Wages Expected to Rise As Contract Workers Get More Expensive

Is this the final nail in the inflation coffin ?

“Staffing agencies are charging companies more for temporary workers, a possible harbinger of a bump up in salaries for permanent employees later this year.

The bill rate at Calabasas, California-based On Assignment Inc. (ASGN), which places temporary staff primarily in the information technology and health-care fields, climbed 6.3 percent in the quarter ended March 31 from the same time last year, the largest 12-month gain since 2008.

The increase in the amount the company charged was “surprising,” said Tobey Sommer, a staffing analyst at SunTrust Robinson Humphrey Inc. in Nashville, Tennessee.

Agencies like On Assignment are the first to reflect shifts in wages because demand for their services is more immediate, prompting “real time” changes in fees, Sommer said. By contrast, he said, employers calibrate compensation for permanent workers less frequently, causing those adjustments to lag behind.

The temp labor market is a “canary in the coal mine” for broader gains in wages, Sommer said. “Bill-rate increases are starting in areas where demand is the strongest, like the IT sector. The logical next step is for bill rates to improve more broadly and ultimately be reflected in the wage gains of permanent employees.”

On Assignment had “robust” revenue growth in its information technology and engineering business during the first quarter, driven in part by higher contract rates, Chief Executive Officer Peter Dameris said on an April 28 conference call. “Exiting the quarter, demand for our services strengthened in all divisions,” he said.”

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