How Much Do Staffing Agencies Charge?

How Much Do Staffing Agencies Charge?

How Much Do Staffing Agencies Charge?

Depending on the business model of the staffing agency, they typically charge anywhere from 15% to 30% of first-year base salary for direct-hire employee placements or a markup of 40% to 45% over the hourly rate of a contractor. Direct hire fees vary according to the difficulty to find and the lead-time to complete a successful placement. Contractor markups vary depending on the length of the contractor assignment.

How much do staffing agencies charge for direct hires?

A staffing agency fee is what an agency charges for successfully placing a candidate in a permanent full-time position with a client company. Fees are almost always a percentage of the employee’s first-year base salary. Common fees range from 15-30% depending on the type of position being filled.

For example, if a staffing agency places a candidate who agrees to an annual salary of $100,000, and the agency’s agreed fee is 20%, the invoice to the client company for successful placement would be $20,000.

How much markup do staffing agencies charge?

A staffing agency markup depends on the length of the contractor’s assignment. For example, if the contractor is with the company for only a few months, then the staffing agency markup will likely be around 45% over the hourly rate paid to the contractor. However, if the length of the assignment is longer, say 6 months or 12 months, the staffing agency will likely charge a lower markup because the agency tends to earn enough to make up the lower markup.

What Impacts a Staffing Agency’s Fees?

There are several factors that influence how much a staffing agency will charge in fees for placing a candidate. These include:

  • Type of position – More specialized or higher-level roles typically command higher fees. For example, a staffing agency will likely charge a higher percentage for placing a highly specialized engineer or executive than they would for a manufacturing technician or administrative assistant.
  • Difficulty to source candidates – If there is a very small talent pool for a specific and highly specialized role, it will likely be more difficult for the staffing agency to find viable candidates. Greater effort equates to higher fees.
  • Existing pipeline of candidates – If a staffing agency already has qualified resumes on file for a position, it takes less effort to place someone. This allows them to charge a lower fee.
  • Established partnership – Once a company has demonstrated an ongoing need for staffing and recruiting services, an agency may offer reduced rates compared to those for a first-time client. This is because of the anticipation of more future business.

Common Staffing Agency Fee Structures

While fees are positioned as a percentage of salary, the actual percentage charged depends on the factors noted above. Here are some typical staffing agency fee ranges:

  • Technician and Skilled Support Roles: 15-20%

Staffing agencies typically place manufacturing technicians, quality inspectors, warehouse staff, drivers and other skilled support roles for 15-20% of first-year salary. These positions require less effort to source candidates.

  • Professional and Managerial Roles: 20-25%

Roles like accountants, engineers, IT specialists, marketing managers and more specialized professionals often command a 20-25% fee. There is a smaller pool of mid-level candidates, so additional sourcing efforts justify the slightly higher price.

  • Executive and Highly Specialized Roles: 25-30%

For highly experienced leadership talent like CEOs, CFOs, COOs and other executives, agencies charge between 25-30%. The very limited talent pool for these niche, high-impact roles requires substantial search efforts.

When Do Staffing Agencies Charge Deposits?

In some cases, staffing agencies will charge an upfront deposit when a client engages them to begin searching for candidates. Reasons agencies may request deposits include:

  • Insufficient Client History – For new client relationships or clients with limited staffing needs in the past, an agency may mitigate risk by asking for a deposit upfront. This deposit is credited back once they successfully place the position(s).
  • At Capacity and Balancing Workloads – Well-established agencies at max capacity may request deposits to ensure they can allot dedication and resources across their book of business. Deposits allow them to balance workloads appropriately.
  • Very Specialized Searches – If an organization requires candidates for a highly niche role only a few people would be qualified for, agencies may charge a deposit due to the very limited candidate pool and effort required.
  • High Rick Groups – There are times when an agency may have a feeling a deposit is best required to mitigate risk with a new company. For example, when working with a start-up, an agency may ask for a deposit just in case the company later declares bankruptcy. Another example, an agency may ask for a deposit when they hear in the news that the company is or may file for bankruptcy.

Typical deposit amounts range from $1,000 to $5,000 per search, depending on the staffing agency. Once an agency has developed an established business relationship and trust with an organization, deposits often become unnecessary.

Key Considerations When Evaluating Staffing Agency Fees

With the typical agency fees explained, what should companies consider when assessing the reasonability of fees? Key considerations include:

  • Industry and Location – Fees vary across industries, job levels and geographic regions. Research average costs for your needs before setting expectations.
  • Specialization – Staffing agencies focused explicitly on your function (e.g. IT, healthcare) often provide better candidates but charge higher premiums.
  • Candidate Quality – Prioritize agencies delivering high-caliber, reliable talent over the lowest cost. It takes considerable investment to source and screen good candidates.
  • Recruiting Infrastructure – Large agencies with extensive recruiting expertise and candidate pipelines often justify slightly higher fees based on resource requirements.
  • References – Talk to other clients about their experiences. Quality agencies earn fees by ensuring excellent candidate fit and customer satisfaction.

Conclusion: Understanding Staffing Agency Fee Structures

In summary, staffing agencies provide invaluable recruitment services to both candidate and client organizations. They charge reasonable percentage-based fees correlated to factors like job type, level of difficulty sourcing talent and business relationships. While their services come at a cost, the right agency placement results in substantial long term value.