Staffing agencies are vital players in the job market, serving as intermediaries that connect businesses with qualified job seekers. Whether you are an existing staffing agency or someone considering starting one, understanding how staffing agencies generate revenue is essential to your success in this industry.
As a staffing agency, your specialization lies in sourcing, screening, and placing candidates into temporary, permanent, or contract positions, tailored to the unique requirements of client organizations. However, to sustain and grow your agency effectively, you need a deep understanding of the revenue models employed in this field.
In the following sections, we will explore the diverse ways in which staffing agencies generate revenue. By gaining insights into these revenue models, you will be equipped to navigate the competitive landscape, seize opportunities, and achieve success in the dynamic and evolving world of staffing.
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Common Ways That Staffing Agencies Make Money
For a staffing agency to continue operating effectively, it must make enough money to manage everyday expenses and generate a profit. However, staffing agencies generate profits differently from many traditional business models. Some ways staffing agencies make money include:
The Types of Employees They Hire
Staffing agencies help connect applicants with organizations looking for employees. When an employee comes into the staffing agency, the team will interview the employee and test their skills before matching them with the company that best fits their abilities and working preferences. The two types of employees a staffing agency will help a company hire include:
1. Temporary Employees
Most temporary staffing agencies gain a profit by requesting a percentage of the salary from the employee they help a company hire. If the temporary employee isn’t requested on a temp-to-hire basis, the agency will typically charge a markup of the average salary for this position to ensure both the employee wages and staffing agency costs are covered. Temp agencies will charge the business hourly for the employee’s work and then pay the employee.
2. Direct Placement Employees
If a staffing agency completes a direct hire instead of a temporary placement, the agency will typically collect a percentage of what the employee makes in their first year of full-time employment.
A staffing agency may also offer a temporary-to-permanent arrangement in which the employee begins as a temporary placement and must earn full-time employment. The staffing agency may use a combination of billing options for temporary-to-permanent employees. For example, they may collect a percentage of the employee’s paycheck while they are a temporary hire and then a more significant sum after the employee completes the hiring process.
Flat Fee Staffing
Another way staffing agencies generate a profit is by charging businesses a flat fee. Agencies that charge a flat fee commonly operate on a retainer and charge companies monthly until they fill the position. Flat-fee staffing agencies are more common in niche industries and may aid in finding employees for executive-level positions, uncommon jobs in science or engineering, and specialized medical positions.
Staffing agencies can also make a profit by charging for their recruitment services. A company can outsource some or all of its recruitment processes to the staffing agency. The company will then pay an agreed-upon percentage. With outsourced recruitment services, the staffing agency works closely with the business’s current HR team for a more thorough hiring solution.
Additionally, staffing agencies can offer on-demand recruiting that enables businesses to utilize the agency’s services by the hour to help teams or support recruiters during a growth period. Another option is recruitment as a service, where businesses pay a monthly fee to utilize staffing services from a recruitment agency.