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Purpose – The purpose of this study was to explore the relation between diversity in work group members’ employment arrangements and the actual performance of the work groups. Design/methodology/approach – A field study was conducted on 31 work groups in a public plant belonging to the industrial sector that constitute a unique data set. The 441 employees are contracted under four significantly different employment arrangements and are mixed together in heterogeneous work groups but perform similar tasks. Findings – The results indicated that the influence of employment arrangement diversity on work group performance is best represented as variation, and work arrangements diversity is positively correlated with improved work group performance. Research limitations – The study design prevented assessment of employees’ opinions. Rather, the authors used objective type of employment arrangements as the basis for calculating diversity as separation. Using mean Euclidean distance as suggested by Harrison and Klein (2007), the authors arbitrarily set the distance between two different employment arrangements as one. Practical implications – The research results help in the stages of recruiting, structuring and development and application of necessary work team. Formal emphasis of diversity in work arrangements improves performance. Originality/value – To the authors’ knowledge, this is one of the first studies using unique data set analyzing real-life team diversity and performance in the public sector. The research highly contributes to organizational decision-making processes regarding the importance of incorporating non-standard work arrangements in organizations. Management’s implementation of formal diversity seems to alleviate the negative sides of diversity and increases its positive performance effects.