Regular readers of Mackinac
Center publications know that school districts use competitive contracting with
private firms to fill their food service and student transportation needs. In
this arrangement, a company provides the employees, who then provide the
But can that model be used for
even more specialized skills that require a single individual? Recent experience
suggests that it can.
Following the example of the
private sector, schools are starting to rely on people who come to the district
to work as individuals, but who are actually employees of a third-party
In Michigan, four major
companies serve the education market. Three of these organizations are headed by
people with extensive experience in education administration: ContractED of Ann
Arbor, with nearly 25 schools on its client roster; Professional Contract
Management of Marine City, with more than 80 school districts and intermediate
school districts as customers; and Thumb Educational Services of Kinde, which
also boasts clients across the state. All offer a wide range of professional
employees to school districts, including building managers, curriculum directors
and a variety of central office employees.
The fourth company is Kelly
Educational Staffing, a division of Troy-based Kelly Services. The firm provides
substitute teachers, administrative assistants and custodians on an individual
basis. It screens and trains its own employees, freeing districts from those
burdens. Since 1999, it has placed more than 8,000 substitute teachers
School districts benefit in
several ways, both financial and nonfinancial, from employee leasing.
The most obvious advantage to
the school is cost savings. For example, with contracted employees, schools do
not have to make pension contributions; for district employees, they do. In the
2003-2004 school year, according to the Port Huron Times Herald, school
districts paid an amount equivalent to 12.99 percent of an employee’s salary
into the state pension fund. Contracting with a private firm that year could
therefore have saved a district up to that amount of an employee’s salary by
shifting the pension costs from the district to the firm. And the potential
savings are rising: Currently the school’s pension payment rate is 14.7 percent,
and it is slated to increase to 18.7 percent in the 2005-2006 school year.
Schools also save money
because they are no longer responsible for employee health insurance premiums,
which can easily exceed $10,000 per year. Employee contract organizations, not
schools, also shoulder the burden for unemployment taxes, workers compensation
payments and many other fees.
It’s little wonder then, that
schools find this an attractive arrangement. Money not spent in these areas
can be used in the classroom. Cass Cities schools, for example, estimated that
it will save $32,000 per year by using an outside employer to fill secretary
But the benefits to schools
extend beyond cost savings. Obtaining employees through an outside organization
saves the school the trouble of a talent search. Some searches, such as those
for an assistant superintendent, can be stressful even if they are infrequent.
Routine needs, such as those for substitute teachers, can snowball unexpectedly.
Moreover, employee paperwork
normally handled by the school district becomes the responsibility of the
contract organization. The school district also gains the flexibility of having
employees in an at-will employment status, making it easier to dismiss poor
performers. Relying on an outside vendor to provide personnel can help schools
concentrate on their main mission: educating kids.
Anecdotal evidence suggests
that many people who choose this arrangement work as contract employees at a
school district from which they retired. The chief benefit to employees is that
they can start collecting retirement income and still draw a paycheck, which is
a perfectly legal option.
Employees can also find the
arrangement a way to serve a district they have worked in for a long time, while
benefiting both themselves and the district. Lavonne McCallum, after working for
over 23 years as an employee of the Sandusky Community Schools, is now an
employee of Thumb Educational Services, according to the Port Huron Times
Herald. McCallum told the paper, “I'm not really ready to retire, and I felt
this was a way to save the district some money.”
Throughout the business world, companies are focusing on
what they do best and relying on other businesses to provide specialized
services. Schools had sometimes followed this example by outsourcing entire
departments — but now, by hiring on an individual basis, they are taking the
logic of specialization to the next level.
John R. LaPlante is an adjunct scholar with the Mackinac
Center for Public Policy, a research and educational institute headquartered in
Midland, Mich. Permission to reprint in whole or in part is hereby granted,
provided that the author and the Center are properly cited.