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Light Industrial Temporary Labor Category: Managing the Challenges Non-VMS and Non-MSP Environment
Light Industrial Temporary Labor Category: Managing the Challenges
Non-VMS and Non-MSP Environment
Overview
Introduction: Republic Services
Light Industrial
Waste Industry
Annual Spend
Largest Staffing Firms
Market Share Trends
Compliance
Cost
Safety
Availability
Solutions Summary
Temp Labor Market
Snapshot
Challenges
& Solutions
Conclusions
3 |
Republic Services at a Glance
• $19.9 billion in assets
• $8.4 billion in annual revenue
• $589.1 million in net income
• NYSE: RSG
$0.99 annual dividend per share
• 31,000 employees
• 8th largest vocational fleet
• $30M investment in recycling facilities
in 2013
A Fortune 500 company
Jacksonville, FL Anaheim, CA Dallas, TX
4 |
The Evolving Ton
Diversion has captured the growth in the waste stream
Organics
Traditional Recycling E-Waste Recycling Specialty Recycling
Waste-to-Energy
Landfill
5 |
Recycling and Diversion Experts
• High volumes of specific materials generate
best rebate pricing
• Logistics and proactive bale route expertise
• Mill direct sales worldwide and marketing
proficiency
• Process improvements and best practices
• Average customer realizes 10-15% savings
• Equipment recommendations and purchase
options
• Innovative reporting analytics
Recycling over 4.7 million tons per year
“Republic had a willingness to think outside the box to help keep waste out of the landfill. That swayed me in Republic’s direction...Republic has a strong hold in the marketplace.”
- SeaWorld Parks & Entertainment
6 |
Facilities and Assets
Facilities and landfills specifically designed, licensed and operated to ensure proper
waste disposal
Owning and operating our assets allows us to be your direct provider with the most
competitive pricing
8th largest and the youngest private commercial fleet
190 Landfills
2 Solar Energy Projects 15,500 active vehicles
1800+ Alternative Fuel
336 Hauling Companies 199 Transfer Stations 69 Materials Recovery Facilities (MRF)
69 Landfill Gas/
Renewable Energy Projects
Temporary Labor
Light Industrial
Waste Industry
Annual Spend
8 |
Temporary Labor
Defined:
Human capital employed by a third party assigned to perform work to another third party, usually on a limited time basis.
9 |
Light Industrial Temp Labor Roles
Sorter/Picker
Helper
General Laborer
Mechanic/Technician
10 |
Republic’s Annual Temp Labor Spend
Annual Spend
Staffing Market Snapshot
Largest US
Staffing Firms
Market Share
Trends
12 |
2014 U.S. Industrial Staffing Firms
Rank Company
2013 U.S. Industrial Staffing Revenue
($million)
Market
Share
1 Express Employment Professionals 1,770 6%
2 Aerotek (Allegis Group) 1,736 6%
3 The Select Family of Staffing Companies 1,702 6%
4 Manpower 1,640 6%
5 TrueBlue1 1,618 5%
6 Randstad 1,324 4%
7 Kelly Services 1,188 4%
8 Recruit 1,120 4%
9 Adecco 1,050 4%
10 EmployBridge2 926 3%
11 Elwood Staffing3 719 2%
12 Corporate Resource Services4 674 2%
13 Staff Management | SMX (The Seaton Companies)5 497 2%
14 Integrity Staffing Solutions 362 1%
15 Labor Finders 350 1%
16 Peoplelink Staffing 207 1%
1.Includes revenue from acquisition of MDT Personnel (1Q13). Does not include revenue from The Seaton Companies, acquired 2Q14.
2.Includes revenue from acquisition of Employment Plus (4Q13) 3.Includes revenue from acquisition of SOS Staffing Services (1Q13) 4.Includes revenue from multiple acquisitions in 2013 5.Acquired by TrueBlue in 2Q14 Confidential Report – NOT for Distribution | ©2014 by Crain Communications Inc. All rights reserved.
13 |
2014 U.S. Industrial Staffing Firms
Rank Company
2013 U.S. Industrial Staffing Revenue
($million)
Market
Share
17 MAU Workforce Solutions 204 1%
18 The Onin Group 172 1%
19 Volt Information Sciences 171 1%
20 Snelling Staffing Services 165 1%
21 QPS Employment Group 154 1%
22 Trillium Staffing 153 1%
23 Automation Personnel Services 150 1%
23 TransForce 150 1%
25 Nesco Resource 143 <1%
26 Atterro Human Capital Group 140 <1%
27 CoWorx Staffing Services 136 <1%
28 @WORK GROUP 120 <1%
29 Barrett Business Services 119 <1%
30 BelFlex Staffing Network (Belcan Corporation) 114 <1%
31 Malone Workforce Solutions 104 <1%
32 Effex Management Solutions 100 <1%
Total 19,178 65%
Confidential Report – NOT for Distribution | ©2014 by Crain Communications Inc. All rights reserved.
14 |
Staffing Firms Market Share Trends
Using data from Staffing Industry Analysts’ annual reports on the largest industrial staffing firms in the U.S., the chart at right shows the trend in aggregate market share for the five largest and fifteen largest firms, respectively.
We note that from 2007 to 2013, the five largest and fifteen largest firms have steadily increased their share of the total market, indicating a steady trend of increasing consolidation in the industrial staffing industry. In 2014, TrueBlue’s acquisition of The Seaton Companies represents further consolidation in the segment and continuation of the trend.
28%
24% 26% 27% 28% 28% 29%
43% 41%
50% 52% 52% 53%
57%
2007 2008 2009 2010 2011 2012 2013
Trend in market share of largest industrial
staffing firms
Top 5 firms Top 15 firms
Challenges
Compliance
Cost
Safety
Availability
16 |
Poll Question #1 What is your biggest temp labor challenge?
1. Compliance
2. Cost
3. Safety
4. Availability
5. Other
17 |
Challenges Compliance Laws, regulations and buyer policies create an environment based on compliance with employment practices
Buyers may lack controls to monitor compliance with organizational policies
Cost
Lack of cost and price transparency
Supplier unit cost is
dynamic
Pay rates increasing due to limited labor pool and minimum wage increases
Safety Many light industrial temp labor jobs have a high safety risk
Safety must be the top principle for both buyers and suppliers
Availability
Labor is not ubiquitous
Available labor pool is
shrinking
Suppliers may not have the footprint to support all buyer locations
18 |
Challenges are Intertwined
Each challenge places
a burden on cost
Regulations and buyer contracts and policies drive cost
Recordables increase supplier workmen’s comp insurance
Lack of labor availability can increase both pay rates and billable rates
High turnover impacts supplier SUTA (experience rating)
Challenges
Compliance
Cost
Safety
Availability
20 |
Co-employment Background
Checks
Drug
Screens
Affirmative
Action
Immigration
Affordable
Care
Compliance
Setting the Table What is Compliance? Conforming to laws, regulations and organizational policies regarding employment practices
Data from the Hildebrand Institute suggests labor and employment related work increased for law firms by 5% while other work declined
According to the WSJ, businesses are preparing for regulations that lower barriers and blur the lines between companies and contract workers
US has been cracking down on I-9 non-compliance and errors
21 |
Minimize Risk of Non-Compliance
Include in supplier contracts:
Statutes and regulations for compliance
Audit rights - Extend beyond contract end date
Termination - For convenience and breach (include cure period)
Service Level Agreements (SLA’s)
Appropriate level of indemnification
Acceptable insurance coverage based on risk tolerance
Sole employer language
Regarding internal organizational policies:
Widely disseminate
Make available on company intranet
Include ramifications for non-compliance
List roles that are off-limits
Consider time limits on assignments
Include rules of engagement
Prohibit resource movement between staffing suppliers
Challenges
Compliance
Cost
Safety
Availability
23 |
Building Cost Transparency
The Facts
Suppliers do not always share cost breakdowns
Supplier cost changes frequently due to regulatory environment, labor availability and safety performance
Variability / wild card cost drivers: SUTA; ACA & Workmen’s Comp
With the appropriate level of analysis, supplier cost (and pricing) can be understood and managed
Building Transparency
Effective use of cost modeling provides data driven positions for principled negotiations
Sources exist from which cost drivers can be determined: government websites; industry websites & supplier 10-K
Some “guess work and assumptions” will still be involved
24 |
Understand the Great Divide
Role – Mechanic
Location – Arizona
Supplier Quoted Rate - $30.31
Pay Rate + Bonus Statutory Burdens
Non-Statutory Burdens
Overhead and
Expenses Profit
25 |
Pay Rate
Hourly rate & incentive / bonus (if applicable) paid directly to resource Example pay rate data sources:
Supplier www.minimum-wage.org/wage-by-state.asp
www.salary.com
www.salary-surveys.erieri.com
www.bls.gov/oes/current/oessrcst.htm
Pay Rate + Bonus Statutory Burdens
Non-Statutory Burdens
Overhead and
Expenses Profit
$19.06
26 |
Statutory Burdens
Pay Rate + Bonus Statutory Burdens
Non-Statutory Burdens
Overhead and
Expenses Profit
$19.06 $4.08
Burden Source % of Pay Rate Total
FICA Social Security & Medical Tax Rates 7.65% $1.46
Workmen’s Comp FCCI Insurance Group 8.36% $1.59
Medicare Social Security (OASDI) Program Rates & Limits
1.45% $.28
State Unemployment Tax (SUTA)
Tax Policy Center: State Unemployment Tax Rates
3.35% $.64
Federal Unemployment Tax (FUTA)
ADP: Federal Unemployment Tax Act Increases
.6% $.11
27 |
Non-Statutory Burdens
Pay Rate + Bonus Statutory Burdens
Non-Statutory Burdens
Overhead and
Expenses Profit
$19.06 $4.08 $3.22
Coverage ACA Penalty**
$6,025 total annual cost of employer coverage for
individual* OR Assume 90% utilization
Assume 90% utilization $2,000/(2,080*.9)=$1.07
$6,025/(2,080*.9)=$3.22
*Kaiser Family Foundation and Health Research and Education Trust ** Penalty for not offering coverage, change to $3,000 for penalty for employee contribution
28 |
Overhead and Expenses
Pay Rate + Bonus Statutory Burdens
Non-Statutory Burdens
Overhead and
Expenses Profit
$19.06 $4.08 $3.22 $5.15
True Blue
Kelly Services
Manpower Group
0 5 10 15 20 25
2013
2012
2011
Average: 17%
29 |
Profit
Pay Rate + Bonus Statutory Burdens
Non-Statutory Burdens
Overhead and
Expenses Profit
$19.06 $4.08 $3.22 $5.15 $.61
0.0 1.0 2.0 3.0 4.0
True Blue
Kelly Services
Manpower Group
2013
2012
2011
Average: 2%
30 |
Putting It All Together
Bill Rate $30.31
Pay Rate $19.06
Statutory Burdens
FICA 7.65% $1.46
Workmen’s Comp 8.36% $1.59
Medicare 1.45% $0.28
SUTA 3.35% $0.64
FUTA 0.60% $0.11
$4.08
Non-Statutory Burdens
Healthcare $3.22
SG&A 17.00% $5.15
Profit 2.00% $ 0.61
Should Cost Total $32.12
Where did our assumptions wrong?
31 |
Step Back and Re-evaluate
Bill Rate $30.31
Pay Rate $19.06
Statutory Burdens
FICA 7.65% $1.46
Workmen’s Comp 8.36% $1.59
Medicare 1.45% $0.28
SUTA 3.35% $0.64
FUTA 0.60% $0.11
$4.08
Non-Statutory Burdens
Healthcare $3.22
SG&A 14.8% $4.49
Profit 1.10% $ 0.33
Should Cost Total $31.18
Before approaching supplier, consider: Are the SG&A and profit is overestimated?
32 |
Step Back and Re-evaluate
Bill Rate $30.31
Pay Rate $20.00
Statutory Burdens
FICA 7.65% $1.53
Workmen’s Comp 8.00% $1.60
Medicare 1.45% $0.29
SUTA 2.50% $0.50
FUTA 0.60% $0.12
$4.04
Non-Statutory Burdens
Healthcare $1.07
SG&A 14.8% $4.49
Profit 1.10% $ 0.33
Should Cost Total $29.93
Are they paying at or over market due to labor availability challenges?
Does their safety record warrant a change in Workmen’s Comp?
Does their experience rating change SUTA?
Are they pushing employees into the exchange or providing coverage?
Challenges
Compliance
Cost
Safety
Availability
34 |
Answering the Safety Challenge
Vet supplier safety performance and commitment as part of the bid process
Work with suppliers that share your safety values
Hold suppliers accountable to ensure resources are properly trained and acclimatized for the role
Include safety performance as an SLA
Require resources to carry cards showing they have completed safety training
Have audit rights on supplier safety training or require suppliers to use auditor to ensure they are in compliance
Create a safe work environment, require PPE at all times – NO EXCEPTIONS!
Consult with industry associations on training
Core Value: Safety must be the top priority for both buyer and supplier
Some staffing companies exit certain businesses or
lines of business due to safety risks
Challenges
Compliance
Cost
Safety
Availability Risk
36 |
Poll Question #2 Is your organization struggling to find light industrial temp labor resources?
1. Yes
2. No
3. Depends on the role
37 |
Supplier/Category Segmentation
In most cases, temp labor can be considered a leverage and/or strategic category due to spend volume or just the nature of the category
Size of Expenditure
Imp
ort
an
ce t
o B
usi
ness
Low High
Low
H
igh
Strategic
Leverage Basic
Crucial
38 |
Supplier/Category Segmentation
In limited cases, the temp labor category is classified as crucial or a bottleneck: low spend; lack of qualified suppliers & limited labor pool
Size of Expenditure
Imp
ort
an
ce t
o B
usi
ness
Low High
Low
H
igh
Strategic
Leverage Basic
Crucial
39 |
Possible Explanations
Unemployment is currently around 6.1% - decreasing the pool of available labor
Temp labor suppliers may be competing against higher paying industries for resources
Suppliers may not have a bench of qualified candidates
Skilled Trades and Laborers two of top 10 most difficult positions to fill in 2014
Labor availability is extremely location specific in certain parts of the United States
40 |
Solving Availability Challenges
Create competition in the supply base – enable competitors
Consider increasing pay rates and incentives
Understand staffing company recruiting activities
Implement an MSP
Work with suppliers that have advanced hiring capabilities (ATS, applicant screening)
Set attainable, yet challenging goals regarding fill rates with fees at risk for non-performance
Use heat maps to identify largest gaps / opportunities
Staffing firms must be creative and innovative in the
hiring space to find and retain talent
Lack of labor availability disrupts the supply chain and impacts buyer service levels with its customers
Conclusions
42 |
Solutions
Protect your organization contractually and with strong organizational policies
Use cost models and validate assumptions
Safety focus first - ALWAYS
Develop competition
Be aggressive, innovative and creative in resolving availability challenges
Solutions exist for each of the 4 challenges and involves close collaboration with the supply base
