The Three Main Staffing Models - And When to Use Each One

I started my career at Kforce supporting our temporary staffing business. During that time, I would frequently have hiring managers reach out to me with requests to help them fill their open positions on an urgent contract-to-hire (C2H) basis. They would come to me with a list of non-negotiable requirements: for example a CPA license, a four-round interview process, five-days in office, a proctored skills assessment, no "jumpy" resumes.

I would counsel the client for some flexibility on these requirements, as very few candidates who meet those requirements are willing to work on a C2H basis. I would suggest partnering with us to fill those roles on a Perm/Direct-Hire basis, but the client would say no due to the high placement fees.

The client would then proceed to reject every resume I sent to them because they were missing one of the required check-marks. A couple of months would pass and the client would express frequent frustration with the inability of both Kforce and our competitors to fill the position. After a while, they would come around to the Direct-Hire route, and all of a sudden we are able to fill the position inside of a week.

This is why it is so crucial for our clients to understand the different staffing models that Recruiting agencies offer, and to know which model fits their specific hiring needs. Not only are there differences in risk and billing structure, but each model gives you access to a fundamentally different candidate pool. Here are the three main Staffing models, and the situations in which you should use each one:

1) Perm/Direct-Hire: The Perm Staffing model is extremely straight-forward. Under this model, an external recruiting firm assists our clients with the recruitment of employees to join their staff on a direct-hire basis. In my current role in the Mid-Atlantic Search team, I only work on Perm roles. If our client hires a candidate that we present to them, we are paid a finder's fee.

These fees are not cheap, typically they come to about 25% of the offered salary depending on the market. So for example, the agency fee for a candidate earning $100,000 would be about $25,000. Additionally, hiring firms take on much more risk in the perm model compared to a contract relationship, which can be terminated much more easily. Most agencies offer some sort of guarantee if the candidate doesn't work out in 60-90 days, but they do not have any direct oversight over the candidates following the placement.

With that said, there are many advantages for an organization to hire Perm. The main one is that is gives you access to a much wider pool of candidates. Qualified candidates who are employed in perm roles are almost never willing to move to a temp or temp-to-hire opportunity (I've seen it happen exactly twice in my entire staffing career). Therefore, if you have a long list of "must-haves," you are much more likely to find a perm candidate who meets your criteria, since we can speak to the pool of candidates who are currently employed in similar roles.

I would also recommend perm if you don't want to see a lot of "jumpiness" on a resume. The contract candidates we present are far more likely to have a number of shorter stints on their resumes, as I will get into later. Perm candidates generally show longer tenures in their roles. They are also more likely to be passively searching and to be willing to commit to longer and more in-depth hiring processes (though I would still recommend condensing the process as much as you can).

2) Temp/Contract: Contract staffing is probably the most well-known service offered by Kforce. Under this model, job candidates are brought onto the staffing agency's payroll, and their services are billed out to the client on an hourly basis. The candidate's pay and benefits are all provided to them by the staffing agency. These contracts are typically for a fixed-period of time (e.g, 3-6 months) although it is also common for contracts to be indefinitely extended.

Clients will typically use this model when they have immediate or surge needs. Examples would be if a key staff member were to go on parental leave or abruptly resigns, or if an upcoming project requires more hands on deck. Temp staffing typically comes with a much quicker turnaround time since the client does not have the luxury of a lengthy interview process. Since temp staffing is a short-term relationship, clients do not need to screen for the perfect culture fit. They need somebody who can come in quickly, get up to speed quickly, and perform essential work for the organization.

Obviously temporary staffing is much less risky for the client, since they are not taking the candidate onto their own payroll. But this also means they need to be a lot less picky. Temp candidates are typically either working on other contract assignments or are in between assignments, you will almost never find one that is employed in a perm role. This limits the pool of qualified candidates considerably, and it means clients need to be willing to hire candidates who don't necessarily check all the boxes. That doesn't mean they're bad candidates - it just means that there might be a steeper learning curve to get them started. Temp candidates resumes also tend to show a number of shorter stints, just due to the nature of the business. If this is an issue for you, you might want to consider going the perm route.

3) Temp-to-Perm/Contract-to-Hire: As the name suggests, C2H is a hybrid of the above two models. In this model, an employee starts with an organization as a contractor, with the understanding that they will be converted to a full-time employee in the future. After the candidate has contracted through a staffing agency through a specified period of time (usually around 6 months), they can be converted to perm at no additional cost to the client. The candidate can be converted before then, typically at a reduced placement fee depending on the amount of hours already worked.

The main advantage of this model is that the employer is taking on less up-front risk. It is much easier and less financially risky to terminate a contractor relationship if it doesn't work out than it is with a perm employee. Like temp staffing, it also is ideal if you are looking to get somebody in the door quickly.

However, C2H comes with similar risks to the contract model. Candidates who are currently perm-employed will typically not move jobs for a temp-to-hire opportunity, limiting the candidate pool. C2H candidates are less likely to commit to lengthy hiring processes and they are more likely to jump to a perm opportunity if one comes along during the contract period.

I would coach my clients to be more open-minded when it comes to the placement of temp-to-hire candidates. Instead of looking to check 10/10 boxes, aim for 6/10. Understand that there will likely need to be a learning curve and a training element on certain aspects of the job. Under no circumstance should there be more than 2 rounds of interviews for a temp-to-hire role. I would tell my clients to treat the contract period a part of the interview process, since they will have the opportunity to assess the candidate's skills in a working environment before bringing them on full-time.

Takeaways

I know this has been a longer article, but I think it is crucial to understand the pros and cons of each staffing model when partnering with an agency. Each model has distinct advantages and disadvantages. In perm staffing you are taking on more risk and paying a higher up-front fee, but that fee gives you access to a much wider pool of candidates and allows you to be "pickier."

If you need somebody in the door ASAP, or if you do not have the budget for agency Search fees, the temp or C2H models will afford you more flexibility.

Hiring managers, I am curious to here your thoughts on this analysis along with any experiences you've had hiring under these staffing models.