A temporary staffing agency, also known as a temp agency, can help your business meet its hiring needs while circumventing the resource-intensive hiring process associated with an internal search. It allows you to quickly connect with qualified professionals at an affordable cost and with minimal administrative hassle. This comprehensive summary explains everything you need to know about working with an agency for your hiring needs.
What is a Temp Agency?
Please allow me to apologize before providing the answer. Despite owning a staffing firm (aka a “temp agency”) for nearly two decades, I’m yet to come up with a simple sentence answer to this question…but here’s the best I can offer without using any industry jargon: Temp agencies find people to work in jobs for a limited period of time.
Clearly, a single sentence doesn’t cut it, so let’s go further. This scenario illustrates what a temp agency is, and the role they play in the job market:
ABC company needs to hire someone with a specific skill set to perform a job that will take approximately three months to complete. The need is urgent, but once the job has been completed, ABC Company has no additional business need for the worker’s services. The solution is for ABC Company to use a temp agency to identify, recruit, and qualify prospective workers. Once selected, the individual who performs the work for ABC Company will do so as an employee of the temp agency. The temp agency profits by charging ABC Company an amount greater than they pay the employee for each hour worked.
But since I mentioned industry jargon, here are a few additional things to know:
- A temporary staffing agency can be known by several names, including staffing agency (or firm/company/service), contract staffing agency(firm/company/service), recruiting agency(firm/company/service), recruiter, and headhunter. As someone who works in the industry, I wouldn’t necessarily use these terms interchangeably, but it’s very common to do so. I’ll reserve the nuanced differences for a different article and simply say I personally associate a “temp” hire with a short-term need.
- Generally, the temporary worker is a “W2 employee” of the agency, who handles all hiring, firing, payroll, and benefits.
- A temp worker is often referred to as a “contractor”, or “contract employee”
- Most temp agencies work with their clients on a contingent basis, meaning there is no upfront payment or revenue guarantee unless and until work is performed.
In addition to the short-term, urgent need in the scenario above, companies will use temp agencies to solve a wide variety of staffing and hiring challenges, like unexpected absences, swings in demand, and seasonal hiring.
Companies of all sizes hire from temp agencies because they are flexible, low-risk staffing solutions that offer access to specific skills quicker than most other hiring methods. Candidates use agencies because they can quickly provide access to flexible employment and help workers build valuable experience to use on their resumes.
When the initial temporary period ends, the worker may be offered an opportunity to stay on board with the company as a contractor, apply for a different position with the agency, or join the company as a permanent staff member. A temp agency typically works with several different clients at any given time, which means they can consider workers for numerous positions and determine which, if any, are the strongest fit.
How Does a Temp Agency Work?
First, a company kicks off the relationship by contracting with a temp agency to fulfill a specified set of hiring needs. The company outlines its desired skills, the duties candidates will be required to perform, and the duration of the work. Then, the temp agency locates and screens candidates to meet those needs as part of the recruiting process.
Agencies earn a profit by billing their client, the company where the work is being performed, a rate greater than they pay the worker. With rare exceptions, the labor rate and bill rate are calculated hourly. The marked-up rate is not all profit for the temp agency, however, as they are responsible for covering all payroll taxes and fees, worker’s compensation, and liability insurance. These charges, often referred to as the payroll “burden” range between 17% – 22% of the labor rate.
Is Temp-to-Hire a Good Idea?
Whether temp-to-hire is right for your business depends on the urgency of the need, the type of role, and the expected duration. Hiring a worker under this arrangement allows you to experience their hard and soft skills, culture fit, and overall impact on the business before making a permanent hiring decision. If you have a short-term need or a lack the internal resources to conduct a thorough recruiting effort, then temp-to-hire can be a great option.
The Benefits of Hiring From a Temp Agency
When using a third party for recruiting and staffing, you will benefit from their immediate reach and access to a vast pool of experienced and qualified talent. This can save valuable time, helping you quickly identify the best candidates for the role.
Less administration
Hiring temporary workers means less administration for your business. The agency will handle all of the onboarding paperwork, including tax forms, payroll processing, background checks, and more.
Faster hiring process
Hiring from a temp agency often speeds up the process of finding the best, most experienced candidates for a role. Temp staffing solutions excel above direct-hire staffing when there is an urgent, immediate need to fill a vacancy.
Immediate access to skilled temporary workers
When using temporary staffing specialists, you gain access to a massive network of candidates, many of whom have a track record of successful assignments. For perspective, we have more than one million candidate resumes in our internal database – thousands of whom we have previously placed on assignment. Our clients benefit by hiring temporary staff when new skills are needed that don’t currently exist on their team.
Related Blog: Pros and Cons of Temporary Staffing
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How to Find the Best Agency to Partner With
To identify the most suitable agency for your company, conducting a thorough search that considers your specific needs is important. Begin by considering the basics of your staffing requirements:
- What skills or qualifications must candidates possess?
- How many workers do you need?
- How long do you need them?
- What’s your budget?
Next, research temp agencies in your area. Look at their specialization, experience, and reputation for delivering qualified talent. Review online reviews and seek out referrals from other business leaders you trust.
When you speak with prospective agencies, explain your needs and assess how well they seem to understand them. Inquire about the tools and methods they use for finding and screening candidates, ensuring those processes align with your company’s standards. Ask questions to learn about their system for working with clients and their level of communication, responsiveness, and flexibility.
Before you decide who to work with, you should have full visibility into the agency’s fee structure and be fully comfortable with all terms of the contract. If the initial contract is not to your liking, negotiate more suitable terms so you can feel fully confident in your new staffing relationship.
Best Practices for Hiring Through a Temp Agency
Be transparent
The more information you can give the temp agency, the better their chance for success. Provide clear and detailed job descriptions, hiring expectations, and any policies you expect to be followed.
Ask about their recruiting process
The temp agency is responsible for screening and qualifying candidates, but that doesn’t mean it should be ‘out of sight, out of mind.’ Ask about your temp agency’s processes for finding and hiring candidates up front to ensure you’re on the same page.
Set expectations
As the relationship starts, define what you consider to be the markers of success. Set realistic goals and deadlines along with regular meetings at which you’ll check in on progress and share feedback.
Provide an accurate timeline for onboarding
While one key benefit of using temporary staffing is getting workers into positions quickly, the more details you provide, the better the chances of hiring success. Give clear direction and timeframes on the the interviewing, hiring, and onboarding process.
Be mindful of compliance
Most states have very specific laws regarding temporary labor. One upside of working with a reputable temp agency is that they should have all this covered. Still, it’s up to you as the employer to do your due diligence to ensure you’re working with a partner operating fully within the terms of the law.
FAQs
Is a temp agency considered an employer?
Yes. A temp agency hires and employs temporary workers. The agency is the employer of record and is responsible for all required payroll taxes and fees.
What is the difference between a staffing agency and a temp agency?
Technically, there isn’t one, as a temp agency is a staffing agency. However, some staffing (and recruiting) agencies provide various hiring solutions to meet permanent, long-term, and short-term hiring needs. There are some “temp agencies” that won’t take certain types of staffing and recruiting efforts. If you want to hire staff on a contract-to-hire basis or potentially look at full-time employment in the future, ask in advance if the agency you select can help with all of this and more.
How much do recruitment agencies charge for temps?
There is no fixed rate for hiring temps from a recruitment agency, and rates can vary widely. Several factors will define the cost of their services. These include:
- Local State Laws – Taxes and mandates vary significantly from one state to the next.
- Volume/Number of Positions – Temp agency rates are lower if placing 25 people vs. 1.
- Level of Positions – Low-end roles are easier to fill, requiring less recruiting time.
- Contract Duration – Longer-term contracts often attract lower markups vs. short-term ones.
- Pre-Employment Checks – Skills tests, background, and financial checks; they all impact temp agency fees.
Other requirements for a specific skill set or position may impact the overall cost of hiring from a temp agency.
Are temp agency employees independent contractors?
No. An independent contractor is a specific classification. From the client’s perspective (i.e. the end-user company), they are classed as temp agency workers. However, to the staffing firm that supplies the workers to their clients, they are classed as employees.
