How do staffing agencies make money?

Written by gigi starr
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How do staffing agencies make money?
(2009 arvindgrover / Creative Commons)

Staffing or temporary (temp) agencies find jobs for corporate clients, working with a qualified pool of applicants that work for a specified amount of time. Temp agencies also train candidates in different tasks and computer programs to enrich their chances of being hired.

Temp jobs can last anywhere from one day to several months, with some agencies offering semi-permanent posts that can last a year or more. Temp agencies also place employees in "temp-to-perm" jobs, which are positions that have the possibility of becoming permanent with satisfactory employee performance.

There are many people who work exclusively as temps. Because of this, some agencies now offer benefits such as health insurance and paid days off for contractors who work a certain amount of hours.

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What a Staffing Agency Does

Staffing or temporary (temp) agencies find jobs for corporate clients, working with a qualified pool of applicants that work for a specified amount of time. Temp agencies also train candidates in different tasks and computer programs to enrich their chances of being hired.

Temp jobs can last anywhere from one day to several months, with some agencies offering semi-permanent posts that can last a year or more. Temp agencies also place employees in "temp-to-perm" jobs, which are positions that have the possibility of becoming permanent with satisfactory employee performance.

There are many people who work exclusively as temps. Because of this, some agencies now offer benefits such as health insurance and paid days off for contractors who work a certain amount of hours.

Profits from Short-Term Placements

Staffing agencies pay contractors only a portion of the actual fee that they're paid. In fact, according to Scott Boyd, founder of Job Seeker's Advice, "[The fee] can easily be twice what [the contractor is] getting paid." This means that a dresser for a fashion temp agency might only get £11.3 an hour from a client price of £26 or more per hour.

Note that a job applicant or contractor should never pay an up-front fee to an agency. The city of Ontario's Settlement.org site states, "Employment agencies make their money by charging the company that is looking for someone, or they may take a percentage of your wage. If someone says you need to pay first for a job you should be very careful and find out more before you give any money to anyone."

Fees from Long-Term and Permanent Placements

Temp agency employees make the most money from permanent placements, since they receive a percentage of the first year's salary (up to 20 per cent) as a commission when the contract is signed. Much like a Realtor selling a house, the headhunter doesn't earn anything until the ink is on the dotted line.

Of course, the high payment makes permanent placements very desirable to temp agencies. However, they can be hard to come by, since many employers wish to test-drive an employee through short-term work first. Some agencies only do permanent staffing for people with high earning potential, leaving mid-range and lower earners the shorter-lasting jobs.

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