StaffingCategory 01 of 10

Temp / Contract Staffing

Definition

A temp staffing agency hires workers onto its own payroll and sends them to client sites by the hour or shift: warehouses, light industrial, admin desks, events, seasonal retail. The client directs the work while the agency carries payroll taxes, workers comp, and unemployment claims. Companies use them for surge demand, absences, and try-before-you-hire.

15,000 to 20,000

US entities

35 to 60 percent

Typical bill markup

1 to 5 days

Time to fill

We estimate 15,000 to 20,000 US entities in this category. Directional estimate, not a census figure.

How they make money

The core model is a markup on the wage. If the worker earns 18 dollars an hour, the agency bills the client somewhere between 35 and 60 percent above that, and the spread has to cover payroll taxes, workers comp premiums, unemployment insurance, any benefits, recruiting, and margin. Net margins in temp staffing are thin, usually single digits, which is why volume and worker retention matter so much to these firms.

Temp-to-hire is the second revenue line. Most agencies let you convert a worker to your own payroll free after a set number of hours worked, often a few months of full-time shifts, and charge a prorated conversion fee if you hire earlier. Invoicing is weekly, matched to payroll, so an agency is effectively financing your labor for the gap between paying its workers and collecting from you.

What good ones have in common

A written markup, not just a bill rate. Good agencies show the pay rate and the markup as separate lines. When you can see what the worker earns, you can judge whether the rate will actually attract people who show up.

A show rate they will quote. Fill rate tells you whether orders get covered. Show rate tells you whether the person arrives on day one. Strong firms track both and will share them without being asked twice.

Safety questions before the first placement. Injuries land on the agency's workers comp policy, so a serious firm inspects or at least interviews you about the site, required protective equipment, and training before sending anyone.

A four-hour guarantee. The standard in this category: if a worker is wrong for the job and you flag it within the first few hours, you do not pay for the shift and a replacement is queued.

Real compliance infrastructure. I-9 verification, E-Verify where required, ACA hours tracking, and correct state registrations. One misclassified crew can cost you more than a year of markups.

Red flags

Workers paid as 1099 contractors. Temp workers directed by you on your site are employees. An agency running them as contractors is dodging payroll taxes and workers comp, and the liability can flow to you.

A conversion fee that never expires. The norm is a fee that phases out with hours worked. A contract demanding a full placement fee no matter how long the temp has been on your floor is a trap.

No certificate of insurance on request. If they hesitate to prove workers comp and liability coverage, assume the coverage is thin or lapsed, and walk.

Warm-body dispatch. If every order is filled instantly with no screening questions, you are getting whoever answered the phone, and the no-shows will cost more than the speed saved.

How the category is changing

Shift-work apps have turned commodity roles into a marketplace: warehouse and hospitality shifts increasingly get filled through platforms where workers claim shifts on a phone, which compresses markups at the low end. Traditional agencies are responding by moving up, into on-site programs where a coordinator manages a large temp workforce inside one client, and into specialty niches where vetting still matters.

On the labor side, daily pay has become table stakes, because workers pick the agency that pays fastest. Wage transparency laws in a growing list of states now require pay ranges in postings, which pushes agencies toward the openness the good ones already practiced. Demand stays cyclical, but the try-before-you-hire motive keeps a floor under this business even in slow years.

Frequently asked questions

How much does a temp agency charge?

You pay a bill rate that is typically 35 to 60 percent above the worker's wage. On an 18 dollar wage, expect roughly 24 to 29 dollars per hour billed. The spread covers taxes, insurance, recruiting, and margin.

Who is the employer of a temp worker?

The agency. It runs payroll, withholds taxes, carries workers comp, and handles unemployment claims. You direct the day-to-day work. That split is the main reason companies use temp staffing at all.

Can I hire a temp worker permanently?

Yes. Most contracts convert the worker to your payroll free after a set number of hours, commonly a few months of full-time work, or for a prorated conversion fee if you hire sooner.

What happens if a temp does not show up?

A good agency replaces the worker the same day or next shift and does not bill you for hours not worked. Ask about the guarantee before signing, because practices vary widely.

Is temp staffing more expensive than hiring directly?

Per hour, yes. All-in, often not. You avoid recruiting cost, payroll administration, benefits, unemployment exposure, and the cost of a bad permanent hire. For steady year-round work, direct hiring usually wins; for variable demand, temps do.

What kinds of jobs do temp agencies fill?

Light industrial and warehouse work is the largest slice, followed by administrative and clerical roles, events, hospitality, and seasonal retail. Specialized temp firms also cover accounting, customer service, and skilled trades, usually at higher markups.

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Temp agencies live on volume, so they market themselves as aggressively as their clients do, buying growth from marketing agencies while competing with every other firm in the wider world of staffing agencies for the same workers.