Staffing agencies make money through several key revenue streams, primarily by acting as intermediaries between employers looking for talent and job seekers seeking employment. Here are the main ways they generate income:
1. Placement Fees: When a staffing agency successfully places a candidate in a permanent position with a client company, they typically charge a placement fee. This fee is often a percentage of the new employee’s first-year salary and can range from 15% to 30%, depending on the industry and the agreement.
2. Temporary Staffing Charges: For temporary or contract positions, staffing agencies charge client companies an hourly rate that includes the employee’s wage, the agency’s markup, and any additional costs such as benefits or payroll taxes. The markup can vary widely but generally ranges from 25% to 100% of the employee’s wage.
3. Retained Search Fees: In some cases, especially for executive or specialized roles, staffing agencies may charge a retained search fee upfront to conduct a comprehensive search for candidates. This fee is paid regardless of whether a candidate is placed and is usually a fixed amount or a percentage of the expected salary.
4. Consulting Services: Some staffing agencies offer additional services such as workforce consulting, training, or human resources consulting. These services can provide additional revenue streams beyond just recruitment.
5. Payroll Services: Agencies may also offer payroll services for companies that prefer to outsource their payroll management. They charge fees for managing payroll, tax filings, and compliance, generating additional income.
6. Value-Added Services: Many staffing agencies provide value-added services, such as background checks, skills assessments, and training programs for candidates. These services can incur extra charges and contribute to the agency’s revenue.
7. Contract-to-Hire Arrangements: In contract-to-hire scenarios, the agency places a candidate on a temporary basis with the option for the client to hire them permanently after a trial period. The agency earns revenue from both the temporary staffing arrangement and potentially a placement fee if the client decides to hire the candidate.
By leveraging these various revenue streams, staffing agencies can create a sustainable business model while providing valuable services to both employers and job seekers.
