Staffing agencies, also known as temp agencies, connect people looking for work with a variety of employment opportunities. Companies also employ the services of staffing companies to find a good candidate for a permanent job. Job seekers might use temporary positions to gain experience or to pay bills while searching for full time employment. A staffing company offers a wide variety of employment related services including:
- Outsourcing and outplacement
- HR consulting
- Recruiting and permanent job placement
- Temporary and contact staffing solutions.
But how much of the temporary employee’s salary goes in their bank account and how much do staffing agencies take?
How Do Staffing Agencies Work?
Staffing agencies work with both businesses and individuals. From a business side, the business would reach out to one or more staffing agencies to outsource their staffing process to an agency. The business or organization would share information about the job, qualifications, and salary. The staffing agency process may include submitting the job information to job boards or websites if they don’t have candidates in mind. Once the staffing business has created a shortlist of potential candidates, they may pass over the candidate’s information to the business for review and a final hiring decision.
A temp agency may also work with individuals seeking employment. Some businesses serve as a recruitment agency for employees looking for direct hire full-time positions. Other agencies specialize in hiring employees for short term or temporary employment. Individuals working with staffing agencies may be placed on a short list when their skills and qualifications match a job opening.
How Does a Staffing Agency Make Money?
Generally speaking, the staffing agency owner salary range varies greatly depending on the type and volume of clients they work to place. According to the Bureau of Labor Statistics, the median annual wage for general and operations managers in 2021 was $97,970/year.
How much do staffing agencies make per employee? Staffing agency income is determined by a number of factors. A staffing agency makes their profit by charging a markup that could be anywhere between 25% and 100% of the employee’s wages depending on the job. They could also assess additional fees depending on what other services they provide, like payroll (including payroll taxes) or benefits administration. Some agencies take a percentage of the employee’s salary while others charge the company looking for an employee a very high price for their services.
According to Forbes, temporary staffing companies are big business. The Adecco Group, one of the largest staffing organizations in the world has a revenue of over $24 billion. Randstad, the largest provider of staffing services had a revenue of over $29 billion in 2022.
The Future of Staffing Agencies
Things are only expected to get better. According to the American Staffing Association, America’s staffing companies hire 16 million temporary workers and contract employees each year. Staffing and recruiting industry sales grew 20% in 2021 to $168 billion. Staffing industry growth has outpaced overall economic and employment growth as more and more companies are using the services of staffing agencies.
Temporary staffing solutions allow employers to have greater labor flexibility, adjusting their staffing needs to maximize profits. Even with the markup that they pay the agency it is easier and ultimately cheaper for companies to hire temporary employees. Temporary employees typically receive lower salaries than full-time employees. Employers can also use temporary position to gauge whether or not the person would make a good full-time employee.
It isn’t just companies that are using temp agencies more frequently. There is also a higher rate of unemployment which again goes back to the 2007 recession. People are going to temporary agencies because they have just been laid off and need something to help make ends meet. Or perhaps they have been looking for a new job for some time and have simply decided that they need help finding something. In short, staffing agencies are seeing a lot of business from both companies and people looking for work.
With the right location and the right business skills, owning a staffing agency can be quite lucrative. And when it comes down to using a staffing agency, everybody wins. The company using the agency finds the temporary employee they are looking for. The person looking for work finds employment. And of course, the agency itself makes money and becomes a thriving business.
Related Resource: Is an HR Degree Worth It?
