How Do Staffing Agencies Work? Ultimate Guide for Small Businesses
This article is part of a larger series on Hiring.
Staffing agencies, also called employment agencies, help job seekers find temporary or permanent work and help employers find qualified candidates for their open roles. They search through their database of candidates for those that match the requirements of the employer’s job openings.
The process works as follows:
- The employer contacts the staffing agency regarding their employment needs.
- The agency then works with the employer to identify the job requirements, such as necessary skills and salary range.
- The agency searches for potential candidates within their talent pool or by advertising on job boards and social media platforms.
- Candidates go through a screening process—interviews, skills tests, background checks, and reference verifications.
- Those who pass the screening are then matched with available positions based on their qualifications and experience.
- The staffing agency provides guidance to candidates throughout the recruitment process, including interview preparation and resume writing tips.
Cost of Hiring a Staffing Agency
Now that you understand what a staffing agency is and how it works, let’s answer the other key question—how much does it cost?
Because the staffing agency does all the prep work of finding and qualifying candidates for you, there are fees associated with hiring a staffing agency. These fees are generally charged to the employer, whereas the job seeker can use the services of a staffing agency to find employment for free.
Staffing agencies do not normally charge a fee upfront to use their services. Instead, they charge a percentage (average 10%–30%) of the salary or hourly rate of the employee the company hires.
Our table below shows how this breaks down for each employee type at an agency rate of 20%.
Employee Hourly Rate/Salary | Payment to Staffing Agency | |
|---|---|---|
Temp | $10/hour | $12/hour |
Temp-to-Hire | $10/hour, while temporary $28,000/year | $12/hour $5,600 |
Direct Hire | $55,000/year | $11,000 |
Per our example above, if you hire a temporary employee for an hourly rate of $10, you can expect to pay the staffing agency somewhere around $12 an hour. If you decide to hire an employee as a temp-to-hire, you will pay the adjusted hourly rate while the employee is temporary and then pay a percentage of the employee’s hiring salary once you bring them on as your hired employee. For a direct-hire, you would simply pay the percentage of the annual salary as a one-time fee.
While these fees may sound like a lot, your company is saving money by not having to look for employees, post open positions on job boards, and spend hours of time screening resumes of individuals who are likely not qualified for the position. Additionally, if you are hiring temporary employees or seasonal workers, the staffing agency is handling all the paperwork for you, including paying the employee their salaries.
Read more in our article on the cost to hire an employee.
How to Hire Using a Staffing Agency
Hiring from a staffing agency follows the same basic outline as hiring a regular employee. The main difference is that instead of handling the primary screening and job posting, you simply sift through the candidates that the agency vets for you.
It is important to outline the requirements for your open positions. The staffing agency will then use its network and resources to find potential candidates who meet those requirements. If interested in any of the candidates presented, employers have the opportunity to interview them and decide whether or not to hire them.
Here’s more details on how hiring from staffing agencies work:
1. Determine the type of employee you need – This depends on the position you are hiring for and the length of time you need the employee. Staffing agencies can help employers fill positions that are temporary, temp-to-hire, or direct-hire.
2. Provide details about the job opening – Start by providing a complete job description that includes all the necessary skills, experience, responsibilities, and qualifications required for the position. You should also specify any special requirements such as language proficiency or specific certifications required for performing certain tasks and provide information about work hours and location.
3. The staffing agency will find and vet candidates – The staffing agency will use various channels to advertise your open positions, including online job boards, social media platforms, and candidates from their own pool of qualified job seekers. Once potential candidates apply for the position, the staffing agency begins screening them based on their qualifications and experience.
4. Interview selected candidates – When the staffing agency finds qualified candidates, they will forward their resumes to your company for review. From here you will select the candidates with the best qualifications and skills and conduct your own internal interviews.
5. Hire candidates and pay the staffing agency – Once you decide which candidate or candidates to hire for your open positions, the staffing agency will draw up contracts with the candidate. For temporary employees and temp-to-hire employees, the staffing agency will pay the employee and handle all employer-of-record procedures. For direct hire employees, you will pay the staffing agency a fee and then the candidate will become an employee under your company.
Learn more about how to hire employees with our comprehensive guide.
How to Find a Staffing Agency
When hiring a staffing agency, you should research and evaluate different firms based on their expertise and experience—look for agencies that specialize in your industry or have experience working with similar companies. Additionally, you should check their reputation by reading reviews from previous clients or asking for references from other businesses.
The type of staffing agency you select may also depend on the type of employee you need. If you need a temporary in-house employee, a local staffing agency may be best for your business. But, if you want to hire someone remotely, a national agency may be right for you.
Pros & Cons of Using a Staffing Agency
There are many benefits of hiring a staffing agency for both employers and job seekers. For employers, staffing agencies have a large pool of potential candidates. For job seekers, staffing agencies offer access to a wide range of job opportunities that may not be advertised elsewhere. However, on the flip side, when vetted by the agency and not your company, the candidate may not be a good cultural or skills fit.
| PROS | CONS |
|---|---|
| Agency takes care of the recruiting process | Can be expensive for highly paid roles; agencies charge a salary percentage |
| Saves time and money in advertising | Candidates may lack the necessary skills |
| Agencies have access to a large pool of potential candidates | Candidates may not be a fit as an agency may not know your company culture |
| Offers a range of employee types, from temporary to direct hire | May take a longer time to find a qualified candidate |
Bottom Line
Hiring a staffing agency can help you save time and resources by pre-qualifying candidates that match the skills and experience needed to fill your open positions. The staffing agency will do all the legwork for you and present you with a few candidates that meet your needs. From there you simply interview the candidates and choose the perfect match.
