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How Does A Temp Agency Work?

How do temp agencies work | TemPositions

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How Does a Temp Agency Work?

Temp agencies serve as a valuable resource for various industries. They facilitate a seamless connection between companies seeking temporary work and the required talent. In recent years, these agencies have broadened their services to include temporary, temp-to-hire, and permanent job options.

Nevertheless, there remains some confusion about the precise role of temp agencies, both for clients and candidates. Clients often question the value they derive from their payments and consider why they shouldn’t independently seek candidates. Meanwhile, candidates sometimes express concerns about potential exploitation and undisclosed expenses.

Let’s break down the basics about how temp agencies work, both for clients and for candidates.

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 to work out exactly what kind of staff you need. Temp agencies will ask 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 begins searching for suitable candidates. These candidates  have the required skills, experience, and knowledge to perform in the given position.

Temp agencies play a crucial role in providing one of the most important services: searching for and finding desirable candidates. They typically have in-house databases and dedicated staff who ensure a smooth process, reducing the time required for hiring and enabling quick placement in client companies.

After identifying potential candidates, the agencies reach out to them and conduct interviews.

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 tests that will ensure they are suitable for work. After, the agency will ask them to attend a physical, virtual, or Skype interview.

Interested candidates are screened to ensure they’re are not misrepresenting their skills. If the candidate is a good fit, they’re placed by the temp agency into the client company.

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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

After placing the employee at the client company, they commence work. The worker is technically an employee of the temp agency, which handles compensation, scheduling, taxes, and other fundamental employer responsibilities.

The work schedule is based on the assignment’s duration and modified according to the client’s needs. Once the contract period ends, the worker is withdrawn from the client company.

Throughout the contract period, the client company remunerates the temp agency at a fixed rate per worker. This rate varies depending on the worker’s hourly wages and fees, as well as an agency markup.

5. Understanding Markups

Many people question the need for a temp agency when they consider the markups involved. Why should someone pay $32 an hour to a third-party temp agency when the employee is only earning $24 an hour?

The primary reason temp agencies generate a surplus is because they assume responsibility for the worker, including their performance and placement in suitable positions. Providing excellent service comes at a price, and locating competent candidates quickly can be challenging.

Moreover, the apparent $24 an hour doesn’t reflect the actual cost. The temp agency incurs various taxes and fees on top of that amount. These expenses encompass payroll taxes, recruiter compensation, company rent, advertising costs, employee insurance, and benefits. The combination of these factors determines the appropriate markup for each client.

Quality service and prompt responses come at a cost. Temp agencies are not inexpensive; they are not as affordable as hiring workers directly. However, the potential loss incurred from work delays and other issues can often have a negative impact on your overall financial situation.

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

Large temp agencies often maintain a substantial pool of candidates who directly submit their information, hoping to secure good temporary work assignments. These candidates serve as the agency’s primary resource. If no suitable candidates are available, the agency can explore other third-party HR resources to find appropriate individuals for the position.

Once a candidate is identified, the temp agency contacts them and communicates the available position. If necessary, the candidate may undergo basic tests and subsequent vetting and interviews to ensure suitability for the specific task.

Following the interview process, all candidates are added to a database for potential future opportunities.

It is important to debunk a misconception held by some candidates that they must pay a temp agency. Let us emphasize this point:

Temp agencies generate profits by meeting a client’s immediate need for short-term work through the provision of candidate services. By offering your skills to the agency, you contribute to their profitability. Under no circumstances should you be required to pay for job placement. If such a demand arises, it is a scam.

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.


This article aims to provide clarity on the functioning of a temp agency. These agencies make a modest profit by offering skilled, short-term work to clients in need, enabling them to swiftly and effortlessly find suitable candidates.

Temp agencies should not be viewed as magical solutions that can replace your HR department or serve as substitutes for hiring full-time employees. However, they can be highly beneficial in situations where clients require a significant volume of work to be completed within a limited timeframe or during challenging times when numerous talented individuals seek part-time employment.

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