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By Roy Rasmussen Updated on October 11, 2021

How a Staffing Agency Can Help Your Small Business

What is a staffing agency, how can it help your business and how does it work? Here’s what you need to know when using one. We’ll cover:

  • What a staffing agency is
  • Why companies use them
  • How staffing agencies work
  • How to decide whether you need one
  • How to work with a staffing agency

What Is a Staffing Agency?

A staffing agency—or an employment agency or recruiting agency, are companies that specialize in helping employers find qualified employees. In return for a fee, the agency helps clients locate, screen and hire workers.

Staffing agencies come in various forms. Typically, the term “staffing agency” refers to companies that help companies hire temporary workers, who may or may not eventually be hired full-time. The term “recruitment agency” refers more specifically to companies that find full-time workers.

Some recruitment agencies specialize in recruiting executives. This type of agency is often called an executive search firm or headhunter firm. Staffing and recruitment agencies might also specialize in particular industries or particular types of workers, such as seasonal workers.

A hiring manager shakes hands with a job candidate as they accept the person's resume.

What are the Benefits of Using Staffing Agencies?

The benefits of using a recruiter or staffing agency can be numerous for companies and human resource departments. The advantages of going through a staffing agency can include:

  • Lowering payroll costs
  • Speeding up recruitment
  • Saving time and labor
  • Tapping into a larger talent pool
  • Prescreening workers
  • Streamlining the onboarding process
  • Testing workers before hiring permanently

Lowering Payroll Costs

Companies often use staffing agencies to decrease payroll costs by reducing the cost of benefits, such as health insurance or retirement plans. A temporary employee hired through a staffing agency probably doesn’t receive the same benefits as a regular employee hired directly by an employer.

However, employers should be aware that under the Affordable Care Act, the rules governing who is responsible for the costs of health care coverage for temporary workers can be complex. In general, staffing agencies—rather than their clients—must assume the cost of benefits for temporary employees. But this can vary depending on whether the IRS recognizes the staffing agency or their client as the worker’s actual employer. Employers should have their legal teams carefully review applicable laws and contracts to understand their obligations when using staffing agencies.

Speeding up Recruitment

Talent recruitment can be a lengthy process. When companies have what is a pressing need to quickly fill positions, using a staffing agency can speed up things. Staffing agencies already have access to qualified workers and can rapidly supply them.

Saving Time and Labor

Even when a company is not in a time crunch to fill positions, using a staffing agency can still save the time and labor the human resources department would need to deploy to recruit workers. This makes staffing agencies an expedient solution for some companies.

Tapping into a Larger Talent Pool

Staffing agencies have pre-existing access to a larger talent pool than a company just starting a talent search. This increases the odds of finding a worker with the right qualifications.

Prescreening Workers

Staffing agencies typically take steps to prescreen workers for employers. These steps can include administering tests to verify worker skill sets. For instance, an agency supplying data entry workers might require workers to take a test to measure typing speed. This can increase employers’ confidence in worker qualifications. Additionally, staffing agencies might perform drug testing on workers for employers.

Streamlining the Onboarding Process

Staffing agencies that partner with employers regularly can initiate employee orientation by providing services such as mentorship, tours and tutorials. This can help employers speed up the onboarding process for new workers.

Testing Workers Before Hiring Permanently

Hiring employees through a temporary agency gives employers a chance to evaluate workers during a trial period before hiring them for a permanent position. Ensuring an employee is a good fit for a role can reduce turnover rates.

A group of new employees stand in a conference room and take notes while a female colleague speaks.

How Do Staffing Agencies Work?

Staffing agencies assist both workers and businesses. They help workers find employers who are looking to hire temporary or seasonal employees, making it easier for them to locate opportunities and land positions. By the same token, they help businesses find qualified workers in a quicker and more cost-effective process.

How Staffing Agencies Recruit Workers

Staffing agencies recruit workers using the same tactics that employers do, such as placing want ads and advertising online. When workers come to them, they review their resumes and conduct interviews. They could also provide workers with assistance in improving their resumes or skill sets. Through these methods, staffing agencies build pools of talent.

How Staffing Agencies Work with Businesses

Staffing agencies actively look for businesses that need workers in their talent pool. Businesses also come to staffing agencies looking for workers. If a company is satisfied with the workers who come to them from a staffing agency, they may develop an ongoing relationship with the agency, regularly hiring their workers.

When a company works with a staffing agency, they begin the process by putting in a request for workers. They provide information such as:

  • What type of workers they need
  • What qualifications they’re seeking
  • How many workers they need
  • How long they need them for
  • What pay rate they’re offering

The staffing agency then reviews its talent pool to find available workers who meet the required qualifications. They might test candidates at the request of the client. If the worker qualifies, the agency then places them in a position with the client’s company.

At this point, the client company takes over supervision of the worker’s job activity, while the staffing agency continues to act as the worker’s actual employer for tax purposes. The client company pays the agency, and the agency in turn handles the payroll process, paying the worker as well as handling tax payments.

In many cases, the staffing agency offers the client an opportunity to hire the worker permanently after a trial period, in exchange for a fee. If the client fires a worker, the agency might choose to place them with another client, or they may choose not to work with them again, at their discretion.

Should I Work with a Staffing Agency?

There are several scenarios where using a staffing agency would help your business’s operations:

  • You need to cut payroll costs
  • You need to fill positions quickly
  • You need to fill seasonal positions
  • You need to temporarily fill a position, such as covering for an employee on maternity leave
  • You’ve been trying to fill a position a long time and you’re having trouble finding qualified candidates
  • You want to evaluate workers on a trial basis before making a permanent hire
  • You have high turnover and you want to avoid excessive unemployment claims and costs

If any of these fit your situation, consider using a staffing agency.

Job candidates sit in a row of chairs as they submit their resumes to a woman who works at the company.

How to Work with a Staffing Agency

If you choose to work with a staffing agency, following a few best practices can help make your relationship with your agency more successful. Some of the key steps include:

  • Doing a cost-benefit analysis
  • Working with specialized agencies
  • Clearly communicating your staffing needs
  • Developing an onboarding process for temporary workers

Do a Cost-Benefit Analysis

While using a staffing agency often saves money, you will pay a fee for their services. To make sure this additional fee is worth your investment, you should do a cost-benefit analysis comparing the long-term costs of working with an agency versus the costs of doing your own recruitment. You should consider both direct financial costs and the indirect costs of the time and labor spent on doing your own recruitment. If you decide the cost of working with an agency is worthwhile but you need some capital to cover the costs of working with an agency, consider looking into financing such as a small business loan.

Work with Specialized Agencies

Many agencies specialize in placing workers in a particular geographic area. Others specialize in particular industries or types of workers. Working with a specialty agency can improve your odds of quickly finding qualified workers who meet your needs.

Clearly Communicate Your Staffing Needs

The success of your relationship with your staffing agency depends on clear communication. Make sure your agency’s contact person has an exact description of the type of worker and qualifications you’re seeking. If you feel the candidates they provide are not meeting your needs, express your concerns to your agency’s representative so they can find a better match for your business.

Develop an Onboarding Process for Temporary Workers

Temporary workers need to be trained just as permanent employees do. Having an onboarding process in place for temporary workers can help streamline this process. Assigning mentors to temporary workers, introducing them to your staff and developing training procedures for them can help ensure they make a productive contribution to your team.

Roy is a respected, published author on topics including business coaching, small business management and business automation as well as an expert business plan writer and strategist.
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