How Do Staffing Agencies Work and Why Do So Many Companies Use Them?

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You have discovered this article asking yourself, ” How do staffing agencies work” and have no idea where to start”. 

Finding the right talent remains a massive challenge for modern small companies. Reviewing the applications, interviewing all of the candidates, and negotiating salaries take time away from a business owner’s existing schedule, which may end up harming the business in the long run.

This is why, more than ever, employers are now partnering with local staffing agencies, which take the time and the stress out of talent searching by providing the best workers for open roles. Using a staffing agency isn’t the perfect choice for every business and it may be difficult deciding what is best for you. 

But, don’t worry! We are here to help! 

We have outlined how staffing agencies work and how you can get started working with one as soon as possible! 

What Can a Staffing Company Do for You?

Staffing companies have incredible benefits for small businesses and corporate giants alike. The advantages do not just stop with the employer, they can be helpful for the employee as well! 

So, without further ado, let’s dive in! 

1. Reduced Overhead Costs

Hiring on permanent employees can potentially cost more than the salary they are being paid. Considering their health care, a 401k retirement plan, sick days, a week of vacation pay, and the employer taxes are just a few of the hurdles added with permanent staff.

Using a temporary staffing agency, an employer may not need to pay for any of that. They might simply pay for the work they have done without the additional overhead costs.

2. Reduced Overtime Pay

Rather than putting additional demands on current permanent staff, an employer can use a staffing agency and bring in temporary workers to help split up the amount of work during busy times.

This saves them from burning out full-time employees and overtime costs for employees if they work on an hourly basis.

3. The Need for Short Term Staff

Employers may need a temporary employee due to a permanent staff member being sick, having a family emergency, or taking a leave of absence.

Hiring with a temporary staffing agency gives the employer the flexibility one needs to schedule someone for a short period.

4. Save on Training and Reduce Hiring Risks

Training your new employees require a critical investment of both your time and costs.

When you are searching for someone to cover just a few months of work, it doesn’t really make sense to spend the money to train them. But, by using a temporary staffing agency, the employer is then provided with someone equipped to do the work they need.

When the contractor’s job is complete, the work is done; no need to worry about severance pay, the unemployment insurance, or finding a future replacement.

5. Staffing Specialists Will Save Time and Increases ROI

Sometimes employers reviewing submitted resumes may have specific projects that require a specialist, or someone with expertise in a field of work. 

If it is a temporary task that will only take a small predetermined amount of time to complete, it just doesn’t make sense to hire them on a permanent basis.

Also, a temp agency can set an employer up with staffing experts and save them time by weeding through all of the resumes and checking their references.

6. Handles Onboarding and Payroll

A staffing agency will thankfully take care of onboarding paperwork, the payroll taxes, workers’ compensation, and of course, unemployment benefits. 

7. Access to Talent Networks

A great staffing agency spends years conjuring their talent network through plenty of referrals, networking, and speaking with new candidates daily. Most employers don’t have the time and resources to constantly engage talent. 

A leading staffing agency should be able to deliver their qualified candidates in no more than 24 to 48 hours.

8. The Ability to Hire Quickly

Modern employers may have an employee quit suddenly and need an immediate replacement. A temporary staffing agency can deliver qualified talent in no time, due to its extensive network of candidates.

9. Industry Market Knowledge

Another great benefit of using a staffing agency today is insider know-how.

The employer has access to their recruiter’s knowledge including available candidates, salary ranges, and local market trends.

10. The Ability to Try Out an Employee Before Extending a Full-time Offer

It can be difficult to determine if an employee will be the best fit strictly through an interview or two. By starting an employee on a contract, you can decide whether the candidate is a good match for both parties, and then if it is not, both can part their separate ways much easier.

How Do Staffing Agencies Work?

What are the major types of jobs that staffing agencies help companies fill? 

  •  Temporary: an assignment with a set start and end date
  •  Temp-to-hire: an assignment that’s initially temporary, but is used to help an employer determine the temp worker’s long-term fit with the company
  •  Direct hire: a permanent position in which the staffing agency acts solely as a recruiter

If an agency doesn’t have an existing employee who is a good fit for the open role, they will typically advertise on job boards and other places job seekers would likely look. From there on, they will accept applications and conduct interviews just as any other employer would.

Finally, once the right candidate is found, that person will be hired as an employee of the agency. The worker’s future paychecks and benefits will be issued from the staffing agency, but the length of employment is ultimately determined by the client.

Alternatively, you can also sign up for on-demand hiring platforms such as Upwork,, and FreeUp, which will give you access to independent professionals and freelancers who are ready to work.

These platforms can operate a bit differently, in that any new workers who come through these websites will be considered independent contractors. This means you will be responsible for paying them directly and issuing the 1099 tax form at the end of the year. 

Common Misconceptions

One of the widespread misconceptions about hiring a staffing agency these days is that it’s just too expensive to be worth it. Why pay the extra cash in recruiting fees when you could just hire someone by yourself?

You may think that you’re saving the money upfront, but in the long run, using a  skilled staffing agency might end up saving your company money.

Many companies will only look at an agency’s fees to determine the cost, yet typically fail to realize the value and savings they can provide moving forward. The time it takes to hire is also an important factor when it comes to how much an open position can cost a company.

The longer a position is left open, the higher the cost, due to a loss in productivity and diverting needed resources. Working with a good staffing firm can help decrease the time needed to hire and help decrease a decrease in productivity.

Another common myth about staffing firms involves the overall quality of their employees.

Some companies will believe that workers who come through staffing agencies are only there because they couldn’t get hired anywhere else.

That’s not necessarily the case.

In fact, temporary employees are often overqualified for the jobs they’re currently doing. 

These workers may decide to work temp jobs because they value the flexibility, or they are trying to get into a different field, or maybe they just want a big change at a career, and temp positions are often easier to land initially than the permanent ones. 

How to Work With a Staffing Firm            

Ready to hire your own staffing company? You’ll know how to find one today! With our expert advice, you can start a great professional relationship now!

Find the Right Company

Before you can start finding quality employees, you have to pick a staffing firm that’s right for your business. It is crucial to find a company with a great reputation for solid business practices.

Make sure you’re working with a reputable firm that also takes pride in the employees it will send.

That includes making sure that their employees have all of the proper credentials verified, including, but not limited to, reference and background checks being conducted. You will also want to make sure that they are carrying all of the proper insurances, including general liability and worker’s compensation insurance. 

As with all business relationships, a staffing firm also needs to provide real value to you to be worth the investment.

Sit down with a staffing firm, and truly find out if they can bring true value to your business or organization. As a small business, each employee’s importance and cost associated with recruitment is amplified. So, find a firm that treats your organization as a business partner, not just another client.

Similarly, if you decide to use an on-demand staffing platform instead of the traditional staffing firm, check the reviews and make sure the website is trusted by other business owners before you sign up or make any future payments.

It may be worth it to consider a specialized staffing firm that works only with companies in your industry. Some niche agencies know the candidate marketplace well and can find an exact match quickly and simply. 

Be Clear About Your Needs

Successful staffing companies want to help you find the best workers for your organization, and they won’t be able to do that if you don’t communicate clearly and thoroughly about your company, the position, and the type of person you want for the job.

Beyond discussing the basic responsibilities and required skills for the job, outline your business policies (dress code, hours, breaks, etc.) to give a staffing firm representative a bigger idea of your corporate culture and what kind of professional would succeed in the workplace. 

When you feel you’ve clearly defined all of your needs, let the recruiter know.

He or she will start the search immediately for the best candidate.

Check Over the Legal Aspects

Depending on the types of positions a staffing firm would be aiding you to fill, you should be sure that related legal details, like worker classification and payroll taxes, are correctly taken care of.

For temporary and temp-to-hire roles, the staffing firm is the official employer for all tax purposes, so the company you choose should confirm that the workers you use are in fact employees, and not independent contractors.

Additionally, you may want to review the contracts that are involved to ensure that there are proper provisions in place regarding indemnification, preferably a dual indemnification clause that protects both parties from issues that may arise.

Maintain a Good Relationship

It may take a little trial and error to find the best staffing company for your business, but once you’ve found one that provides the highest quality service and high-quality workers, stick with it! 

Discussing new workers with your agency’s representative can help both you and the company as a whole with your future talent searches.

Whether you tap into on-demand staffing solutions for unpredictable needs or traditional staffing solutions for your predictable needs, always ensure you have staffing agencies who have proven themselves to be reliable time and time again, so you can focus on growing your business.

Why Do Companies Use Staffing Agencies? 

You were asking, “How do staffing agencies work? What are the benefits and how can I get started?”  

Well, now you have the answers and it was a pleasure to help! You are a seasoned professional when it comes to the ins and outs of staffing agencies and you are ready to start hiring.

Now it’s time to get yourself some new employees

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