How much do staffing agencies charge? It depends on how you hire. A staffing agency is paid in one of three ways: a one-time fee when you hire someone permanently, a markup on every hour a temporary or contract worker works, or a program fee when the agency runs part of your recruiting for you. The ranges below are typical across the industry. Actual pricing varies with the role, the market and how scarce the skills are.
Direct-hire placement fees
When an agency finds you a permanent employee, you pay a one-time fee, usually a percentage of the hire’s first-year base salary. Fees commonly fall somewhere around 15% to 25%, and run higher for executive, specialised or hard-to-fill roles.
Worked example: a $90,000 role at a 20% fee costs $18,000, typically invoiced once the person starts. Most direct-hire work is contingent: you pay only if you hire someone the agency presented. Retained searches, used mainly for senior roles, are paid partly up front.
Ask about the guarantee period. If the hire leaves or is let go within an agreed window, many agencies replace them at no extra fee or refund part of the fee. The length and terms vary, so get them in writing.
Temp and contract markups
For temporary and contract workers, the agency employs the worker and bills you an hourly bill rate. The bill rate is the worker’s pay rate plus a markup. The markup is not all profit: it has to cover the employer’s payroll taxes, workers’ compensation, unemployment insurance, any benefits, payroll processing, recruiting cost and the agency’s margin.
Worked example: a worker paid $25 an hour at a 50% markup bills at $37.50 an hour. Markups vary widely by industry and skill level; light industrial work usually carries a lower markup than specialised IT or healthcare roles, where recruiting is harder and pay rates are higher.
When you compare quotes, compare bill rates for the same pay rate, and ask what the markup includes. A low markup that excludes overtime, benefits or workers’ comp is not cheaper.
Temp-to-hire conversion fees
Contract-to-hire lets you work with someone before hiring them permanently. If you hire them before an agreed number of hours or weeks, most agreements charge a conversion fee, often reduced the longer the worker has been with you and sometimes waived entirely after a set period. Check the conversion terms before the first day, not when you want to make the offer.
RPO pricing
In recruitment process outsourcing (RPO) the agency runs all or part of your recruiting function. Pricing is usually one of:
- A monthly management fee for a dedicated recruiting team or capacity;
- A fee per hire, usually well below a contingent placement fee because volume is committed;
- A hybrid of a lower monthly fee plus a per-hire fee.
RPO tends to cost less per hire than contingent placements when you have steady, repeat hiring. For one or two hires a year, direct hire is usually simpler.
Which model fits your hire
- One permanent role you need filled well: direct hire.
- Seasonal peaks, projects or uncertain headcount: temp or contract.
- You want to try before you commit: contract-to-hire.
- Many hires a year, or recruiting is a bottleneck: RPO.
Questions to ask any agency before you sign
- Is the fee calculated on base salary only, or on total compensation?
- When is the fee invoiced, and on what payment terms?
- What is the guarantee, and is it a replacement, a refund or both?
- For temp and contract work, what exactly does the markup cover?
- What are the conversion terms if we hire a contractor permanently?
- Is the agreement exclusive, and for how long?
For the other side of the table, see how staffing agencies make money, which explains where the markup and the placement fee actually go. To see the hiring services Scylla Solutions offers, visit our solutions.