Recruiting Agency vs. Staffing Agency: What's the Difference?

Choosing the right type of agency can fuel growth and meet diverse business needs.

Every business, big or small, hinges on attracting and keeping the right talent—a game-changer for future success. However, the recruiting process can be time-consuming and challenging, especially for small and midsize business owners who have to juggle many responsibilities.

To ease this burden, many turn to outside hiring assistance in the form of staffing agencies or recruiting agencies. The question becomes: should you turn to a recruiting agency or staffing agency? What are the key differences between the two, and how do you determine which one is best suited to address your specific hiring needs?

Understanding the nuances between recruiting and staffing agencies is key to empowering informed decisions, enhancing your talent acquisition strategy, and shaping the future of your business.

What is a staffing agency?

Staffing agencies, also known as employment agencies, help businesses find skilled workers on a temporary or contract basis. They maintain a pool of pre-screened candidates across various industries and job functions, making it easier for companies to find qualified talent quickly.

When an unexpected vacancy arises or a new project kicks off, businesses—particularly in fast-paced sectors like healthcare, tech, or retail—often find themselves needing skilled professionals, and fast. This is where the nimble nature of contract or temporary roles shines, filling gaps without the commitment of a full-time hire. These roles are a perfect fit for professionals seeking flexibility due to education commitments or unique life circumstances. Enter staffing agencies: they're the matchmakers in this scenario, adept at aligning companies with a ready pool of talent for these short-term or project-based needs.

People looking for contract work can register with staffing agencies and create profiles that include their education details, professional experience, and skill sets. The staffing agency then vets and interviews these candidates before they are presented to companies. When a company is looking for a temporary worker, the staffing agency can then provide a list of pre-qualified candidates that fit the role.

The most common pricing model for staffing agencies is the time and materials model. They bill their clients for the actual number of hours worked by temporary employees, as well as the cost of any materials used.

Pros and cons of using a staffing agency

Staffing agencies take care of the recruiting, screening, and payroll for temporary employees. Some of the benefits of their services include:

• Flexibility in scaling up and down: Staffing agencies allow SMBs to rapidly increase staff for seasonal sales, busy periods, or new projects without taking on permanent hires. When the need winds down, temporary and contract workers can be released.

• Access to specialized skills: Staffing agencies enable SMBs to tap into skills they may lack in-house, like technical expertise for a software rollout.

• Reduced hiring risks: Trying out temp workers allows SMBs to evaluate fit before making permanent job offers.

• Cost-efficiency: SMBs avoid overhead costs like benefits and HR management for temporary staff.

But there are also some downsides to staffing agencies to consider:

• Temporary nature: Frequent turnover from temp workers can disrupt operations and productivity.

• Less employee loyalty: Temporary workers can be less invested in the company culture and mission.

• Higher hourly wages: Hourly pay for staffing agency talent is usually higher than salaried employees.

Tips on working with a staffing agency

If your SMB decides a staffing agency makes sense for your hiring needs, here are some tips for a fruitful partnership:

• Clearly explain the job specifics, required skills, and work duration. The more precise you are, the better the match.

• Vet multiple staffing agencies to compare services, experience, and candidate pools.

• Develop strong relationships with your agency contacts. Communication is key to finding the right candidates.

• Onboard and manage temporary staff thoughtfully to integrate them into your workflows.

• Convert strong temporary and contract workers to permanent hires for key roles if they are a fit.

What is a recruiting agency?

While staffing agencies focus on finding businesses temporary and contract workers, recruiting agencies, often called headhunters or executive search firms, specialize in finding companies permanent, full-time employees. These are often higher-level or highly skilled employees who can add long-term value, and might be hard for these companies to find on their own.

Recruiters turn to industry publications, professional websites, and job platforms like LinkedIn to identify qualified candidates that match open roles. They can filter candidate profiles on sites like these by industry, experience level, skills, or other attributes to streamline their search.

Many recruiters also directly engage and build professional relationships with potential candidates by posting openings on job boards and social platforms. Although these are not direct company job listings, recruiters typically request standard job application materials like resumes, cover letters, and work samples to evaluate candidates.

For any job opening, there could be a large pool of potential candidates, and recruiters help narrow this pool down to find the best fit. They examine resumes, cover letters, and portfolios and conduct the initial screening interviews to filter applicants. The most promising candidates advance through one or two rounds of interviews with the recruiter, which may include skill or personality tests, and are passed along to the employer for final consideration.

Recruitment agencies use different pricing models than staffing agencies, either charging a flat placement fee or a percentage of the hired candidate's annual salary rather than an hourly billable model.

Pros and cons of using a recruiting agency

Recruiting agencies allow SMBs to find experienced, specialized talent even in tight labor markets. Benefits of using a recruiting agency include:

• Deep industry connections: Recruiters have strong professional networks and relationships they leverage to find candidates.

• Specificity: Recruiters can pinpoint precise skills, experience levels, and competencies needed.

• Better quality hires: Recruiters thoroughly vet candidates for cultural fit and long-term retention.

However, there are also some drawbacks to recruiting agencies that should be considered:

• Higher costs: Recruiter fees are usually 20-30% of the placed candidate's first-year salary.

• Lengthier process: Permanent hiring takes more time than temporary solutions.

• Less control: SMBs rely heavily on the recruiter's judgment and networks.

Tips on working with a recruiting agency

Follow these tips to ensure that your partnership with a recruiting agency is a successful one:

• Clearly outline the role requirements, must-have skills, company culture, and salary range.

• Maintain frequent communications on expectations, progress, and feedback.

• Leverage the recruiter's expertise but stay involved in interviews and evaluations.

• Don't rely too heavily on a single recruiting agency. Diversify your options.

• Focus the recruiter's search on hard-to-fill roles where their networks offer advantages.

• Be ready to act quickly when presented with strong candidates in high demand.

Recruiting agency vs. staffing agency

Now that we've explored recruiting agencies and staffing agencies independently, how do you decide which type of service makes the most sense for your hiring needs? Here is an overview of the major differences:

When to use a recruiting agency

If you seek highly skilled, specialized talent for permanent roles that are difficult to fill in-house, a recruiting agency may be the better choice. The right hire justifies the higher investment.

When to use a staffing agency

If you need to rapidly scale or trial new hires for short-term projects or seasonal swings, the flexibility of a staffing agency makes sense. You pay only for labor as needed.

Embracing the right agency partnership

This guide has examined the strengths, limitations, and optimal applications of both staffing agencies and recruiting agencies, providing SMBs with a clear framework for identifying the right partner for their specific requirements. Either one of these types of agencies can help SMBs streamline their recruiting and hiring process, but each has its own strengths:

• Staffing agencies: Ideal for temporary or contract staffing needs, providing quick access to specialized skills and flexibility in workforce management.

• Recruiting agencies: Strategically focused on identifying and placing top talent for permanent, full-time positions, ensuring long-term cultural fit and alignment with business objectives.