Pros and Cons of Using a Temp Agency

What is a temp agency?

What is a staffing or temp agency? A temp agency is a B2B (business to business) organization that helps companies find temporary employees for short-term, seasonal or contract positions. It takes the legwork out of recruiting employees, especially if you need someone quickly or for a limited time.

Some tasks an HR staffing agency can do include:

Seeking out talented professionals
Creating a pool of qualified candidates
Working with businesses at a client level to determine their staffing needs
Selecting one or more qualified candidates to work for the client for a set period of time
Completing payroll and taxes for those candidates on behalf of their clients
Maintaining beneficial relationships between clients and their candidates

Pros and cons of using a temp agency for your hiring needs

Before you start researching temp agencies, decide if it’s the right choice for your staffing needs by looking at the advantages and disadvantages. There are a variety of potential pros and cons of using a staffing agency for your business.

Pros of using a temp agency

In many situations, a temp agency can provide quick, effective staffing for your business. The pros of using a temp agency include:

Time savings: A temp agency can save you and your HR department valuable time, because the agency already has qualified individuals in its talent pool. The agency interviews and screens candidates ahead of time, so they’re ready to start working. By the time you come into contact with a potential candidate, you may only have to determine whether they fit well within your company.
Money savings: Hiring a temp agency to help you employ temporary workers could potentially be more cost-effective than hiring someone for a permanent position. You’ll likely pay more per hour, but the temp agency typically pays their salary, benefits and other expenses. This can save you money overall, especially if you only need the employee short-term.
Less paperwork: Temp employees are hired by the staffing agency, not your company. That means the temp agency handles all the employment paperwork and taxes. This saves you time and streamlines the process for your company.
Less liability: A related benefit is less liability on your part. The staffing agency assumes expenses such as workers’ compensation, liability insurance and employee benefits packages.
Access to a large pool of talent: By working with a temp agency to hire temporary workers, you also gain access to a large pool of candidates that the agency took the time to find. You might identify additional areas where you want temporary help for your business.
Opportunity for permanent employment: If a temporary hire turns out to be a valuable asset to your company, you can offer them a permanent position. It’s an easy way to test out potential employees without the commitment of hiring them permanently until you know they’re a good fit.
Flexible arrangements: You can scale your employment up or down easily with a temp agency if your company’s workload fluctuates frequently. It’s a good way to ease the stress of staffing during busy times. When work slows down, you can scale back on how many temp employees you have to reduce your employment costs.

Cons of using a temp agency

It’s also beneficial to look at the negatives of using a temp agency. Being aware of the cons can help you prepare to find a work-around. Potential cons of using a temp agency include:

Limited timeframe for training: Although a temp agency may offer some professional training, you often still need to train temp employees to complete certain tasks and uphold your company’s values. Depending on the allotted timeframe for their placement, you may have to rush this process to get them acclimated to your business before their contract is up. Each time you get a new temp employee, you have to repeat this training, which can affect productivity.
Lack of loyalty to your company: Because temp employees may only be with your company for a short amount of time, they may have low morale, low productivity or a lack motivation to do well at your company.
Potential for misunderstanding company values: A temp agency might not understand your exact needs or company culture from an outside perspective. Establish a set of traits and qualifications you expect of potential candidates to help get the result you want from the agency.
Less control: When you hire directly, you review all applicant resumes and have access to the full talent pool. A temp agency sends you the best options based on their evaluations, so you have less control over the vetting process.
Lack of team bonding: If you frequently use temp employees, it can be difficult to develop strong teams. Since it’s just a temporary arrangement, your current employees and temp employees might not want to waste the time bonding.

How to determine if your company should use a temp agency

Here’s how to determine if you should use a temp agency:

1. Identify the immediacy of your needs

First, decide whether hiring someone is an immediate need for your company. If you must fill a position immediately, you may want to use a temp agency because it typically screens its candidate pool ahead of time. For example, if a graphic designer responsible for creating images for your upcoming ad campaign suddenly takes another job offer, hiring a temp agency with access to marketing professionals could help you complete your campaign in time.

2. Review your internal staffing capabilities

Review the different skill sets and department responsibilities within your company that could benefit from outsourcing temporary hires. For example, if you have a small HR department that’s overwhelmed with responsibilities surrounding employee benefits, payroll and employee services, you might benefit from transferring certain recruiting responsibilities to a temp agency.

3. If you own a small business or startup

If you own a small business or a sole proprietorship, or are just starting a business, hiring a temp agency could be a great way for you to build your company or staff positions in areas where you lack in-house skills. For example, if you own a small business, you may hire an accountant from a local temp agency each year to help you prepare your taxes, instead employing a full-time accountant.

Tips for finding a good temp agency for your business

Shop around to find the right temp agency for your needs. Pay attention to all interactions you have with potential temp agencies to see how they treat you. Look for an agency that values your time and cares about your needs, instead of one that simply wants more business. Here’s a list of tips to help you find the right temp agency for your business:

Search for firms that specialize in areas you need
Read reviews and customer testimonials to look for red flags
Make your staffing expectations clear
Ask about their screening processes, including background checks
Determine the markup percentage to calculate your costs
Always review contracts prior to agreement
Don’t be afraid to change temp agencies

Temp agency FAQs

What kind of jobs do temp agencies offer?

Temp agencies can offer a wide variety of jobs within a variety of industries. Common jobs include those within administrative, HR, trade, engineering and IT professions. Some agencies specialize in a certain field, such as IT, while others have a range of options under one agency. Determine if a temp agency has candidates in the positions you’re looking for by visiting its website and reviewing its areas of specialty.

How much does it cost to use a temp agency?

The amount it costs to use a temp agency may vary depending on the location, services provided or agency itself. The temp agency makes money by adding a markup cost to the salary of the employee, which usually ranges from 25% to 100% of the salary the employee will receive. For example, if the markup is 50% and the hired employee will receive $15 per hour, the markup amount is $7.50 per hour. That means your company will pay a total of $22.50 per hour for the temp employee. The employee will receive $15 and the temp agency keeps the other $7.50 as its fee. That fee goes toward the temp agency’s costs, including full-time staff salaries, office expenses and the employer’s part of Medicare and Social Security taxes, which you don’t need to worry about paying for temp employees.

Do temp agencies give raises?

Temp agencies can potentially give raises to their outsourced candidates. This ultimately depends on the agency itself and how valuable it believes a temp worker could be to its clients. Talk with your company’s temp agency to determine whether it gives raises and, if so, how those raises affect the fees for its services.

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