Temporary Workers in Organizations and Permanent Employee Performance: The Role of Human Resource Investments

Hiring temporary labor has become an important human resource strategy in modern economies. Theories on strategic human resource management advocate this strategy as a way to improve labor performance. By externalizing or temporalizing less important parts of work, organizations can focus their developmental efforts on “core” workers to reach better performance. Critical commentators, however, argue that temporary work demotivate worker performance by undercutting trust and solidarity-based workplace relations. An interesting question is how permanent employees perform within organizations that use temporary work, as “core” employees’ unique skills and work performance are strategic assets for organizations. While there is a considerable literature on temporary worker performance, there is a surprising lack of research on the work performance of permanent employees. The aim of the paper is to fill this gap by addressing whether the use of flexible work at the organization is beneficial or detrimental to the work performance (task performance and organizational citizenship behavior) of permanent employees. Human resource strategies regarding temporary workers are highly diverse, also across functional units within organizations, and the paper investigate how different human resource configurations of temporary workers (integration vs separation of temporary workers with permanent workers; high or low investment in temporary workers’ human capital) relate to permanent employee performance. To study these questions, we utilize the Sustainable Workforce survey, a new, large-scale multilevel survey of more than 250 organizations, 400 work teams, and 9000 employees in multiple economic sectors from 9 European countries (UK, Germany, Spain, Sweden, Finland, the Netherlands, Portugal, Hungary, Bulgaria). We use multilevel models –and specifications with organizations fixed-effects to exclude organization-level unobserved heterogeneity– to analyze the effect of use of temporary work within work teams on permanent employee performance. The findings suggest a positive effect of the use of temporary workers in teams on organizational citizenship behavior, but no influence on task performance. Integration and investment in the training of temporary employees, however, increases permanent co-worker performance net of the effects of individual job and demographic characteristics and received benefits and training. These results provide ground for criticism towards segmented human resources approaches that argue for the differentiation of investments among workers within firms.