How Can Temporary Employment Agencies Offer More Training?

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Temporary employment agencies use training as an argument for recruiting and retaining workers when there is a shortage of skilled workers. Small jobs, however, are a major obstacle for employers and workers to increase investment in training. Since technical temp agency workers are mostly poorly qualified and often previously unemployed, paid work combined with training should lead to more sustainable employment. Adjustments in labor market institutions could increase the attractiveness of training for both employment agencies and temporary workers.

Motivation

Temporary work is characterized by a triangular relationship between temporary workers, temporary workers, and user companies. On the one hand, it includes an employment contract between temporary employment agencies and temporary workers and, on the other hand, an employment contract between temporary employment agencies and user companies. Both contracts are a prerequisite for orders in user companies. Temporary workers work for a user company but are working by an employment office [2]. This business model has spread all over the world in recent decades. However, institutional regulations differ considerably between countries. In some countries, such as B. in Germany, employment agencies act as an employer for temporary workers. According to German law, such agencies must pay for illness, vacation and inactivity. Conversely, in most other countries, employment agencies are simply employment agencies. For example, under French law, they are only required to pay agency workers for the tasks assigned to them.

Although employee employment has increased in the past ten years, it is still shallow in terms of the total employment rate (“penetration rate”). Figure 1 provides an overview of the penetration rates of temporary workers in the years 2000–2013.

Temporary workers are mainly young men, people with a low level of education and often unemployed. Temporary agency work enables informal learning in the workplace. Also, training can improve the employability of employees and increase the likelihood of retention.

Discussion of pros and cons

This article explores the role of employee hiring in providing training for low skilled and unemployed workers. Relevant questions are about the sufficient current training offered, the amount of investment that workers make in their own workforce and whether the agency’s practice really benefits temporary workers. Besides, the role of the government about the training of institutions and issues related to the training supply during periods of suitable labor shortages are marked.

The staffing agency’s perspective

Do the employment agencies offer their employees adequate training? According to the standard theory of human capital, companies will invest more in their employees’ social capital concerning their expected work. In this way, the company can benefit from investments over time. In today’s competitive world, companies don’t offer general training because employees can quit. Companies cannot guarantee that they will repay their investment in general employee training. However, general training, for example, in the area of computer skills, can be used as a self-selection mechanism; H. More talented employees choose companies that offer training opportunities. General training can also be rummage-sale as a tool to test employee skills, as companies can learn more about employee performance once employees demonstrate their skills by participating in general training programs [3].

Personnel agencies compete for appropriately qualified employees to fill vacancies in user companies. The adjustment of the labor supply to the labor demand is the basis of their business model. If there is enough qualified personnel available, there is no need for training. However, if there is a shortage of skilled workers, you cannot fill vacancies and earn no income. For this reason, training can serve as an investment option that recruitment agencies can use to fill this income gap. Besides, employment agencies that offer training to their agency workers may be preferred by user companies because the preselection of candidates is supposed to be better. From the hiring agency, exercise is useful, in addition to the concepts of self-selection and selection, in case of a shortage of skilled labor. Training is an additional recruitment argument for candidates who value training as part of the overall employment package offered by recruitment agencies. Exercise can also help increase the retention rate of employees of the acting agency. Today, companies can no longer guarantee the long-term employment of their employees so that they can offer employment opportunities through training rather than job security. Therefore, this implied contract requires employers to invest in human capital. If this does not happen, the alleged contract will be dishonored, which will reduce employee participation in the company and ultimately reduce performance [4].

Recruitment agencies provide training in so-called monopsonistic markets, where companies demonstrate enormous market power in employment practices. This form of market power allows companies to pay employees less than guarantees their productivity. As a result, there is a gap between employee production (more training to increase productivity) and wages. Market companies choose the optimal level of training, in which the additional costs of more training are equal to their additional benefits. Therefore, it is worth investing in the general training of its employees in this environment. The strength of Monopsony can arise for two main reasons: (i) transaction costs related to matching and the search for friction, and (ii) asymmetric information between an employee’s current employer and other companies.; the current employer is the only player who knows the exact content of the training offered to employees. Keep in mind that there is little empirical evidence about the strength of the company’s monopolies.