How Do Temp Agencies Work?

How Do Temp Agencies Work?


Temp agencies work by connecting temporary employees to companies and individuals. However, temp agencies operate under various legal jurisdictions and work conditions in different states. Some agencies are registered as businesses, while others are classified as independent contractors who pay their taxes.

Moreover, the following article will explain how temp agencies work.

Table Of Contents:

Basics Of Temp Agencies

Temp agencies generally match employees to job openings and temporary jobs, but the process differs from state to state. However, the employee needs to know that some agencies may require a background check before being matched with a company.

In most states, once a company selects an employee, the agency is responsible for paying for the transportation costs of getting them to work. However, general aspects of temp agencies that the employee should know are

  • Housing

  • For those relocating from one city to another for work purposes, a temp agency may offer temporary housing in exchange for some money or services. For instance, the company may ask the agency to provide temporary housing for their employees in a hotel or airport. However, this is usually not an option for employees moving within the same city. 

  • Commissions  

  • Since temp agencies are profit-driven and depend on their sales to operate, some offer commission payouts to motivate their employees. Commissions can be calculated either as a percentage of their deals or a flat amount per customer. 

    However, some agencies allow their employees to collect commission only after they have earned it.

    Working Of Temp Agencies

    The working of temp agencies is not a complicated process at all. Rather, it is pretty simple. To understand how it works, it is essential to learn what a temp agency does. It matches employees with company openings and helps them find the correct temporary positions for their skill set. 

    Consequentially the operations may differ from one state to another, but the following are general steps of how a temp agency works:

    1. To start, let's assume that an agency is getting ready to complete an assignment for a client. The first thing that the temp agency must do is establish their business with the client. They should provide the necessary information about their company and how it works to gain their clients' trust. 
    2. Next, they will have to create a database of registered employees through their website or offices as available for work. The temp workers who have registered with the agency are considered their employees, and they are required to pay taxes. 
    3. Moving forward, the next step is to search for the right employee that would be able to complete the assignment. If there are many applicants in a specific area, the agency needs to check their client's needs and requirements before zeroing down on a few potential applicants. Employers usually prefer to hire employees who will meet their needs the best. 
    4. After discovering a suitable person, the next thing will be to contact them to schedule an interview, preferably one over the phone. At this stage, they must ask questions to find out more details of the temp job required to do. 
    5. Furthermore, the agency will get back to their client and provide them with candidates who meet their requirements. To choose an employee, the client must compare their skills and experience with others to select a suitable one. 
    6. Once they have done that, the client will have to agree on a commission rate for the agencies based on the salary and other short-term or long-term contracts that they set for their employees. In addition, a specific commission will be paid to the temp agency for every employee selected by the client to complete the assignment. This figure is usually a bonus payment to the temp agency and its employees. 
    7. Afterward, the agency will provide all necessary training required to acclimate to the new work environment. Also, they must make sure that the employee understands how to complete their job tasks. 
    8. Finally, after these procedures are completed, the agency will send their employee to begin working with their client. Once they have done that, they will be paid every week by their client and not by their agency.

    How Does A Temp Agency Make Money?

    The primary purpose of a temp agency is to put skilled employees available for work on the market. They will do this by recruiting from various sources, such as candidates from school or the job market. There are some temp agencies that hire felons providing opportunity to them to have a good paying job.

    The workers they recruit will register with them officially as known as an employee. After this, the company/client in question will pay for their services and take advantage of their skills, especially in times of need. 

    Considering these conditions, it is pretty clear that a temp agency receives money/pay only from their companies and is not involved at any step with their employees' work. It makes it impossible for them to withhold or delay payments to the workers and, at the same time, enhance their profits. 

    The only way to increase profit is by increasing their sales, generating more clients for themselves. On the other hand, a company that hires temp agency workers can do so regardless of whether they need skilled temporary workers. 

    They will only pay the temp agency based on their need for temporary workers. However, it should be noted that the money/pay paid by this company to the temp agency does not include profit.

     If a company hires a worker through an agency, they will pay for this worker based on his salary and other terms that the employer and agency have agreed upon.


    In the current times, the role of temp agencies has become increasingly crucial for fulfilling growing demands for temporary workers. The importance of temp agencies today is evident because many companies and individuals employ them to meet their needs. 

    Temp agencies may provide their employees an opportunity to move from a part-time position to a full-time job that is a permanent job as per their performance. 

    Therefore, it is essential for every person who wants to put their skills on the market and get employed by a company in a different state to register with one. In other words, it's the job of temp agencies to keep the markets open and operate smoothly to help companies/individuals find the right workers they need.


    Do Temp agencies provide insurance for the workers?

    The answer is not always no, but some agencies provide insurance to their employees who have registered with them and give their employees the documents to show this insurance when asked in case of an accident during an assignment or while working at a client site. 

    Is it mandatory for temp agencies to pay any benefits?

    In some cases, it is not mandatory but depends on the agency. Some agencies have their benefits which their employees can use. That's why they are called private sector agencies.

    Do Temp agencies do a drug test, and background check before hiring?

    Yes, there is a mandatory drug test before a worker can be hired. The Temp agency will take the details of the employee when they register with them, and the employer will send them in the form of a form to show this drug test both to the agency and the HR department at the client's company.

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