to many European countries, including the United Kingdom, Germany, Italy, Belgium and the Netherlands, where 5 to 10 per cent of the labour forces are employed in temporary jobs.
The simple fact is that temporary employment is on the increase and most of those affected by this phenomenon are not happy about it.
Why is temporary employment on the rise?
Worker preferences are only part of the story: two-thirds of temporary workers in Canada say they would prefer to have a permanent position. The same applies in most European countries, where an inability to find a permanent job is the reason most frequently given for taking a temporary job.
Changes in employers hiring strategies is another explanation. The increased use of new employment arrangements is one of many strategies used by businesses today to achieve the flexibility necessary to face intensified competition, rapidly changing technologies and volatile consumer demands. By hiring workers on a temporary basis, employers are able to tailor their workforces to meet fluctuations in business activity. Temporary workers can be hired quickly during business upturns and simply dismissed when they are no longer needed. Because of their short job tenure, temporary employees are eligible only for the minimum legal notice of dismissal and level of compensation. This allows a firm to respond quickly to labour market changes while avoiding the costs and risks associated with hiring permanent employees.
The growing number of women in the labour force also may have fuelled employers demands for temporary workers. With more women joining the paid labour force, the number of pregnancy-related absences increased from 134,000 in 1980 to 254,000 in 1994. Many firms report that one of their main reasons for hiring temporary workers is to replace employees on maternity leave.
Who are temporary workers?
Temporary workers are neither a homogeneous group, nor are they limited to a single type of employment. They are found in almost all industries and occupations and reflect the diversity of the population. For example, temporary jobs are filled by almost equal numbers of men and women, and temporary workers are found in any number of occupations including clerical work, teaching and health professions, construction trades and service occupations, among others.
Educational attainment among temporary workers is also wide-ranging. Among those aged 25 to 44, for example, almost half have a certificate, diploma or degree from a college or university, while one-quarter had not completed high school. People employed through temporary help agencies are particularly well-qualified. This runs counter to the common belief that education and training will enable individuals to move into more permanent forms of work. Indeed, among workers who experienced a period of unemployment before taking a temporary job, over three-quarters reported that a shortage of jobs was a barrier to finding employment, compared to just one in five who cited lack of education as an obstacle. Many of these individuals had accepted temporary jobs, not because they lacked the proper education for permanent positions, but because it was the only kind of work available.
In terms of age, a disproportionate share of temporary workers are young people (aged 15 to 24): they fill about one out of every three temporary positions, but only one in five permanent jobs. Yet temporary employment is not simply a youth phenomenon. Two-thirds of temporary workers are adults who must cope with the financial insecurity that results from the temporary nature of their employment. This is all the more pressing given that nearly half of these adults are the sole income earners in their households.
Wages and benefits
Generally, wages in temporary jobs are lower than those in non-temporary jobs. Women in temporary jobs receive, on average, $2.00 per hour less than their non- temporary counterparts in similar occupations. For men, the average wage loss associated with temporary employment is $2.85 an hour. This wage penalty remains even after other factors affecting hourly wages such as age, education and industry are taken into account.
In this context, it is not surprising that one-third of temporary workers earn less than $8.00 per hour (compared to only one-fifth of non-temporary workers), and well over half earn less than $12.00. Some temporary workers do earn fairly high wages, with one in five earning $18.00 an hour or more. Many of these are men in construction trades and women in health and teaching professions.
In addition to lower earnings, temporary workers are less likely to receive non-wage benefits and protections. To qualify for some of the legal rights under the Canada Labour Code, a worker must be continuously employed by a single employer for at least six months or a year. Likewise, benefit packages offered by employers are often attached to minimum service requirements of a similar duration. Seventy-five per cent of temporary jobs last less than six months, however, and as a result, many temporary workers are excluded from various legal protections and employee benefits.
Some temporary workers, who for all intents and purposes are employees of a firm, are defined legally as self-employed contractors. As such, they do not have the same rights and protections as the regular employees. They are not paid for days away from the job due to sickness, statutory holidays, bereavement or vacation leave, nor are they entitled to severance pay upon termination of their employment. Moreover, employers are not required to pay unemployment insurance premiums or Canada/Quebec Pension Plan premiums on behalf of these workers. Clearly the emergence of these new forms of employment has implications for a wide range of policies and programs.
Unionization
When temporary jobs are covered under a collective agreement, workers make, on average, $4.80 more than non-unionized temporary workers. But in an effort to protect job quality and employment for their members, most unions have traditionally opposed the use of temporary workers. With the continuing rise of temporary employment, however, some unions are now working to establish guidelines to govern the terms and conditions of such work. Some of the key bargaining issues include: the use of temporary workers only under specific circumstances, and subject to agreements between labour and management; recruitment and conversion of temporary jobs into permanent positions wherever possible; parity of wages and benefits between temporary and permanent workers on a prorated basis; and the inclusion of periods of contract employment in the calculation of an employee s seniority. This new approach is premised on the view that it is better to regulate the use of temporary workers through a collective agreement than it is to exclude them altogether from the bargaining process and hence, from the sphere of union influence.
Temporary and part-time work
There is considerable overlap between temporary and part-time employment: one-third of temporary workers are employed on a part-time basis (fewer than 30 hours per week). Among adults whose work is both temporary and part-time, over half said they took the part-time work because they could not find a full-time job. Add to this, the six in 10 temporary workers who would rather have a permanent position and we find a group that is doubly disadvantaged preferring full-time, permanent employment, but finding only part-time, temporary jobs.
With reduced hours of work and lower hourly wages, the weekly earnings of temporary workers in such occupations as sales and service jobs are several hundred dollars below those of their non-temporary counterparts.
The dynamics of temporary employment
Concerns that workers in temporary jobs remain on the margins of the labour force appear to be well-founded. Where do people go when they have completed their temporary job? In 1987, four in 10 found a new job within a month, while the same number were still looking for work. Two months later, only half the workers had managed to find a job and slightly less than one-third were still looking for employment; the remainder had dropped out of the workforce.
Of those that did find work after completing a temporary job, most found another short-term position. It seems that many of these workers are moving from one precarious term of employment to another, rather than using temporary jobs as springboards to more permanent employment.
Policy implications
Available data suggests that temporary employment is on the rise and will affect more and more people in the labour market in the years to come. For some, temporary work no doubt has advantages. Flexible work arrangements could improve the quality of life for some families. For a double-income family with two children, the chance to tailor their work schedules could be viewed as an opportunity to complement household responsibilities, including taking on other short-term work assignments. Similarly for consultants and other professionals with skills in high demand, the flexibility and potentially higher income makes contract work an attractive option. But this is only one side of the story. For many others, the advantages are less apparent.
If most people working in temporary jobs preferred such employment and they enjoyed similar benefits and advantages as those in more permanent jobs, then perhaps temporary employment might not be an issue worthy of government attention. That is not the case, however. Temporary employment is an important issue with substantial policy implications. Too many workers today are unable to string together enough temporary jobs in a year to provide them with an adequate income or security. Moving from one contract to the next, many individuals are left with only part-time work and irregular hours, and rarely with any of the non-wage benefits like pensions or unemployment insurance. In short, temporary employment in some of its current forms is eroding the economic security of Canadian families.
It is within this context that we discuss public policy implications. Policy responses should be targeted at making temporary employment a more viable form of work by ensuring that it like more standard forms of employment provides workers with a reasonable level of financial and social security, and that both employees and employers share in the consequences of these more flexible work relationships.
Employer-sponsored benefits
Like other non-standard workers, those in temporary jobs are rarely eligible for employer-sponsored non-wage benefits. Referring specifically to part-time workers, The Report of the Advisory Committee on Working Time and the Distribution of Work recommended the provision of private sector benefits on a prorated basis. This logic could be extended to temporary workers, providing them with prorated medical and dental coverage, maternity and sick leave, and pension contributions. This would improve the financial and social security of temporary workers while at the same time, limit the incentive for employers to replace regular, full-time workers with temporary help.
Since employer-sponsored benefits fall outside of the direct program responsibilities of the federal and provincial governments, either financial inducements like tax incentives deductions, credits, preferential tax rates or legislation could be used to ensure some degree of parity between temporary and non-temporary workers. Employers might also be allowed to pay workers cash in lieu of benefits rather than prorating such benefits.
Employer-sponsored training
As the employer-employee relationship is eroded by a greater reliance on temporary workers, the extent of employer-sponsored training and development will presumably diminish as well. That is because employers are most likely to provide training to workers with longer job tenure, and they are less likely to risk an investment on temporary staff where returns are unlikely to be realized. As in the case of employer- sponsored benefits, incentives could be used to encourage more workplace training and thereby reduce the risks for firms making investments in workers, since the government would share in the cost of such investments.
Labour codes
Because of the often short job tenure of temporary workers, many are excluded from protections under federal and provincial labour codes. A number of provisions under the Canada Labour Code, for example, require that individuals work for at least six consecutive months or even one year. This poses a problem for many temporary workers, half of whom work for periods of three months or less, and three quarters of whom work for six months or less at a time. To address this problem, current labour code criteria could be replaced by a prorated formula based on employee tenure measured by days or hours worked so that workers would be compensated for the degree to which they have been employed. This would include the extension of prorated bereavement leave pay, maternity leave, severance pay and notice of termination or wages in lieu of notice.
Unemployment insurance
As temporary jobs become more prevalent, it is likely that periods of unemployment will become more frequent for many workers. The incidence of temporary work tends to be the result of management decisions rather than worker preferences. For this reason, the unemployment insurance program (now called employment insurance ) should not penalize workers for accepting the only kind of work available, even if it is temporary. Rather, there is a need for short-term income replacement and employment measures to support workers during these transitional periods, particularly if temporary employment is to be a viable form of work.
Some temporary workers are unable to participate in the unemployment insurance program because legally they are classified as self-employed. As the Standing Committee on Human Resources suggested in its 1995 report, UI coverage should be extended to contract workers in order to allow them the opportunity to contribute to and benefit from the program.
To reduce the financial incentive of some employers to replace regular full-time workers with temporary workers, the employer s contributions should be based on the total wage bill of the firm. Premiums would then be paid on all labour, including contract help, rather than just on the regular employees, as is currently the case.
Conclusion
Overall, temporary employment is becoming more prevalent. To some extent this is nothing new. Seasonal employment has long been a part of the Canadian economy. But the face of temporary employment is changing. It is now found within all industries and occupations, and cuts across demographic and socio-economic groups. For some people, temporary employment offers a way to balance paid work with other activities, or the chance to become entrepreneurs selling specialized skills. But for many others, it means low wages, few benefits and precarious attachment to the labour force.
The growth of temporary employment, along with part-time work and self- employment, is changing our understanding of what constitutes a job . These work arrangements are challenging the traditional [male] employment model characterized by long-term, full-time/full-year employment with a single firm. They also pose challenges for government policies and programs, many of which were designed around the traditional employment model.
Temporary Employment in Canada - Related Material
Canadian Council on Social Development,
309 Cooper Street, 5th Floor,
Ottawa, Ontario, K2P 0G5
Tel: (613) 236-8977, Fax: (613) 236-2750, Web: www.ccsd.ca, Email: council@ccsd.ca
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