What Does a Staffing Agency Do? Complete Guide

A staffing agency is a third-party firm that finds, screens, and places workers into jobs for other companies. The agency recruits candidates, verifies their skills, negotiates pay, and either employs them on its own payroll as contractors or hands them off to the client as a direct hire. For the job seeker, the service is free. Employers pay. They pay either as a markup on the worker’s hourly wage, or as a flat percentage of the hire’s first-year salary, depending on whether it’s a contract role or a direct hire.

That is the snippet version. It is also about 15% of the real answer.

The rest lives in the small stuff. Who picks up the phone when a candidate ghosts on a Monday morning. Who eats the risk when a contractor no-shows on day three. Whether the 20% markup the client is paying feels like a bargain or a ripoff six months in. If you are a hiring manager considering whether to bring one in, or a job seeker trying to figure out what the recruiter on LinkedIn actually does all day, the mechanics are worth understanding from the inside.

I’m Gregg Flecke. I’ve been placing talent at KORE1 across IT, engineering, finance, and commercial roles for years, and the question in the title of this post is the one I answer more than any other. Bias disclosure up front: we benefit when you use a staffing agency. I have an obvious reason to pitch it. I’ll flag where that pitch stops being honest.

What a Staffing Agency Actually Does, Hour by Hour

Short answer: we find the right person and put them in the seat faster than your internal team can.

Longer answer is what you’re here for.

A client sends over a requisition. Could be a Python engineer in Orange County, a controller in Irvine, a mechanical engineer in San Diego, a forklift operator in Ontario. Doesn’t matter. The first hour is intake. What is this job actually doing. What has the client already tried. What is the real budget versus the posted budget. What went sideways with the last person in this chair. Most of that never appears on the job description. We ask anyway because we’ll waste three weeks if we don’t.

Then comes sourcing. Our team searches our internal candidate database first, which for KORE1 is roughly 30 years of relationships compounded. LinkedIn Recruiter second. Targeted outbound third. A typical technical search will generate 40 to 60 candidates in the first pass, of which maybe 8 to 12 are worth a phone call and 3 or 4 of those end up as polished submittals that actually land in front of the hiring manager. The 48 to 72 hour window between the req coming in and the first three resumes landing in the client’s inbox is the part that makes this work, and it’s the part the client usually didn’t realize they were paying for when they asked us to take over the search.

Screening is the part clients always underestimate. It is not a 10-minute call to confirm the candidate exists. It’s a 45-minute conversation about their last three roles, why they left, what they actually built versus what the bullet points claim, their compensation floor, their commute tolerance, their family situation as it pertains to relocation, whether they interview well, whether they’ll ghost a hiring manager, whether they pass a reference check with the one manager they don’t want us to call. We do all of that before the client ever sees the resume.

Then we coordinate. Scheduling interviews across a hiring manager, two team leads, an HR partner, and a candidate who is already interviewing at three other places is its own logistical puzzle. We prep the candidate on the hiring manager’s communication style. We prep the client on what this candidate needs to hear to say yes. We negotiate the offer, handle the counter-offer from their current employer, and when it’s a contract role, we put the person on our payroll with full W-2 benefits, workers’ comp, and employment tax handling.

All of that is what “staffing agency” means before any of the paperwork gets signed.

The Three Ways Staffing Agencies Place People

People call it all “staffing.” In practice, there are three very different arrangements, and the differences are not academic. They shift who employs the worker, who owns the risk, and how the fee gets paid.

Contract placements are the bulk of what the industry does. ASA’s 2024 data puts the U.S. staffing workforce at roughly 2.2 million temporary and contract workers per week. Over the full year, staffing companies placed 11 million people into jobs. Contract is what most people picture when they hear “temp agency.” About 57% of firms operate primarily in this space.

Direct hire is a different animal. The client hires the person outright, puts them on the client’s own payroll from day one, and pays the agency a placement fee. 20% of the first year’s base salary is the number I quote most often. Sometimes 18%. Sometimes 25% for a hard search with a compressed timeline. No benefits through us. No markup. Flat fee, paid once, usually with a 60 or 90 day replacement guarantee in case the hire washes out.

Contract-to-hire sits in the middle. It’s a contract for the first three to six months, then the client decides if they want to convert the person to direct employment. Risk-averse companies love it. Good candidates sometimes hate it because it delays the benefits package they’d get as a full employee. The conversion fee is negotiable and usually drops the longer the contract runs.

How Staffing Agencies Make Money (The Markup Math)

This is the question I get asked in interviews and in dinners with friends. How much are you actually paying the person when the client is paying $60 an hour for them.

Take a typical contract placement where the worker’s pay rate is $40 per hour and the bill rate charged to the client lands at $56 per hour. The spread is 40%. Not all of that 40% goes to agency profit. Most of it doesn’t. Out of that $16 spread, we pay the worker’s portion of FICA, federal and state unemployment insurance, workers’ compensation, general liability insurance, any benefits the worker elects through us (health, dental, 401k match), the recruiter’s commission, office overhead, and whatever’s left is the agency’s gross margin. That gross margin on a typical contract placement is 3 to 7 percent of the bill rate. Not 40.

Markups shift with the role. altLINE’s 2024 analysis puts the typical range at 25% to 71% depending on specialty and risk profile, with a 35% to 41% average for most clerical and light industrial work. Specialized technical roles climb higher because the recruiter hours per placement climb higher. A light industrial warehouse worker might take 4 hours of recruiter time to place, while a senior DevOps engineer with a specific cloud stack and security clearance history can easily burn 20 to 40 hours of sourcing, screening, and coordination across multiple candidates before one of them actually starts. The markup on the DevOps engineer reflects that gap in recruiter labor, not some arbitrary premium the agency decided to charge for the privilege of working in tech.

Direct hire fees follow a different logic. We invoice once, for one placement, and the entire fee has to cover all the searches where a candidate fell through, rejected the offer, or where the client changed the req three weeks in. A 20% fee on a $120,000 controller role is $24,000. Sounds steep until you price out the alternative: two months of a recruiter’s salary plus job board costs plus the hiring manager’s time, against whatever it costs the company to leave that seat open. The math usually works. Not always. I’ll get to when it doesn’t.

What Employers Actually Get

The generic answer is “time savings.” Which is true and also boring. Here’s what it actually means when you hire us for a real role.

Speed. A well-specified technical req with a reasonable budget gets three to five qualified resumes in the client’s inbox inside 72 hours, which is a number that’s close to impossible for a single internal recruiter who is also juggling four other open reqs, running two phone screens a day, and trying to keep the ATS tidy enough that the CHRO doesn’t ask hard questions in next Monday’s staff meeting. Our team doesn’t have competing priorities on this search. When a req hits, we sprint until it closes.

Access to the passive candidate pool. About two-thirds of qualified tech candidates are not actively applying to jobs at any given moment. They’re heads-down at their current company, responding to three or four recruiter messages a month, and they will only engage if the pitch is sharp and specific. Agencies spend years building those relationships. An internal recruiter at a 200-person company can’t. Not without a budget most companies don’t allocate.

Risk transfer on contract work. If a contractor no-shows on day four, if they fail drug testing, if they quit to take a different offer a month in, the agency eats that disruption. Not the client. The client stops paying the moment the worker stops working. We find a replacement, usually inside a week, and we absorb the cost of the transition.

Specialized reach. KORE1 has dedicated verticals for engineering staffing, accounting and finance, and IT and technical roles. When a client needs a biomedical mechanical engineer with 10 years of FDA-regulated device experience, we have a pipeline of five to ten people who fit that description. Nobody is posting “senior mechanical engineer, Class II medical devices, ISO 13485 experience” on Indeed and getting quality applicants back. They’re tapping someone who isn’t looking yet.

Local presence matters too. Our Orange County, Los Angeles, and San Diego offices each run their own candidate pool with regional knowledge of who is actually working where, which companies just laid off, and who is open to commuting to El Segundo on a Wednesday.

What Job Seekers Get

Free access. Always. No agency that’s been around more than a year charges candidates, and if one does, walk away from it without a second thought.

Past that, the value depends on where you are in your career.

If you’re early career, you get a foot in the door at companies that would have tossed your resume. Most of my contract-to-hire placements are candidates who had two or three red flags on paper that would have gotten them auto-rejected by the ATS before a human ever saw the file: a weird employment gap, a non-traditional background, a title at their last job that didn’t match what they were actually doing in the role. A recruiter can walk a hiring manager past those red flags in a 10-minute phone call. A resume filter cannot.

If you’re mid-career, you get market intel. I’ll tell you what you’re worth in today’s market, what companies are actually paying for your skill set right now, and whether the offer you just got is light. I have no reason to lowball you. The agency’s fee goes up when your salary goes up.

If you’re switching industries or stacks, you get a sandbox. ASA’s 2024 survey found that 64% of staffing employees cited bridging to a permanent role or filling a gap between jobs as the reason they worked through an agency. Contract roles let you try a new tech stack, a new vertical, or a new city without the 18-month minimum that a direct hire carries with it.

What you don’t get: a perfect match every time. I’ve put candidates into contracts that ended up being a terrible fit by week three. We pulled them out and put them somewhere better. That’s the job. It isn’t glamorous.

When You Probably Shouldn’t Use a Staffing Agency

Here’s where I stop pitching.

Low-skill, high-volume hiring where you already have inbound flow. If you’re hiring 40 warehouse workers a quarter, your Indeed spend plus an internal recruiter is going to beat our markup on pure math. We can help with the top of the funnel, but you’ll leave margin on the table unless volume climbs to a level where your team can’t keep up.

Roles where culture fit outweighs skill fit, and you have months. Some senior leadership roles need the hiring manager involved from the first conversation. An agency adds a layer between you and the candidate. For most roles that layer saves time. For a VP of engineering at a 15-person startup, it doesn’t.

Strong employer brand plus patient timeline. If your company shows up on every “best places to work” list, if you’re pulling 200 qualified applicants per posting, if you have six months to fill the seat, you might not need us. Use your inbound. Run a good process. Save the fee.

Heavy compliance roles where only the client can legally screen. Government contracting positions with clearance requirements, certain healthcare roles with credentialing timelines that only the hospital can manage. We can still help, but the value add is smaller because we can’t shortcut the parts that actually gate the hire.

Telling clients this loses us deals. We do it anyway because the alternative is six months of frustration and an invoice nobody wants to pay.

A Realistic Placement Timeline

Assuming a standard mid-level technical role, here is what the calendar usually looks like.

Contract roles compress the timeline. A contractor can often start inside five to seven business days because there’s no two-week notice to a current employer, no counter-offer drama, and no relocation package to negotiate before the first day on the new job.

Direct hire of a senior role can stretch the other way. Six to twelve weeks from intake to start date is not unusual when the candidate pool is thin or the client’s interview loop has six stages.

Things People Actually Ask Me

So what’s the real difference between a staffing agency and a recruiter?

A recruiter is a person. A staffing agency is a firm that usually employs multiple recruiters, runs back-office payroll and insurance for contractors, and has systems and relationships that a solo recruiter can’t replicate. Some independent recruiters operate like mini-agencies. Some agencies are just a shell around one good recruiter who happens to have a business card with a logo on it. The title on the LinkedIn profile is not the thing that tells you whether you’re working with a real operation or a one-person shop pretending to be bigger.

Does it cost me anything as a job seeker?

No. The employer pays the fee. If a firm asks you to pay for placement services, resume coaching, or “premium candidate status,” it is not a legitimate staffing agency. Full stop.

How much less am I making because the agency is taking a cut?

Wrong framing, slightly. The rate we quote you is the rate you make. The markup is paid by the client on top of what you’re earning. Your $40 an hour is $40 an hour. The client paying $56 is a client problem, not yours. What’s true is that a client with a tight budget may only be willing to spend $56 an hour total, which means if the markup is 40%, your pay gets squeezed to $40. So the markup does indirectly affect your offer, but it’s not a cut out of your paycheck.

Realistically, how long do contract assignments last?

All over the map. Short projects run three to six weeks. Most technical contracts run three to twelve months. Long-haul contractors at large enterprises can stay on a single contract for two or three years, renewed in six-month increments. Depends entirely on the client’s budget, the project scope, and whether they have headcount to convert you.

Can I get hired directly after a contract?

Happens every week. Contract-to-hire exists specifically for this scenario, and plenty of contractors get converted off straight contract roles when the client decides three months in that they want to keep the person permanently. The mechanics are straightforward in either case. Sometimes there’s a buyout fee the client pays; sometimes the fee is prorated based on how long you’ve already been on contract. Rarely does a client walk away from a candidate they want to keep over a conversion fee.

Why would a company pay a 20% fee instead of posting on LinkedIn?

Because the posting doesn’t work for the role, or doesn’t work fast enough. For commodity roles with a big active candidate pool, LinkedIn is fine. For senior technical roles, compliance-heavy roles, or anything where the qualified candidate pool is mostly passive, a job posting attracts the wrong 80% of applicants and wastes weeks of the hiring manager’s time. The 20% fee buys a curated shortlist in days instead of a flood of resumes in weeks.

Is going through an agency worse than getting hired directly?

It’s different, not worse. Contract pay is sometimes higher per hour because you’re absorbing benefits cost. Direct hire pay is usually steadier because it includes PTO, health insurance, and equity. What agency hiring buys you in both cases is a recruiter who actually knows the hiring manager, the real budget, and what the interview loop looks like. That information asymmetry is worth a lot when you’re weighing two offers.

So Does a Staffing Agency Make Sense for You?

If you’re hiring and the seat has been open more than 30 days, it’s worth a call. If you’re looking for work and you want someone in your corner who knows the local market, same answer. We don’t fit every situation, and I’d rather tell you that upfront than take a retainer we can’t earn out.

Talk to a recruiter on our team and let us know what you’re working on. We’ll tell you whether it’s a good fit, and if it isn’t, we’ll usually point you to whatever is.