How Temp Agencies Work

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.