By Staffing agencies connect businesses with qualified talent, filling roles quickly and efficiently. But many job seekers and employers wonder: How do staffing agencies make money?
In short, staffing agencies earn revenue by charging fees to client companies for finding, hiring, and managing employees. The exact way they make money depends on the type of placement, contract terms, and industry niche.
The Core Business Model of Staffing Agencies
Staffing agencies act as intermediaries between job seekers and employers. Instead of charging job seekers, they bill the hiring company for their services.
Revenue streams typically include:
- Markup on employee wages
- Direct placement fees
- Contract-to-hire charges
- Retainer fees for executive search
How do Staffing Agencies Make Money
Temporary and Contract Staffing Markups
For temporary employees, the agency pays the worker’s hourly wage but charges the client a higher hourly rate. The difference—called the markup—covers:
- Payroll taxes
- Benefits (if provided)
- Administrative costs
- Agency profit
Example:
- Agency pays the worker: $20/hour
- Client is billed: $30/hour
- Agency keeps: $10/hour gross profit
Direct Hire or Permanent Placement Fees
When an agency recruits a candidate for a permanent position, the client pays a one-time placement fee, usually 15–25% of the candidate’s first-year salary.
Example:
- Candidate’s salary: $60,000
- Fee at 20%: $12,000 to the agency
Contract-to-Hire Arrangements
The agency places a worker on a temporary basis with the possibility of a permanent role. During the contract period, the agency earns hourly markups. If the client hires the worker full-time, an additional conversion fee may apply.
Retainer Fees for Executive Search
Executive search firms—specialized staffing agencies for high-level roles—often work on a retainer basis. This means the client pays upfront installments for the search, regardless of the final hire.
Additional Services
Some agencies diversify their income through:
- Payroll outsourcing – Managing payroll for client companies
- Training and onboarding – Charging for skill development
- HR consulting – Advising on compliance, benefits, and workforce strategy
How Profit Margins Work in Staffing
Profit margins vary depending on industry, skill level, and demand:
- Light industrial jobs – Lower markup (15–25%)
- Professional/technical roles – Higher markup (30–50%)
- Executive search – Very high fees (up to 50% of salary)
Agencies aim for gross margins of 20–40% on temporary staffing contracts.
Why Companies Pay Staffing Agencies Instead of Hiring Directly
- Faster hiring – Agencies maintain candidate pools for quick placements
- Reduced HR workload – Agencies handle screening, interviews, and paperwork
- Lower risk – Temporary hires can be tested before making a full-time offer
- Expertise – Agencies know industry-specific talent markets
Challenges Staffing Agencies Face
- Cash flow issues – Agencies often pay workers before getting paid by clients
- High competition – Many agencies compete for the same clients
- Worker shortages – Difficult to find qualified candidates in certain industries
- Economic downturns – Hiring freezes reduce demand for staffing services
Example of Staffing Agency Revenue Flow
- Agency secures a contract with a client for 5 temporary workers.
- Workers are paid $18/hour by the agency.
- Clients are billed $26/hour per worker.
- Agency earns $8/hour per worker × 40 hours × 5 workers = $1,600 gross weekly profit.
How Staffing Agencies Scale Their Revenue
- Expanding into high-demand industries like healthcare or IT
- Offering both temporary and permanent placements
- Building long-term client relationships
- Using automation to reduce recruiting costs
Conclusion
Staffing agencies make money by charging client companies for recruitment, placement, and workforce management services—often through markups, placement fees, or retainers. Their business model works because they save employers time, reduce hiring risks, and provide access to qualified talent quickly.
For entrepreneurs, starting a staffing agency can be lucrative, especially when focusing on high-demand sectors and maintaining strong client relationships.
FAQs
1. Do staffing agencies charge job seekers?
Generally no—legitimate staffing agencies make money from employers, not job seekers.
2. What’s the average markup for a staffing agency?
Anywhere from 15% to 50%, depending on the role and industry.
3. How do agencies get paid for temporary workers?
They bill the client for hours worked at a higher rate than the worker’s wage, keeping the difference.
4. Are staffing agencies profitable?
Yes—if managed well, staffing agencies can achieve high returns due to recurring contracts and scalable operations.
5. What industries use staffing agencies the most?
Manufacturing, healthcare, IT, finance, administrative support, and construction are top users.
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