How to Hire Temporary Employees Using a Temp Agency
Heather is a staff writer and payroll specialist with several years of experience working directly with small business owners. Her expertise allows her to deliver the best answers to your questions about payroll.
Jennifer Soper is an HR Specialist and staff writer for Fit Small Business, with over 15 years of experience in accounting, payroll, and human resources.
This article is part of a larger series on Hiring.
Hiring a temporary employee 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. A temp agency (or temporary employment agency) seeks to connect businesses with job seekers who wish to work non-permanent positions. It acts as the worker’s employer and handles all matters related to employment—pay, employment taxes, time off, benefits, etc.
When using a temp agency, you’ll still need to interview applicants and make a hiring decision before the agency employs the candidate. Follow the steps below to identify the employment type needed, select an agency, interview candidates, and make your final selection.
Step 1: Determine the Type of Temporary Employee You Need
There are different types of temporary employees that you can hire depending on your needs—you can go for a temp-to-hire, seasonal, or part-time employee. To help guide you to which type you need, ask yourself these questions:
- Do you need a seasonal employee to help during a busy season?
- Are you looking to fill a gap while an 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.
Alternative: Freelancer or Independent Contractor
Depending on your needs, you might consider a freelancer or independent contractor instead of hiring a temporary employee. 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; however, you will be responsible for paying the contractor.
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. Learn more about misclassification and the difference between employees (W-2 workers) and independent contractors (1099 workers) in our 1099 vs W-2 workers guide.
Check out our how to hire an independent contractor article for more information. Otherwise, for an easier time finding the right freelancer, consider Upwork, a freelance platform where you can search for thousands of independent contractors ready to get to work. Check out our Upwork review to learn more about this platform.
Step 2: Research Temp Agencies
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.
You can find local staffing agencies by performing a Google search in your area. Or, you can use a national agency to help you find either local or remote talent. Some national agencies include:
- Robert Half – Staffing for professional talent in finance and accounting, administrative and customer support, technology, marketing and creative, and legal
- Staffmark – A temporary or direct-hire agency that matches based on interests and skills
- Kelly – Specializes in science, technology, engineering, education, industrial, government, and international
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.
Budget Accordingly
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 temporary worker is an employee of the agency, not your business.
Insider Tip: The percentages and fees paid to a temp agency are always negotiable, and some will go as low as 10% to earn your business.
Step 3: Discuss Details With the Temp Agency
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, then 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.
Job Details
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.
Skills Assessments
When the recruiter receives applications, they will speak with candidates first. They will also give pre-employment assessments to ensure applicants possess the requirements necessary to do the job. For example, if you need to hire a bookkeeper temporarily 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.
Applicant Pool
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 30-minute video call or in-person interview with them to make sure they fit your company culture.
Learn the best way to conduct interviews in our in-depth guide on how to interview candidates. If you opt to do so virtually, check out our how to do video interviews guide for some tips and best practices.
Step 4: Interview Applicants
The temp agency should send you at least three job seekers to review. Some may send them at once so you can evaluate them 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.
To gauge each applicant’s answers in the fairest and most efficient way possible, use a structured interview process. 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.
To keep track of the candidates you have interviewed, consider using our Free Interview Evaluation Forms & Scorecards.
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 significantly 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 |
| Reduces your overhead by not having to pay for taxes and benefits | Legal and compliance issues exist |
Hiring a Temporary Employee Frequently Asked Questions (FAQs)
Onboarding a temporary employee, while different from a permanent employee, is an important step. Be sure to provide the temp with a copy of your company handbook and rules, as well as a description of the required duties. Introduce the new temp to their work environment and co-workers and have a manager train them in their job duties.
Companies generally hire a temporary employee if they need to fill a role that is not long term, such as seasonal employment, replacement of an employee on long-term leave, or handling a small project. These temporary employees do not receive the full benefits the company offers and are paid through an agency, thus reducing the cost to the company.
The Department of Labor identifies temporary employees as those who work a job for no more than 12 consecutive months. However, some states have stricter laws—such as North Carolina, where a temporary worker cannot work for more than 11 consecutive months. Be sure to check the laws specific to your state and city.
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.
