You’ve got a position to fill (or maybe multiple) and you’re weighing up if working with a staffing agency is worth it.
It’ll take a HUGE task off your plate and, like most businesses, the sudden demand in your business has caught you off guard.
But will working with a staffing agency cost you more than managing recruitment yourself?
The straightforward answer:
Hiring temps? You’ll pay a 25% - 75% markup on the hourly wage.
Filling a permanent position? You’ll pay a one-time fee of 15 - 25% of the annual salary.
But like any answer in business, it’s not as simple as it looks.
In this article, we’ll break down the costs of what’s included (and not) when working with a staffing agency and what affects the price.
Already working with a staffing agency? Use the tool we share at the very end of this article to find out if you’re being ripped off!
Staffing agency fees aren’t just random markups - they cover a variety of services that save businesses time and effort.
Imagine how long (and the cost) it would take an internal employee to do the following:
This is before considering standard costs of running a business, like their own staff’s wages, office rent, and stationary.
Use the fees below to calculate if hiring an HR department (or doing it yourself) is cheaper than using a recruitment agency.
As mentioned in the introduction, staffing agencies use different pricing structures depending on the type of worker and contract.
For temporary workers, agencies typically charge a markup on the worker’s hourly rate.
This percentage can range from 25% to 75% and covers the agency’s services.
For example, if a worker’s hourly wage is £10, the agency might charge the business between £12.50 and £17.50 per hour.
Each agency will have its own formula, but hiring 1x specialist on a temporary basis will cost you more than hiring 50x forklift drivers at Christmas time (based on a per worker fee).
When filling permanent positions, agencies often charge a one-time flat fee.
This is usually calculated as 15% to 25% of the new hire’s annual salary.
For instance, hiring someone with a £40,000 salary could cost the business between £6,000 and £10,000 in fees.
For specialised or senior roles, agencies may request a retainer fee upfront.
This fee often covers an extensive search and is typically split into stages, such as one payment at the start and another upon successful placement.
Every business wants to reduce their costs without impacting quality. When it comes to recruitment, there are a few factors that affect the fee. Use these when planning long-term to get the best price (and not to be caught off guard!).
In a competitive job market, agencies may increase fees due to heightened demand for skilled workers.
Limited availability of qualified candidates also drives up costs, as agencies invest more in sourcing and recruiting efforts.
It’s why hourly rates of bar staff, warehouse workers, and delivery drivers always increase around Christmas and other festive periods.
If there’s a recession, what happens to staffing agency costs for Logistics & Construction?
Your hiring requirements influence staffing agency fees as well.
If you’re hiring pickers and packers, who need no experience, your fees aren’t going to be extortionate. Most likely, the staffing agency has a huge database full of keen pickers and packers ready to start tomorrow.
But, if you need a Logistic Coordinator with years of experience in a specific WMS, then the agency may need to go and source candidates outside their existing pool. Expect your fees to be higher for specialist roles - Especially if you need them on a temporary basis.
Planning on hiring 50+ employees in one go? You may get a negotiated rate - especially if it’s for the same role.
As the agency saves time on certain tasks (for example, they don’t need to create a job description for every available position), they pass these savings on to you.
Generalist recruitment agencies offer something for everyone. But often than not, your industry-specific requirements come at a cost.
For example, if you require background checks or skills assessments in a niche area, not every agency will include that in their pricing.
Industry-specialist staffing agencies know exactly what you need for each role. They’re repeating the same process for your competitors around the world.
So (you’d like to think), when you request a quote, they’ll cover everything that you need.
Always do your due diligence to prevent any cost or compliance surprises. We’ve found specialist recruitment agencies are normally cheaper overall.
If you want to compare only the financials, use this formula:
( (Hours for internal staff to hire) * (Hourly Rate for internal staff) ) - (Staffing Agency Fee)
Here’s a step by step guide:
If the final answer is positive (above 0), it’s cheaper to use a Staffing Agency.
If the final answer is negative (below 0), it’s better to hire using internal staff. Even in this case, I’d still ask:
Is paying the difference worth it for me, my staff, and business?
99.9% of the time, it is.
Whether you’re already working with a recruitment agency or just starting to get quotes in - we’ve created this Spend Checker tool for you.
In just 15 seconds, you’ll see how much you’re overspending (or will be) each year with your current agency compared to working with Tempo.