How Does a Temp Agency Work?

How does a temp agency work?
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How Does a Temp Agency Work?

Temp agencies are often used by a huge variety of industries. The primary advantage of a temp agency is that companies looking for large volumes of temporary work can be easily connected with the required talent – but over recent years, many such agencies have become even more robust, offering temporary, temp-to-hire, or even permanent jobs, in some cases.

However, there remains some confusion about the precise role of a temp agency – both for clients and for candidates. Clients often wonder what they’re paying for – why not find candidates ourselves? And candidates are sometimes concerned that they’re simply being used, and may be hit with hidden costs, fees, or miss out on benefits of other work.

We’re here to break down the basics about how temp agencies work, both for clients and for candidates.

Infographic - How Does a Temp Agency Work?
Infographic – How Does a Temp Agency Work? (click to enlarge)

How do Temp Agencies Work for Clients?

Here’s the breakdown of how a temp agency relationship works for clients, step-by-step.

1. Client Companies Contact a Temp Agency

The first step is working out exactly what kind of staff you need. Generally, temp agencies will ask for pertinent information about the type of work being done, job descriptions, job expectations, skills required, and so on. After this initial consultation is finished, the process of finding the required candidates begins.


2. Candidates Are Identified

Using third-party search tools, as well as in-house databases on contacts, candidates, and recruits, the agency takes the particular requirements of the client company, and begins searching for suitable candidates – candidates who have the required skills, experience, and knowledge to perform ably in the given job position.

This is one of the most important services that temp agencies provide – searching for and finding desirable candidates isn’t always easy, and most agencies have in-house databases and dedicated staff who can ensure that the process goes as smoothly and efficiently as possible. This decreases the time taken for the hiring process, which allows open positions at client companies to be filled quickly and effectively.

Once candidates are identified, they are contacted and interviewed.

3. Contact and Interviews

The temp agency reaches out to the appropriate candidates and informs them about the job opening. Generally, candidates who are new to the agency are asked to undertake a battery of tests that will ensure they are suitable for work, after which the agency will usually begin asking them to come in for a physical interview, or an interview conducted over the phone or through an online interview via Skype.

Interested candidates are then spoken to, and vetting and background checks are done to ensure that they are not misrepresenting their skills. If everything checks out and the candidate is a good fit, they are then placed by the temp agency into the position open in the client company.

4. Placement and Remuneration

Once the employee is placed in the client company, they begin work. Technically, the worker in question is an employee of the temp agency – which is why they deal with remuneration, work scheduling, taxes, and other basic employer tasks.

Work schedules are made per the length of time required for an assignment, and changed depending on client requirements. When the period of work concludes, the worker is removed from the client company, and then begins seeking other work.

During the contract period, the client company pays the temp agency a set rate per worker, depending on the hourly wages and fees associated with that worker, along with a markup that’s passed on to the agency.

5. Understanding Markups

Markups are what often make people question the need for a temp agency – why pay $32 an hour to a third-party temp agency when an employee is only making $24 an hour?

Well, the fact that the agency is responsible for the worker, their performance, and for finding and placing the worker in the appropriate position is the primary reason that they make a surplus – after all, great service isn’t cheap, and good candidates can be hard to find fast.

In addition, $24 an hour isn’t really $24 an hour. The temp agency is responsible for a number of taxes and fees including payroll taxes, paying the recruiter, company rent, paying for ad postings along with employee insurance and benefits. Combining all of these costs is how the temp agency creates the appropriate markup for each client.

Good service and fast responses aren’t free. Temp agencies aren’t cheap – not as cheap as hiring workers yourself – but the opportunity cost of work being delayed and other issues can often hurt your bottom line.

How do Temp Agencies Work for Candidates?

Here’s how a temp agency works from the candidate side.

1. Candidates Apply to The Temp Agency – Or Are Contacted Directly

Often, large temp agencies have a large pool of candidates already, as many professionals submit their information to them directly in hopes of finding good temporary work assignments. These are usually the first resources that agencies will go to for candidates. If there are no appropriate candidates, other third-party HR resources can be used to find appropriate persons for any given position.

Regardless of the way that a candidate is found, the candidate will be contacted by the temp agency, and informed of the position that is available to them. The candidate will perform basic tests if necessary, and then be vetted and interviewed to ensure they are appropriate for the task at hand.

Once interviewed, all candidates will be placed in a database for consideration for future work.

One misconception that some candidates have is that they must pay a temp agency. We’ll say it in bold:


They make money by profiting off of a client’s immediate need for short-term work – by providing your services to the agency, you’re helping them make a profit. You absolutely never should have to pay for job placement. If you do, you’re being scammed.

2. Candidates Are Placed in An Appropriate Position

This may take some time – depending on the skills of a candidate. Once an appropriate position is open, a candidate will be contacted by the temp agency if they are determined to be a fit.

The agency will provide the candidate with all of the pertinent details of the job – required skills, dress code, location, requirements, scheduling, and so on. Once the candidate agrees to the job, they are sent to the appropriate location to begin work.

3. Candidates Are Handled by The Agency For The Duration Of Work

When you work for a staffing corporation, you’re not technically employed by the client company. The temp agency that hired you will take care of payments, taxes, scheduling, and other basics, as well as handle complaints – both from workers and from client companies. The temp agency also handles the candidate’s benefits including insurance, vacation, retirement plans and child care assistance.

The worker will show up to the specified location, begin work, and continue in that manner until the conclusion of the duration of their work term, receiving payments, schedules, and so forth from the staffing agency.

4. At the End of Work Term, Candidates May Inform Temp Agencies of Further Work Needs

A candidate/temp agency relationship doesn’t usually end after just one job. If performance was good, and a candidate makes it clear that they are seeking more temporary work, another assignment may be found relatively quickly, and the candidate may be placed in a new position at a new client company. The agency only makes money if the temp is out working so their goal is to find the temp as many jobs as possible. The temp can aid in this process by keeping the agency updated on their availability so the agency can notify them when a suitable position becomes available.

Doing so allows a temp company to continue providing work to good candidates, and helps candidate, earn a steady income.


Hopefully, this article has helped clear up how a temp agency works. By providing short-term, skilled work for clients in need, they make a small profit, which allows them to find appropriate candidates quickly and easily.

Temp agencies aren’t magic – they can’t replace your HR department, and they’re not usually alternatives to finding full-time employees. But for those times when clients need large amounts of work done in a short time-frame, or when times are tough and many talented folks who are in need of part-time work are seeking employment, temp agencies can be very helpful indeed.

For more information, feel free to check out our FAQ’s

5 thoughts on “How Does a Temp Agency Work?

  1. Can you give information about how a temp could stay on a position permanently. Also, would it help to ask the temp agency hiring manager for positions in the same field once that position is finished, so that the individual would not be out of work too long?

    1. The recruiter should speak with you at the start of the process to lay out expectations for the position. They will be able to tell you if the position is temporary or temp-to-perm. If a position is temporary, unfortunately there is not much that can be done by the temp to stay on the position permanently, but the temp should know that going into the role. As far as a temp-to-perm position goes, you just need to do your best work and show the company you should be hired permanently. You should always keep in contact with your recruiter as soon as a role has finished so they can get you in another one as quickly as possible. For more information check out our FAQ page…this might be of some help.

  2. That’s good to know that clients initiate a job search with an agency. That means they definitely are looking for workers. I’m between semesters right now, and I think I’ll look for temp work.

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