Temping Agencies

[MustangFan]

How do temping agencies work? Do they work all the same? I know you don''t pay them, but the company does. Do they take out money from your hourly rate or are they paid a flat rate by the company?

 

[musey]

My FI worked as a temp last summer and it led to his current job.

In his case, the his employer had a set hourly rate for the position he was working. They paid the temping agency this rate plus a certain percentage, then the agency paid him. I think that the agency took that percentage and a little bit off the top of the hourly rate, as well.

He wasn't supposed to be privvy to that information, but since they ended up hiring him permanently, he got filled in after the fact.

 

[dianne]

Date: 3/1/2008 12:15:43 PM
Author: musey
My FI worked as a temp last summer and it led to his current job.

In his case, the his employer had a set hourly rate for the position he was working. They paid the temping agency this rate plus a certain percentage, then the agency paid him. I think that the agency took that percentage and a little bit off the top of the hourly rate, as well.

He wasn't supposed to be privvy to that information, but since they ended up hiring him permanently, he got filled in after the fact.

Musey's right....I used to do job placement for a temp service and this is what we did:

Employer set rate for employee to be paid, say $10.00/hr.
Temp agency charged a percentage of that hourly rate for their fee, say 50% = $5.00 hr.
Temp agency charged employer a total of $15.00/hr.

If the job was a temp to perm position, the employee would work through the temp service for a pre-set amount of time, say 10 weeks...
OR
the employer, at any time, always had the option of paying the remaining balance of the 10 week fee and the employee was free to move to the employer's payroll.

ETA: Musey, I would be furious if the temp agency took additional monies from your FI's hourly rate in addition to their agreed fee percentage. Looks like he could pursue getting that back...or he may just be glad to be away from them. That's simply ridiculous and infuriating!!

 

[MustangFan]

ok so if the temping agency says the hourly rate is $14 an hour am I getting $14? Would they have already calculated the cut they take?

 

[dianne]

We never disclosed anything but the actual hourly pay rate to the employee, the rate they would be getting paid. We never discussed what the employer was paying as a fee. I am only limited to knowing how the company I worked for did this but I would think that the fee would be private. Sometimes, for good employer customers, the temp service may lower the fee percentage which could cause conflict if other employers found out about it...another reason to keep it quiet.

 

[MustangFan]

Ok thanks so I guess if they say I''ll be making $14, I''ll be making that, but technically maybe $16 or so depending on the percentage...?

 

[KimberlyH]

Date: 3/1/2008 2:38:25 PM
Author: MustangFan
Ok thanks so I guess if they say I''ll be making $14, I''ll be making that, but technically maybe $16 or so depending on the percentage...?

What they are paying the temp agency is seperate from your actual pay. Think of it as a service fee. So you''re making $14 an hour, and the company is paying the temp agency a percentage of that to cover the cost of a finders fee as well as additional employer expenses such as worker''s comp insurance, because the temp agency is your employer of record.

 

[dianne]

Right...except, unless things have changed a lot, our rate really was 50% which would mean $14 for you and $7 for the temp agency....just for bringing you and the employer together. Clearly, there is money to be made by owning a temp agency, huh? But, to your advantage, you may not have found this employer without them....and this employer may not have found you. It can definitely be a win-win for everyone. Good luck to you!

ETA: Oops, KimberlyH, we were posting at the same time, but your comments are right on!

 

[MustangFan]

ok thanks for clearing that up for me

 

[musey]

Date: 3/1/2008 2:15:27 PM
Author: dianne

ETA: Musey, I would be furious if the temp agency took additional monies from your FI's hourly rate in addition to their agreed fee percentage. Looks like he could pursue getting that back...or he may just be glad to be away from them. That's simply ridiculous and infuriating!!

I could be wrong on that, it was just my understanding of the situation. If that is not common practice, then I am most likely just mistaken, as the agency was otherwise wonderful for him to work with.

Temping was the only way for him to have found this job, as they only find employees through temping agencies (always temp to perm). He would otherwise have had really limited options. Plus, the increased rate they paid the agency gave him grounds for salary negotiations when they offered him a job.

 

[monarch64]

I was hired through a temp agency for a previous job. I got paid an hourly rate of $10 (through the temp agency), and then when the actual company I was working for hired me permanently they gave me a significant increase plus full benefits. My boss did share with me that they had to "buy me out" from the temp agency. He said the company had to pay the temp agency the equivalent of what they would''ve made off of hiring me out. All very confusing, I still don''t really understand how it worked. There is definitely money to be made if you own a temp agency, that''s for sure! I was pleased with the overall experience; the agency found the position (that I ended up being perm. hired for) 5 blocks from our house, and it was only the second job I temped for in the span of three days. I ended up staying with the comp. who hired me for the next two years.

 

[Sparkster]

Date: 3/1/2008 10:36:46 PM
Author: monarch64
I was hired through a temp agency for a previous job. I got paid an hourly rate of $10 (through the temp agency), and then when the actual company I was working for hired me permanently they gave me a significant increase plus full benefits. My boss did share with me that they had to ''buy me out'' from the temp agency. He said the company had to pay the temp agency the equivalent of what they would''ve made off of hiring me out. All very confusing, I still don''t really understand how it worked. There is definitely money to be made if you own a temp agency, that''s for sure! I was pleased with the overall experience; the agency found the position (that I ended up being perm. hired for) 5 blocks from our house, and it was only the second job I temped for in the span of three days. I ended up staying with the comp. who hired me for the next two years.

Say if a company hires a recruitment agency to find a new employee. How does the agency get paid? Well, they get paid a percentage of the salary of what that the person would get. For example, I go for a job that''s $50,000 and the agency''s fee is 10% of the salary, they get $5,000. Where I come from, permanent jobs come with a 3 month probation period. If the employee does not pass the probation period, then the agency does not get paid the service fee.

That is why your boss had to ''buy you out''.

 

[dianne]

Date: 3/1/2008 10:36:46 PM
Author: monarch64
I was hired through a temp agency for a previous job. I got paid an hourly rate of $10 (through the temp agency), and then when the actual company I was working for hired me permanently they gave me a significant increase plus full benefits. My boss did share with me that they had to ''buy me out'' from the temp agency. He said the company had to pay the temp agency the equivalent of what they would''ve made off of hiring me out. All very confusing, I still don''t really understand how it worked. There is definitely money to be made if you own a temp agency, that''s for sure! I was pleased with the overall experience; the agency found the position (that I ended up being perm. hired for) 5 blocks from our house, and it was only the second job I temped for in the span of three days. I ended up staying with the comp. who hired me for the next two years.

I''ll see if I can help you understand, monarch. I''ll use the same example as in my previous post and I''ll elaborate a bit further--plus, by coincidence, my example is for the same rate you were paid. Again, this is how we did it at the company I worked for...there may be several types of pay and fees with other companies.

Employer sets rate for employee to be paid = $10.00/hr.
Agency charges 50% of that hourly rate for their fee = $5.00/hr.
Agency bills employer for the total of employee pay ($10.00) plus the hourly fee ($5.00) = $15.00/hr. total.

Per signed contract between agency and employer, temp must work 10 weeks before moving to employer payroll.
Bottom line, the temp agency requires $2,000 before they will release temp to work full time with employer:
10 weeks X 40 hours = 400 hrs
400 hrs X $5.00/hr fee = $2,000 total fee

Ok, say the employer wants to hire temp onto their payroll after 5 weeks/200 hours (exactly halfway through contract). Well, they have already paid $1,000 in fees over the last 5 weeks so they simply pay a lump sum of the remaining $1,000 to the agency and move temp to their payroll. The agency still gets their required $2,000.

I hope this helps and doesn''t make it more confusing.

 

[omieluv]

Every temp service is different, in terms of fee structure to the employer - everything is negotiable though. I worked as a recruiter for a staffing service for a few years, what would happen is that an employer would call me to let me know they have a need to fill XYZ role. After speaking to them about their needs, I would quote them a bill rate, which would cover the employees pay rate, benefits, taxes, administrative costs, etc. Customers were not locked into a time period as to when they could hire the temp, they were just charged a fee, which would decrease each week the temp was with them. Honestly, the fee was negotiable. For instance, if they were a loyal client, I might reduce it by 50%, or waive it if I knew they would have more needs. In terms of the employee, they were informed of their hourly pay rate and that was it.

Another route a customer could take is the direct hire option. Here, we would recruit for the candidate and the customer would select which person to hire. The staffing firm would take 20% of the yearly income as their fee. To protect the customer's interests, the customer had 60 days to decide if the person was a good fit, otherwise we would replace for free. in terms of salary negotiation, the customer had the choice as to whether they wanted to negotiate salary, or whether they wanted us to do that.

An interesting option is the payrolling option. This is where a customer wants to use the service to pay people who work with them. This is not a bad route to go if the employer has a role open & already knows of a person they might want to fill it, but is unsure as to whether they want to bring the person on permanently. The staffing firm would charge a reduced rate for the service because they did not have to actually source the candidate. This also worked out well for our customers who had retirees want to come back to work after they retired from the company.

For job seekers, staffing services can open the doors to companies that they never could have gotten into on their own. If lets say you are not good during interviewing, but have great skills, a good recruiter will be able to speak on your behalf to the client. Even if the client might request an in-person interview and you completely flop, a good recruiter might be able to smooth things over, especially if the person has a good relationship with the client. However, there are more inexperienced and not so good recruiters than good recruiters at staffing services, so do not get frusterated early in the game. Here is a tip, if you are out of work and looking for a permanent job, but the service only has short-term assignments, go ahead and explore those. If you successfully complete a few of those, you will have established a positive relationship with the firm, so they will keep you in mind for more. Besides, you never know, one of those short-term roles could turn into something much bigger...I have seen it happen plenty of times.

Avoid services (in the US) that require you to pay anything, unless they are a head hunter, that is different. Also be wary of services that ask you to sign a contract that will lock you into a role for a certain period of time. It is perfectly normal for services (in the US) to require that you take drug screen, run a background check, even credit checks (especially for roles in finance/banking), as that could be the client's request. if you do go in for an interview, treat it like a formal interview with a company, as the recruiter will be assessing whether you would be ok to send to a client.

 

[Mara]

Date: 3/1/2008 11:25:45 AM
Author:MustangFan
How do temping agencies work? Do they work all the same? I know you don''t pay them, but the company does. Do they take out money from your hourly rate or are they paid a flat rate by the company?

My experience with temp agencies in college was that they negotiate a higher rate overall and then take a cut from it. So if you get paid $18 an hour then the temp agency probably charges the company you are working for something like $24 an hour for you, then they take the $6. Then if you go perm, typically the company has to ''buy'' you from the agency through a fee paid to the agency (depends on your rate and level).

I loved temping in college, I worked for 2 agencies at a time and pretty much worked consistently through school. I worked for companies like Cisco, Adobe, Oracle back when they were much smaller than they are now. How I wish I bought some stock then!!! 20/20 hindsight!

 

[omieluv]

When I worked with my clients, I always quoted them a bill rate range, this way, I would have some flexibility in terms of what I could offer to a temp. For instance, if I had a great temp who was technically a bit "over qualified" (hate that term) for the role, but who I thought would also be a good fit in terms of personality, I would pay that person on the higher end of the scale. Typically, my clients would want me to present at least 2 people, so I would present someone with skills falling toward the higher end of the scale and present someone on the mid-lower end and let the client decide which person would work out best for them. I would never present a person who did not at least meet the client''s minimum requirements, without them knowing so at least (sometimes I would have candidates that I felt could grow into the role with training).

The difference between the bill rate to the client and the pay rate the temp is what is used to cover expenses (employee benefits, payroll tax, administrative costs). The larger the "gap" between the bill rate + pay rate, the more that the staffing firm makes to cover costs. However, the difference between pay & bill rates is not 100% net profit to the staffing firm. In addition to benefits & taxes, the firm has to pay its own employees, pay rent on location and other operating costs too. Don''t get me wrong, the service will make money though. Just wanted to clarify that if you make $10/hr on an assignment and the firm charges $15/hr, the $5 does not go straight to net profit.