Business Overview

Temp agencies and staffing centers recruit work talent on behalf of their client employers. The terms “staffing services” and “staffing firm” are the most comprehensive ways of describing this business, since both of these include all three forms of possible worker recruitment: temporary employment (possibly just a single day); direct hire (the immediate placement of full-time help); and temp-to-full-time. This last area involves delivering workers on a temporary basis who might eventually be hired full-time by your client after a trial period. Some staffing firms provide only some of these services, but most offer all three.

Who is this business right for?

You should understand the human resource side of the business, as you’ll be dealing with common HR issues, such as interviewing, hiring, firing, work disputes, and tax and other withholdings. You must also have the sales ability to attain clients, and a knack for managing and motivating your own employees, many of whom are likely to be on the sales side of the business.

What happens during a typical day at a temp agency?

In your position as an employment broker, your daily responsibilities are likely to include the following:

  • Pitching your expertise to the human resource professionals and office managers who will be the decision makers among your client base
  • Posting job descriptions to job boards and other places where they’ll be seen by applicants, and creating additional ways of attracting talent
  • Conducting job interviews, screening applicants and making hiring recommendations to your clients
  • Maintaining and updating work schedules
  • Managing payroll services and income inflow and outflow

What is the target market?

Your best clients are likely to be those who regularly must hire. This might be because their business is growing so quickly they can’t keep up with hiring, or because their workforce needs fluctuate day-to-day or with the rise and fall of business conditions. In that circumstance, the client is likely to seek temp workers on a moment’s notice.

Other motivated prospects include employers who don’t have the time or resources to go through resumes and job applications or feel that they need a third-party expert opinion on hiring decisions. This might particularly be the case when employers seek highly compensated or niche talent, in which case the hiring might be a major investment.

Among the workers who’ll sign up with your agency, this will include those who are willing to work on a temporary basis while seeking eventual full-time work, as well as those who prefer the flexibility and changing environment of temp placements.

How does a temp agency make money?

For the placement of temp employees, staffing firms will take an hourly rate from the employer and pay the temp worker from that amount. For instance, the employer might pay you $25 an hour and you pay the worker $15 (minus the various withholdings such as taxes and FICA; you are the actual employer in this scenario, so you’re responsible for all payroll costs). In the case of placing a direct hire, your firm will charge a fee based on the starting annual salary of the new employee -- typically 10-33 percent.

Some staffing agencies might instead provide their services free to employers and charge the workers for a hire, though this is rare today. You might also generate income by consulting with employers on recruitment and/or screening services without actually placing the candidate, in which case you’ll charge a flat rate or hourly wage.

What is the growth potential for a temp agency?

Your company’s success will be based on your sales ability and greatly affected by the economy. If you mostly provide employers with temporary workers, a challenging economy might be most beneficial to your bottom line. That’s because in a weak economy employers are hesitant to make significant long-term workforce investments when they’re unsure of their revenue stream even a quarter or two down the road. In this case, they’d rather bring on workers they can immediately discontinue using with no severance costs.

On the other hand, during good economic times, clients might come to you for temp or full-time workers because their hiring needs are so great they can’t keep up on their own. Your growth will depend on how you can take advantage of local and national economic trends to provide the services needed.