How Do Staffing Agencies Work?

Staffing agencies can help you quickly find the right candidate for required job openings.

Tight budgets and limited candidate pools often challenge small-and-midsize-businesses’ (SMBs) ability to hire and retain talented professionals. The increasing gap between candidates’ salary expectations and the business’s budget for a vacant role is another hiring-related hurdle SMBs face. 

If you are an SMB leader or an HR professional who finds recruitment to be a detailed yet time-consuming process, hiring a third-party staffing agency could help you. But, before you select the right one for your business, knowing how staffing agencies work is important.

Staffing agencies can help with candidate sourcing and screenings while reducing hiring time and negotiating contracts and pay. Let's learn how small business leaders can utilize staffing agencies to find the perfect candidate and examine different types of staffing contracts, potential fees, and benefits.

What do staffing agencies do?

Staffing agencies are firms that help businesses recruit and place employees according to their business needs. These agencies often specialize in industries such as manufacturing, security, technology, and hospitality.

Staffing agencies are outsourced teams that augment internal resources to assist businesses in finding candidates, performing initial screenings, moving candidates along the hiring process, and extending a job offer.

Many SMBs don’t have to employ a huge in-house recruiting team due to their limited staffing and project-related needs. As hiring multiple full-time recruiters can be time-consuming and expensive, you can hire a staffing agency, which can be an extension of your internal team and serve your seasonal staffing needs.

According to Keca Ward, a human resource specialist from HumanResource.com, “In-house staffing offers a close-knit environment and a deep understanding of company culture, which I’ve seen foster strong employee engagement in a tech startup I advised. However, it can be resource-intensive. Conversely, outsourced staffing provides flexibility and access to a diverse talent pool.” She also mentioned a retail client who significantly reduced hiring lead time through outsourcing.^[1]

Benefits of hiring staffing agencies

As an extension to your team, staffing agencies can quickly scale up or down with demand, giving you ultimate flexibility and multiple benefits.

Access to a wider talent pool

Staffing agencies often maintain extensive databases of qualified candidates. Even if they’re not currently active in the job search market, they can reach out to top candidates on your behalf. Many staffing agencies use artificial intelligence (AI) based screening tools to parse out candidates from their talent pools, helping you find the right candidate quickly.

Specialized expertise

If you are looking for a candidate to meet your business needs but are unsure about the necessary skills they should have, staffing agencies could provide you with experts to help you find the best candidate. A staffing agency with specialized expertise in your industry can offer invaluable insights related to the qualifications, past experiences, and characteristics needed for the job opening you want to fill.

Cost-effective

Hiring a staffing agency is often cheaper than hiring a full-time recruiter in-house. This is because you can hire them per business requirements. They can scale up their services when you want to hire for multiple positions and reduce their workload when you’re not hiring. This allows you to save your internal team’s time, allowing them to focus on other priority projects.

Reduce hiring time

When job positions remain vacant for months, your business tends to witness losses in revenue and productivity. Staffing agencies can significantly reduce the time-to-hire, accelerating recruitment and filling vacant roles much faster. They can also bring more qualified candidates into the pipeline, giving you a wider variety of talented candidates to choose from.

How do staffing agencies work, and what process do they use?

Expert Keca Ward says, “Staffing agencies are like matchmakers, connecting businesses with suitable candidates. They manage contracts and payments, alleviating administrative burdens^[1].” 

Staffing agencies often use their own proprietary, streamlined hiring process. Even though each company is different, most high-quality staffing agencies work proactively to ramp up hiring for businesses. Here’s what a typical hiring process looks like.

Contact the staffing agency

Businesses contact multiple staffing agencies to determine the perfect fit. Next, they have to clarify any requirements, ask the agencies’ experience and skills of their employees to identify the right agency.

Post the job and begin outreach

Next, the staffing agency begins the hiring process. They might post the job listing online and contact highly qualified candidates in their talent pool. They will warm outreach to job seekers with whom they have existing relationships or do manual searching across job sites like LinkedIn to reach out to candidates at other companies.

Pre-screening

Once the staffing agency has generated the candidates’ interest and applications start rolling in, they can perform basic screening calls. Screening removes the administrative burden of reviewing thousands of resumes, scheduling calls, and discussing the job role with candidates. Pre-screening helps staffing agencies quickly sort through qualified and underqualified candidates, allowing them to push the best talent through the pipeline.

Interviews

After pre-screening, staffing agencies can reach out to qualified candidates who pass the pre-screening process. Your internal hiring managers can interview the most qualified individuals and introduce them to other team members and interviewers as needed. Depending on the interview process, candidates can have multiple round interviews with team members or perform homework assignments and assessments.

Selection

Once the candidate pool is narrowed to a handful of individuals, staffing agencies can support the selection process by providing invaluable advice, recommendations, and an unbiased third-party perspective.

Negotiate contracts and pay

After making the final selection, staffing agencies can negotiate contracts, benefits, and salaries. They can extend the offer on your business’s behalf and work closely with the candidate to find an offer that works for them.

How do staffing agencies charge?

Staffing agencies typically charge between 20% to 30% of the first-year salary of the placed candidate^[2]. For example, if a candidate is successfully placed within a company making $100,000 as their annual salary, the staffing agency might take a fee as high as $33,000. If your business is hiring for hourly roles, most staffing agencies charge between 25% and 100% of the hired employees’ hourly rate.

How to find a staffing agency

While there’s an abundance of high-quality, expert staffing agencies in the market, it’s important to find one that’s experienced in your industry, fits your budget, and has high-quality reviews.

Check staffing agencies’ reviews

Before you hire a staffing agency that works with businesses within your industry, you should closely read reviews from similar businesses. Pay attention to their experience and the value they gained from working with this staffing agency. Make sure to note any consistently-mentioned red flags within these reviews.

Look within your industry

A deep understanding of a specific industry is an invaluable aspect of a high-quality staffing partner. Look for staffing agencies that specialize within your specific field, as they may have the best candidate pool, increasing the chances of success in augmenting your internal team.

Align on budget

While a staffing agency is often cheaper than an in-house full-time recruiter, it’s important to have firm salary ranges for candidates so you can accurately project how much you’ll be paying in staffing fees. It’s best to get quotes from at least two to three agencies before you finalize one.

Hire top talent with staffing agencies

SMBs often lack the time and resources to hire qualified candidates. With a talented staffing agency, you can get the best-suited candidates for open positions in your business,  accelerate the time-to-hire, and save money in the process. Following the checklist mentioned above will help you avoid staffing agency scams and find the best candidates.