The Broken Business Model of Staffing Agencies

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Every day, staffing companies of all sizes give away one of their most important services for free — their expertise in recruiting. 

The hard work of sourcing, screening, and evaluating talent for contingent roles is why clients work with staffing firms. And yet these same firms do not actually make any money on these recruitment practices.

So when do they make money? When their candidates are actually hired by clients. Except, by that point, the service they are now providing clients is not recruiting people but employing them on behalf of their clients. 

Treating Workers as Commodities

More specifically, here’s how this pricing model currently works: Clients pay an hourly bill rate that is calculated as a markup on the talent’s hourly pay rate. This markup covers not only worker pay but also employer taxes, worker benefits, overhead costs, and profit. Since the bill rate doesn’t change based on whether workers are on assignment for a day or a year, the notion of what a client actually pays for recruiting is highly imprecise and lacks transparency for the client (or even the staffing company).

The funny thing about paying only for employing people is that most staffing companies are notoriously bad employers — because our industry views recruiting as our primary function and the main value we provide. There’s often little investment of time and energy in the people we place as true employees.

Though these workers are technically temporary staffing employees, they often work at a single client for a year, two years, sometimes even longer (which looks awfully similar to a “permanent” job on the client-side). But unlike how clients treat their own employees, many staffing companies don’t typically work on engaging, nurturing, and developing talent since they typically view these workers as commodities.

Doing Better With Benefits

Many staffing firms provide bare-bones benefits to the talent that they place. They focus simply on legal compliance rather than going above and beyond. But if they actually spent more on talent benefits — for things like high-quality medical insurance, paid sick leave and time off, and good retirement plans — they’d earn it back in spades…

Source: ERE

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