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Data sources, definitions and methodology

The following information is to ensure a clear understanding of the basic concepts that are being measured, the underlying survey methodology (how the concepts are measured), and key aspects of data quality. This information will provide a better understanding of the strengths and limitations of the data, and of how they can be effectively analysed and used. The information may be of particular importance when making comparisons with data from other surveys or sources of information, and in drawing conclusions regarding changes over time.

Description

This annual sample survey collects the financial and operating data needed to produce statistics on the industry in Canada. The survey also collects detailed information on the characteristics of the businesses, such as type of revenue and type of client.

These data are aggregated with information from other sources to produce official estimates of the national and provincial economic production of the industry in Canada. The results from this survey provide data to businesses, governments, investors, and associations. These data allow these groups to monitor the growth of the industry, measure performance, allow comparison across similar businesses and to better understand this industry to react to trends and patterns.

Target population

The target population consists of all establishments classified to the employment services industry (NAICS 5613) according to the North American Industry Classification System (NAICS) during the reference year. This industry comprises establishments primarily engaged in the permanent placement, executive search, contract staffing, temporary staffing and co-employment staffing services.

Industry structure

Under the North American Industrial Classification System (NAICS), the employment services industry consists of Employment Placement Agencies and Executive Search Services (561310), Temporary Staffing Services (561320) and Professional Employer Organizations (561330).

Employment Placement Agencies and Executive Search Services – NAICS 561310

This industry group comprises establishments primarily engaged in listing employment vacancies and selecting, referring and placing applicants in employment on a permanent basis (indeterminate period) or on the basis of written contracts (assignment of contractors). The individuals placed are not employees of the placement agencies.

This type of establishment provides permanent placement, executive search and contract staffing services.

Permanent placement services consist of recruiting, selecting and referring candidates to a client to fill positions on a permanent (indeterminate) basis. The services provided may include testing, interviewing, reference checking, evaluation and counselling of prospective employees. The service provider acts as an employment intermediary. The candidate is selected and hired by the client. The placement firm is paid on a contingency basis meaning only for successful placement of a candidate. This product includes permanent placement services for a complete range of occupations from low-level employees to management employees, including executives. Includes domestic and international job placements.

Executive search services are defined as a specialized search and recruitment service limited to filling highly paid executive, senior manager, and professional positions, according to client specifications. Services may include:

1. conducting detailed interviews with the client organization's management team;
2. developing job profiles;
3. conducting original research and advertising to locate potential job candidates;
4. screening possible candidates;
5. preparing, presenting, and discussing a confidential list of highly qualified applicants with the client;
6. making interview arrangements;
7. negotiating compensation; or
8. providing post-hire follow-up.

The search firm typically provides two assurances to the client firm: to repeat the search at no extra charge (out-of-pocket expenses only) should a placed candidate subsequently fail for reasons attributed to lack of due diligence by the search firm, and not to recruit from the client firm for a stated period of time.

The client makes the decision as to which candidate to hire. The search agency's fee is charged whether or not the candidate is hired. This product is also known as retained search.

Contract staffing services consist of finding individual contractors to fill positions on the basis of written contracts that stipulate the deliverables for which the client has contracted, as well as specific terms and conditions of employment. Under the terms of this agreement, the service provider has legal rights and duties with respect to the individual contractors. Not being employees of the employment placement agencies, the individual contractors are normally responsible for their own payroll deductions and government filings.

Temporary Staffing Services – NAICS 561320

This industry comprises establishments primarily engaged in supplying workers for limited periods of time to supplement the workforce of the client. The individuals provided are employees of the temporary staffing service establishment. These establishments do not provide direct supervision of their employees at the clients’ work sites.

The main activity of these establishments is to supply personnel for temporary work assignments. The temporary staffing firm hires its own employees and assigns them to clients to support or supplement the client's workforce in work situations such as employee absences, temporary skill shortages, seasonal workloads, and special assignments and projects. When working, these employees are under the direct supervision of the client, but being on the payroll of the temporary staffing firm it is the temporary staffing firm that is legally responsible for their actions and that specifies their pay, benefits, etc.

Professional Employer Organizations – NAICS 561330

Professional Employer Organization (PEO) comprises establishments primarily engaged in providing human resources and human resource management services to their clients.These establishments operate in a co-employment relationship (i.e., the rights and responsibilities of the employer are shared or allocated between the client firm and the PEO) with client businesses or organizations and are specialized in performing a wide range of human resource and personnel management duties, such as payroll accounting, payroll tax return preparation, benefits administration (retirement, life, dental and supplementary health insurance, etc.), recruiting, and managing labour relations (counselling, employee assessment, regulatory compliance, risk management, etc.).

Professional employer organizations typically acquire and lease back some or all of the employees of their clients and serve as the employer of the leased employees for payroll, benefits and related purposes. Professional employer organizations exercise varying degrees of decision making relating to their human resource or personnel management role, but do not have management accountability for the work of their clients’ operations with regard to strategic planning, output or profitability.

Co–employment services are a major employment service activity in the United States but they are not prevalent and are not expected to grow rapidly in Canada. This can be explained by the differences in the Canadian and American medical systems as well as Canadian laws governing employment. In regards to providing employee benefits, PEO arrangements in Canada do not result in the same degree of savings compared to the United States since most medical plans are publicly funded. Furthermore, Canadian provincial labour laws, the Workmen’s Compensation Act and other legislation severely inhibit co-employment activities in this country.

Data users who wish to learn more about NAICS, its underlying principles, and many of the other statistical concepts discussed in this brief summary, are referred to the Introduction section of the Statistics Canada publication “North American Industry Classification System: Canada 2007” (catalogue no. 12-501-X).

Sampling

This is a sample survey with a cross-sectional design.

The frame is the list of establishments from which the portion eligible for sampling is determined and the sample is taken. The frame provides basic information about each firm including address, industry classification, and information from administrative data sources. The frame is maintained by Statistics Canada's Business Register and is updated using administrative data.

The basic objective of the survey is to produce estimates for the whole industry - incorporated and unincorporated businesses. The data come from two different sources: a sample of all businesses with revenue above or equal to a certain threshold (note: the threshold varies between surveys and sometimes between industries and provinces in the same survey) for which either survey or administrative data may be used; and administrative data only for businesses with revenue below the specified threshold. It should be noted that only financial information is available from businesses below the threshold; e.g., revenue, and expenses such as depreciation and salaries, wages and benefits. Detailed characteristics are collected only for surveyed establishments.

Prior to the selection of a random sample, establishments are classified into homogeneous groups (i.e., groups with the same NAICS codes and same geography). Quality requirements are targeted, and then each group is divided into sub-groups called strata: take-all, must-take, and take-some.

The take-all stratum represents the largest firms in terms of performance (based on revenue) in an industry. The must-take stratum is comprised of units selected based on complex structural characteristics (multi-establishment, multi-legal, multi-NAICS, or multi-province enterprises). All take-all and must-take firms are selected to the sample. Units in the take-some strata are subject to simple random sampling.

The effective sample size for reference year 2006 was 576 collection entities.

Definitions

1. Operating revenue excludes investment income, capital gains, extraordinary gains and other non-recurring items.
2. Operating expenses exclude write-offs, capital losses, extraordinary losses, interest on borrowing, and other non-recurring items.
3. Operating profit margin is derived as follows: operating revenue minus operating expenses, expressed as a percentage of operating revenue. The derived figure excludes corporation income tax paid by incorporated businesses and individual income tax paid by unincorporated businesses. For unincorporated businesses, operating profit margin includes unpaid remuneration to partners and proprietors, which is not recorded as salaries, wages and benefits. Therefore the profit estimate will be higher in industries where unincorporated proprietorships and partnerships are significant contributors.
4. Salaries, wages and benefits include vacation pay and commissions for all employees for whom a T4 slip was completed. This category also includes the employer portion of employee benefits for items such as Canada/Quebec Pension Plan or Employment Insurance premiums. Salaries and wages do not include working owners' dividends nor do they include the remuneration of owners of unincorporated business. Therefore the relative level of salaries, wages and benefits will be lower in industries where unincorporated businesses are significant contributors.
5. An active statistical establishment is one production entity or the smallest grouping of production entities which produces as homogeneous a set of goods and/or services as possible; which does not cross provincial boundaries; and for which records provide data on the value of output together with the cost of principal intermediate inputs used and cost and quantity of labour resources used to produce the output.

Data quality

While considerable effort is made to ensure high standards throughout all stages of collection and processing, the resulting estimates are inevitably subject to a certain degree of error. These errors can be broken down into two major types: non-sampling and sampling.

Non-sampling error is not related to sampling and may occur for many reasons. For example, non-response is an important source of non-sampling error. Population coverage, differences in the interpretation of questions, incorrect information from respondents, and mistakes in recording, coding and processing data are other examples of non-sampling errors.

Sampling error occurs because population estimates are derived from a sample of the population rather than the entire population. Sampling error depends on factors such as sample size, sampling design, and the method of estimation. An important property of probability sampling is that sampling error can be computed from the sample itself by using a statistical measure called the coefficient of variation (CV). The assumption is that over repeated surveys, the relative difference between a sample estimate and the estimate that would have been obtained from an enumeration of all units in the universe would be less than twice the CV, 95 times out of 100. The range of acceptable data values yielded by a sample is called a confidence interval. Confidence intervals can be constructed around the estimate using the CV. First, we calculate the standard error by multiplying the sample estimate by the CV. The sample estimate plus or minus twice the standard error is then referred to as a 95% confidence interval.

For this survey, the CVs are excellent (less than 5%) for operating revenue and operating expenses and wages, salaries and benefits of employees variables.

Quality evaluation

Prior to dissemination, combined survey results are analyzed for overall quality; in general, this includes a detailed review of individual responses (especially for the largest companies), an assessment of the general economic conditions portrayed by the data, historic trends, and comparisons with other data sources.

Disclosure control

Statistics Canada is prohibited by law from releasing any data which would divulge information obtained under the Statistics Act that relates to any identifiable person, business or organization without the prior knowledge or the consent in writing of that person, business or organization. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.

Data accuracy

Of the units contributing to the estimate, the weighted response rate was 81.9%. CVs were calculated for each estimate and are available upon request.