How Temp Agencies Work


Job applicants converse outside the Staffmark temp agency in Cypress, Calif.
Job applicants converse outside the Staffmark temp agency in Cypress, Calif.
Ric Francis/AP Images

Temporary employment agencies -- popularly known as temp agencies -- provide workers to a variety of businesses via short-term contracts or indefinite temporary positions. From the employers' point of view, temp agencies perform many of the duties of a company's human resources department, but may be able to do so more efficiently and have access to a wider applicant pool. Workers see temp agencies as a place that will put in the effort to place them in a job, even in a difficult job market. Plus, a temp job can be a foot in the door that leads to a permanent position.

Sometimes, temp agencies are seen as a last resort, a place for unskilled workers to find low-wage jobs. However, today there are temp agencies that specialize in providing highly skilled contract workers in fields like medicine, technology, publishing and engineering. These agencies provide flexibility for both employers and employees.

Temp agencies have their critics, however. They see temp agencies as cost-cutting measures that allow companies to use workers without providing vacation time, health insurance or other benefits. This practice, they say, contributes to the erosion of job security in modern job markets.

Though they have both pros and cons, temp agencies are a major part of the world's job market, especially in the U.S., where more than two million Americans were employed by temp agencies as of 2004 [U.S. Dept. of Labor]. Employment with temp agencies peaked in 2006 before suffering declines due to the economic downturn [U.S. Dept. of Labor]. From the "Kelly Girls" of the post-war years to today's contract software programmers, temp workers have become an integral part of the business landscape. For both workers and employers, it pays to understand how temp agencies work, what they cost (or pay), and how to use them to your best advantage.

Function of a Temp Agency

A temp agency can play a lot of roles, but essentially the process works like this:

  1. The agency has a pool of workers that come to the agency looking for jobs.
  2. The agency screens the workers, weeding out unsuitable applicants and determining what skills the workers they hire possess.
  3. An employer that needs temporary workers enters into a contract with the agency. The contract defines what types of workers the employer is looking for, the cost paid per hour of work and other details.
  4. The agency draws workers with the required skills from its pool of workers and sends them to the new temporary employer.
  5. The agency pays the workers an hourly wage.
  6. The employer pays the temp agency based on the hourly wages of all the workers provided, plus an additional amount to cover the agency's services.

There are several advantages to employers who use temp agencies. They drastically cut the amount of time and effort that must be expended screening applications and interviewing job candidates. Imagine a company that just won a new contract to produce electronic components, but it's a short-term contract, lasting only 3 months. It could take weeks to find and hire qualified workers to build the components, which is very inefficient. A temp agency allows the company to add the necessary workers quickly, and would (ideally) already have workers qualified to build electronics waiting to go to work.

While most companies don't like to admit it, temp workers also save them money because they can put them to work full-time without providing benefits such as health insurance or paid vacation time. For example, Microsoft is known to use thousands of temporary workers -- and lost a class action lawsuit in 2000 that required them to pay benefits to "temporary" workers who had been with the company for 10 years or more [source: Seattle Post-Intelligencer].

Temp agencies have their advantages for workers as well. Submitting your resume to a temp agency can give a worker access to dozens of potential jobs, depending on his or her skills. It's much more efficient than applying and interviewing for multiple jobs. Some companies also use temp agencies to test out workers before offering them a full-time, permanent position. That means temp agencies can provide workers access to permanent jobs they wouldn't otherwise be able to get.

Next, we'll find out what it's like to use a temp agency.

Using a Temp Agency

Applying to work for a temp agency can be just as easy -- and just as nerve-wracking -- as applying for a conventional job.
Applying to work for a temp agency can be just as easy -- and just as nerve-wracking -- as applying for a conventional job.
Ric Francis/AP Images

If your business is thinking of using a temp agency, there are several factors to consider. Do you need a large supply of unskilled workers for a job with high turnover? Are you looking for a few highly specialized workers in technical fields? For a high volume of workers, it might be best to contract with several temp agencies to ensure access to all the workers you'll need. However, working exclusively with a single agency can sometimes allow you to negotiate a discount on the agency's fee. If your temp needs are more modest or specialized, there may be other advantages to building a relationship with a single agency. In rare cases, a single contract can become so important to a temp agency that it actually has a full-time liaison working at the client company's facility to oversee the temps.

The specific cost of hiring a temp agency to provide workers varies tremendously. It will depend on the jobs being filled (unskilled jobs like basic office or light industrial work pay less than technical jobs), the cost of living in the region, the agency's particular standards and fee structure, and discounts or deals worked out as part of the contract. Employers always pay the full wages earned by the temps, plus some percentage above that. A good temp agency will be upfront about the wages and fee structure, so you know exactly what you're being paid.

The process of using a temp agency is relatively simple for workers. It's just like applying for a job: You submit a resume (possibly online, depending on the agency), fill out an application, and have an interview. For unskilled positions, this meeting can be very brief; for higher paying jobs, it can be more like a full job interview. There is often a screening phase during which the agency may conduct a background check or require a drug test. Once you've been accepted into the agency's workforce, you'll be offered one or more jobs that fit your skills if there are any immediately available. There may be a delay of several days or weeks until something opens up -- the more general your skills or the positions you're willing to work, the easier it will be to find you something that fits.

Your pay rate is typically determined by the temp agency, and it pays you directly. If you're trying to turn the temp position into a full-time permanent job with the employer assigned to you, you may discuss that with the company. However, the temp agency often negotiates temp-to-perm positions themselves -- your supervisor at the agency will explain how that's handled.

Specialized Temp Agencies

The average temp agency has a large pool of generalized, unskilled workers who can be placed in any basic job position -- the kinds of jobs that require little training and no special schooling, degrees or industry experience. Office workers, production line workers, security guards, janitorial staff and the like all do important jobs, but just about any temp agency can provide them.

Some employers need specific skills for high-level jobs. Maybe they need to update a suite of software for a new client, so they need an experienced programmer to work only for the 2 months it will take to complete the project. A bank might need a highly skilled accountant to assist with a major merger. Once the merger is complete, the accountant's job is done. For these skilled but still temporary jobs, specialized temp agencies can find the right people.

Temp agencies exist for many specific fields. Some of them you might expect: Computer help deck workers, data entry specialists, legal compliance auditors and even staffing specialists are all jobs provided by temp agencies. You might be surprised to find that some agencies specialize in more diverse fields, like natural gas pipeline safety engineers, paralegals, project managers and even doctors. Some agencies are general specialists, offering a wide range of skilled workers, while others serve a narrower niche, like computer science or medicine.

In some ways, highly specialized temp agencies act a bit like recruitment agencies. Instead of supplying large volumes of workers, they offer a smaller number of quality workers with the right education, experience and skills for the lucrative jobs they provide.

Find more information about temp agencies on the next page.

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Sources

  • Davidson, Paul. "Contract Workers Swelling Ranks." USAToday. Dec. 7, 2009. (Accessed Aug, 30, 2010)http://abcnews.go.com/Business/contract-workers-swelling-ranks/story?id=9263750
  • Net-Temps. "Working for a Staffing Agency." (Aug, 30, 2010)http://www.net-temps.com/careerdev/career-tools/view-article.html?type=topics&id=3863
  • O'Brien, Jonathan. "How Much Does a Temp Agency Charge?" Certified Staffing Solutions. July 28, 2010. (Aug. 31, 2010)http://www.certifiedstaffingsolutions.com/blog/post/2010/07/28/How-Much-Does-a-Temp-Agency-Charge.html
  • U.S. Dept. of Labor. "Job losses in temporary help services." April 14, 2009. (August 31, 2010) http://www.bls.gov/opub/ted/2009/apr/wk2/art02.htm