6 Common Ways Staffing Agencies Make Money

A staffing agency is an organization with the primary role of finding qualified candidates for open positions at various companies. But are you even curious about how these staffing agencies make money?

Well, staffing agencies, like any other business, charge for their services and make money off them.

While some charge some percentage of the newly hired employee’s annual salary, others charge flat fees, which are all paid by the hiring company.

This article explores what staffing agencies are, how they make money, and other relevant information you should know about them.

What is a staffing agency?

Staffing agencies help businesses fill different open positions by searching and placing people who are a good fit, including temporary, temp-to-hire, direct hires, etc.

They are also sometimes responsible for both the hiring and terminating processes, employment taxes, medicare, social security, and so on.

Often, these agencies have a talent pool they recommend suitable candidates from, but if they do not have any readily available, they run ads on job-seeking platforms to look for them.

These agencies also reach out to qualified individuals directly using professional platforms such as LinkedIn, which allows them to narrow down search results by keyword, job function, profession, industry, and so on.

SEE: How long do employee background checks take?

How do staffing agencies make money?

There are a few main ways through which staffing agencies make money, and it has evolved over the years as a result of the latest cutting-edge strategies.

The following are some of the common ways through which staffing agencies make money:

1. Contingency

The contingency model is typically used to recruit permanent salaried employees. Hence, they use the “no placement, no fee” method.

In the event of successful recruitment, the agency will charge a fee equal to 15-30% of the position’s annual base income, and it usually comes after a reasonable 3 months probation, but if unsuccessful, the agency receives no money.

2. Exclusive search

By this, the hiring company pays some up-front payment (based on agreement) and completes it upon completion and successful hiring of a candidate.

This is another tested and trusted way through which staffing agencies make money, with benefits such as more stable cash flow and more predictable income for the agency.

3. Temporary, contract, and temporary to permanent

For temporary, contract, and temporary to permanent (temp to perm), staffing agencies make money by putting on a premium on the wages the hired employees earn per hour, which is usually paid by the organization.

4. Recruitment process outsourcing

Recruitment process outsourcing is when a corporation outsources all or a portion of its permanent recruitment to a staffing agency and makes money based on an agreed percentage.

The staffing agency works as an extension of a company’s HR team, sitting on-site with the client and delivering a comprehensive hiring solution.

SEE: Reasons why jobs pay so little

5. On-demand recruiting

On-demand recruitment is a project-based method in which the company contacts a staffing agency hourly to help internal teams or give advice and support to internal recruiters during the growth stage of the company.

6. Recruitment as a Service (RaaS)

Recruitment-as-a-Service is an ultra-modern way through which staffing makes money as well. It is a new outsourcing recruitment model that is usually billed monthly.

How much do staffing agencies make?

There is no limit to how much staffing agencies make (Well, there is a limit, but it is not a fixed sum, like a salary).

According to Indeed, the average earning for staffing agencies in the United States is about $49,236 per year. However, there are numerous sources with differing numbers ranging from $34,000 to $60,000 per annum.

SEE: All you should know about employee onboarding

Choosing the right staffing agency

Choosing one with a sterling reputation is important if you choose to use a staffing agency. Consider these tips while choosing one:

1. Evaluate your staffing needs

Before contacting a staffing agency, the first thing to do is to have a clear picture of your hiring needs. Communicate the type of employee you want (full-time or part-time). This will help the agency before and during the hiring process to find suitable candidates.

2. Look for a budget-friendly agency

While most staffing agencies charge a net bill for their services, like pay rate, premium, and so on, consider all these things when choosing a company that fits your budget. ‍

3. Do your research about the staffing agency

When looking for a staffing agency, it is not enough to pick one that has a thorough understanding of your industry and expertise but also has a methodical strategy to attract and retain top talents.

4. Review contracts and other paperwork

To protect both sides if there is a problem. Find out your company’s legal requirements based on your role. Tell the staffing agency about these needs while writing up your paperwork.

Can you always trust a staffing agency?

Yes, many companies and business owners outsource their recruitment process. However, this depends on the company’s needs, urgency, and budget.

While staffing agencies help with the whole hiring process, doing extra screening on your own never hurts.

SEE: Industry Experience: Meaning, Benefits, Development & More

FAQs

Is using a staffing agency a good idea?

Yes, a staffing agency has many advantages but it can be expensive.

How do you search for staffing agencies?

Through an internet search, social media platforms, and Word-of-mouth

How long does the hiring process take after an interview?

Typically, you should expect to hear back from the hiring firm within one to two weeks after the interview. However, waiting times vary by industry.

Conclusion

Staffing agencies are interested in helping you find the most qualified candidates for your open positions.

However, to do their jobs effectively, they should properly be orientated about the company, the ideal candidate needed for the role, and other necessary information that could be helpful to them.

Finally, it is up to the company to decide how much a staffing agency should be involved in the hiring process to maximize the efficiency and suitability of the organization’s specific needs.

I hope you found this article helpful. You can also read about how to perfectly handle employee offboarding.

Thanks for reading.