How to Hire Temporary Employees Via a Temp Agency in 5 Steps
Charlette has over 10 years of experience in accounting and finance and 2 years of partnering with HR leaders on freelance projects. She uses this extensive experience to answer your questions about payroll.
This article is part of a larger series on Hiring.
Hiring temporary employees through a temp agency can be a great option for businesses in need of seasonal or short-term workers or companies that need to make a quick hire. It will also save you overhead costs since you won’t need to provide benefits like healthcare and time off.
When using a temp agency, you’ll still need to interview applicants and make a hiring decision before the agency employs the candidate. Our guide walks you through how to hire temporary employees using a temp agency, from identifying employment type and selecting an agency to understanding the agency’s process and interviewing candidates to making your final selection.
Step 1: Determine the Type of Temporary Employee You Need
If your company is considering a temporary employee, ask yourself these questions:
- Do you need a seasonal employee to help during a busy season?
- Are you looking to fill a gap while a full-time employee is out on extended leave?
- Do you have a new position but are not ready to commit to a full-time employee?
Any of these situations can be handled by a temp agency. However, you must ensure that you are not overstaffing or understaffing your business with a temporary employee. Overstaffing leads to higher payroll costs, and you may have employees who don’t have enough work. Meanwhile, understaffing can lead to overtime costs and employee burnout. And for small businesses, these are important considerations.
Temporary Employee vs Temp-to-Hire
A temporary employee is used to fill a gap for a short period, usually less than six months. A temp-to-hire employee, however, can be an option if you want to hire a full-time employee but aren’t confident that you can find the best employee quickly or would simply like to test the new role out.
Temp agencies offer temp-to-hire employees to small businesses to try out before committing to full-time employment. A temporary employee is usually hired on a 90-day contract, giving you and the worker a chance to evaluate each other and decide whether you’re a good match.
After the 90 days have elapsed, you can hire the employee full-time on your company’s payroll, continue having the employee work as a temp, or end the relationship. Temp-to-hire can give you more options, but be prepared to pay a conversion fee of about 20% of the employee’s salary.
Step 2: Research Temp Agencies & Budget Accordingly
It is imperative that you do your due diligence and not simply sign a contract with the first temp agency you come across. There are many temp agencies that specialize in certain industries and positions, so make sure the agency you’re targeting has the expertise to send you the right candidates.
Ask for references. Just like checking references from past supervisors when hiring an employee, ask temp agencies to provide names of current and former companies they have supported. By speaking with these businesses, you can determine whether the temp agency delivered high-quality employees and get a sense of the experience you can expect.
Find out if the temp agency is providing workers’ compensation insurance or if your business will need to provide it for the hired employees.
You also need to find out how the temp agency bills so you can budget for this expense. If you’ve never used a temp or staffing agency, be prepared for a bit of a shock. While the price may seem high, you could save money by reducing your own company’s overhead.
Most temp agencies bill a percentage of the hourly rate of the temporary employee you choose. The percentage can vary and usually ranges from 20%–50%. So, if the temporary employee you choose makes $15 per hour, you may pay the temp agency as much as $22.50 per hour. The good news is that’s your only overhead since you don’t have to pay employment taxes or offer employee benefits because the temp is an employee of the agency, not your business.
Insider Tip: The percentage and fee paid to a temp agency is always negotiable, and some will go as low as 10% to earn your business.
Step 3: Discuss Job Details With Temp Agency & Understand Its Process
When you determine that a temp agency is within your budget and have found an agency that specializes in your industry or the type of job you need filled, it’s time to work with the temp agency and its recruiters to find the best candidate.
Some temp agencies, especially those specializing in administrative workers or technology, usually have employees ready to go. So, if you’re looking for a general office admin, you may be able to start interviewing candidates the same day you sign on. For more specialized positions, you may need the temp agency’s recruiter to source job seekers.
The temp agency’s recruiter will have a discussion with you about the duties of the job. Be prepared to give them lots of detail about the work, the culture, your company, and the other employees this person will interact with while working at your company. They will use this information to build an attractive job ad. While you can do this yourself, recruiters are experts in crafting job ads with the right keywords to help land the best candidates. Additionally, they have the tools at their disposal to find potential employees and entice them to work for you.
When the recruiter receives applications, they will speak with candidates first. They will also give a skills test to ensure applicants possess the requirements necessary to do the job. For example, if you need to hire a bookkeeper on a temporary basis to cover your employee’s extended leave, the temp agency may give applicants an Excel test and an accounting best practices test. The temp agency will see to it that when you finally see applicants to interview, those individuals can do the job.
When you’re discussing the position with the recruiter, also ask how many candidates they will send you. That way you can schedule time for interviews. While the recruiter will do initial interviews, you are going to be working with this person, so you should at least have a thirty-minute video call or in-person interview with them to make sure they fit your company culture.
Insider Tip: If the temp agency is routinely sending you unqualified candidates and not making your life easier or, it’s not doing its job.
Step 4: Interview Applicants
The temp agency should send you at least three job seekers. Some may send them at once so you can evaluate all at the same time. You are under no obligation to speak with them, and if you think the recruiter has missed the mark, tell them. They won’t be able to help you unless you are clear and blunt.
When you receive an applicant you want to interview, let the recruiter know. They will schedule the interview for you at a time slot that’s convenient for you. Make sure you interview at least three candidates for the job—never settle for the first or let the recruiter try to push an applicant on you.
During each interview, ask candidates structured questions so you can gauge their answers and determine which one is the best fit. While the temp agency will test the skills of applicants, ask situational questions specific to your business. Consider using real-life examples so you can see how a candidate would handle a situation you have encountered.
Get a feel for the individual’s communication style and think about how they’ll fit into your organization. Although they’re temporary, you still want them to fit in so everyone can do their jobs effectively.
Step 5: Select a Candidate
After you have interviewed at least three applicants, give the recruiter your feedback. If none stand out to you, have the temp agency send you more. If you do find one stellar candidate, let the recruiter know which one you have chosen. They’ll begin the process of getting that worker set up with your company.
Once the temporary employee starts working with your company, pay close attention to how they do the job. If you’re not satisfied with their performance, contact the temp agency immediately. It has to take action and resolve any issue, as the worker is its employee, not yours. Many temp agencies will also give you a grace period of 30 to 90 days where you can tell them the employee isn’t a good fit, and they will replace that employee with another worker.
Depending on the role you need to fill, getting to this step yourself could take nearly 50 days. Using a temp agency can greatly reduce that time and, if the temp agency has a worker waiting, it could be less than one week.
Pros & Cons of Hiring Through a Temp Agency
The use of a temp agency can save your company money by avoiding the time and resources wasted on posting a job ad, reviewing resumes, and testing applicants. Temp agencies can handle all of that for you more quickly because they have a pool of candidates on hand and have the resources to find qualified candidates quickly.
| PROS | CONS |
|---|---|
| Faster hiring process, filling positions quickly for illness, sudden departure, or leave | Temp worker may not be a good cultural fit |
| Gives you the ability to evaluate a worker without a substantial up-front financial commitment | Worker may be unreliable and require additional training |
| May save time and money | Legal and compliance issues exist |
Consider a Freelancer or an Independent Contractor
Depending on your needs, you might consider a freelancer or independent contractor instead of hiring a temporary employee via a temp agency. Independent contractors work with your company on a project basis; they are not employees of your company. Much like using a temp agency, an independent contractor can save you on overhead since you don’t have to cover employment taxes and benefits.
Keep in mind that if you direct the independent contractor’s daily duties or cross any other line where they would be considered an employee, you could be misclassifying the independent contractor and subject to costly fines and penalties. To help you manage this and find the right freelancer, consider Upwork, a freelance platform where you can search thousands of independent contractors ready to get to work.
Bottom Line
If your small business needs to fill a temporary position or cover a gap in your staffing, a temp agency could be the solution you need. You can speed up the hiring process, reduce your overhead, and quickly find the most qualified candidate with its help. Temp agencies that specialize in your industry will most likely be able to provide you with the right worker fast.
