Understanding the Costs of Working with a Staffing Agency

In today’s ever-evolving business environment, companies are increasingly relying on temporary and contract workers to tackle specific projects, manage varying workloads, and access specialized skills. Staffing agencies have become a go-to solution for efficiently acquiring talent without the complexities of full-time recruitment. This trend is reflected in the staffing industry’s revenue, which has doubled from 2010 to 2022. Core Group Resources is proud to have contributed to this growth!

But what exactly drives the costs associated with working with a staffing agency?

We frequently engage with hiring managers, executives, and stakeholders, and we understand that cost considerations are often top of mind—especially during economic uncertainty. Let’s break down staffing agency costs, factors influencing these fees, and strategies for maximizing value while keeping expenses in check.

Types of Staffing Agency Placements

Temporary Placements:

For temporary roles, you typically pay an hourly rate in addition to the employee's wages. This rate covers the agency’s services and any benefits provided to the temporary worker. Some agencies might charge a flat fee per employee or a percentage of the worker’s total pay.

Temporary-to-Permanent:

This arrangement allows you to evaluate a candidate's performance and fit within your company before making a permanent hire. Fees for this type of placement are similar to temporary placements, though there may be additional costs if you decide to offer the employee a permanent position.

Direct Hire Placements:

When filling a full-time role, you only incur a fee if the agency successfully places a candidate with you. This fee is usually a percentage of the new hire's first-year salary. Higher salaries mean higher fees. Some agencies also assist with finding independent contractors who set their own hours and use their own tools, with payment based on an agreed rate.

Factors Affecting Staffing Agency Costs

Staffing agency fees are not uniform and can vary based on several factors:

Industry and Job Title: Certain industries or specialized roles may incur higher fees due to their demand or complexity.

Location: Costs can vary depending on the geographical region and local market conditions.

Candidate Experience and Skills: Highly skilled or experienced candidates may come with higher placement costs.

Length of Assignment: The duration of the assignment can influence the overall cost.

Hidden Costs of Hiring

While working with a staffing agency may seem straightforward, there are additional costs to consider:

Internal Recruitment Costs: Expenses for advertising, screening, and interviewing candidates.

Time Investment: The time spent on recruitment detracts from core business activities.

Risk of Bad Hires: Costs associated with turnover and lost productivity.

Additional expenses may include benefits, insurance, and administrative fees, which can add 30-50% to the employee’s annual salary. To get a clear picture of the total cost, request a detailed breakdown from the staffing agency.

Cost-Saving Strategies

To optimize staffing costs, consider the following strategies:

Clear Job Descriptions: Accurate job descriptions help attract the right candidates, reducing wasted time and recruitment fees.

Long-Term Partnerships: Building relationships with agencies can lead to better rates and terms.

Temporary-to-Permanent: This approach allows you to assess a candidate’s suitability before committing to a full-time hire, potentially reducing long-term costs.

Interested in refining your hiring process and exploring cost-effective staffing solutions? Connect with one of our hiring partners at Core Group Resources today to learn how we can assist you in achieving your recruitment goals.