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The Difference between On-Demand and Temporary Staffing

A quick search on Google for the term “temp agency” has traditionally brought up staffing agencies and job boards. However, recently a blog post titled “The Ultimate Guide to Temp Agencies” has been gaining some traction. This post contains useful information about the staffing industry. However, there are some inaccuracies that may be causing some confusion. In this post, we’ll address some of these points.

What Temp Agencies Do for Their Clients

The post explains the relationship between staffing firms and their clients with accuracy, with exception of this line:

One of the biggest challenges companies find in working with temp agencies is that time-to-fill rates can be exceedingly long, making it an inconvenient (if not entirely unrealistic) solution for companies that frequently need to fill shifts or secure qualified talent on short notice.”

In fact, staffing agencies started because companies had immediate needs. It was just as recently as twenty years ago when a company would just call a temp agency, ask for a certain amount of temps, and the agency would select which temps would be sent out on the job. While companies now recognize the value having an external team of recruiters to augment their own hiring processes, staffing agencies are still held to specific service level agreements to ensure they quickly submit candidates to their clients.

Today’s clients expect recruiters to thoroughly vet, screen, interview, and background-check the people they send over. That’s not to say that there is no longer a need for labor or administrative work on demand: sometimes we do get a call asking for a certain number of people to be quickly deployed on short notice. On-Demand companies aren’t revolutionizing how hiring is done, but rather are introducing the “gig economy” to an older model.

The Cost of Temp Agencies for Clients

Another misleading sentence can be found in how the post describes the revenue model of the staffing industry. They state,

These rates (what’s billed to clients) are known as markups, or the additional cost on top of the worker’s hourly wage that covers the agency’s costs and any benefits being provided to the temp worker.”

Actually, it’s the other way around. Our clients agree to a fixed rate (called a “bill rate”) that they would like to pay for the service. The worker’s hourly wage is a portion of this rate, but depending on the contract the bill rate can be a set fee, a percentage of the rate, or even a flat dollar amount. While it may seem like splitting hairs, the distinction is important. The implication is that agencies take what the job seeker wants and then add a specific percentage on top of it, when in fact it is not uncommon to see clients (especially larger ones) have set contractual rates for different types of work. A good recruiter will take time to work with a job seeker to discuss different pay rates and ensure that they understand why one administrative assistant job pays one rate, while a similar job pays a different amount.

How Taxes Work for Temporary Employees

The post goes on to explain that individuals employed by a temp agency may be surprised to learn that they have to file as a W-2 employee instead of a 1099 (aka an Independent Contractor), even though they work contracts. In actuality, the employee is considered an employee of the staffing agency and not an independent contractor. 1099 contractors are subject to their own category of tax laws. They are also responsible for paying their own taxes, buying their own healthcare, and sometimes must file as their own company. It’s due to these requirements that many employers prefer to deal with W-2 over 1099. Not only that, but the IRS has very specific interpretations of the type of work that can qualify someone as a 1099. It’s for this reason that many companies will not consider an independent contractor for the work they need done.

The Most Sought-After Skill Sets in the Temp Work World

According to the post,

Job seekers looking to sign up with an agency should inquire about its specialties and current contracts before starting the – often lengthy – application process.”

In actuality, we don’t have an application process. Job seekers can simply apply with a copy of their resume, their Monster or Career Builder resume, or even their LinkedIn profile. Take a look at our jobs page and you will find that it’s a very simple, streamlined process.  

Why Today’s Flexible Workers Are (Not) Skipping the Temp Agency

Finally, the post concludes with a statement regarding how companies are turning towards online platforms for freelance workers instead of going through traditional temp agencies and recruiting companies. While it is true that On-Demand staffing has the potential to impact many individuals, what we’ve seen since its introduction is that On-Demand staffing has not been a replacement for staffing agencies, but instead has served as an alternative for businesses that have not found other short-term staffing formats to be a good fit. Also, many temp agencies specialize in certain types of jobs and industries, so a company’s normal go-to staffing partner may not be the best fit depending on the situation.

Likewise, for the roles we staff (Administrative, Healthcare, Customer Service) we’ve found that businesses desire the ability to review resumes of job applicants. They value that companies like Parker have already carefully screened candidates for best cultural fits. Unlike On-Demand staffing, they don’t have to train someone all over again each time they have a need for extra staff, as the staffing company knows their preferences and can even send over people who have already worked in the company.

On-Demand can be a great fit for someone seeking immediate work or are in need of flexible scheduling. We’ve seen businesses move away from simply asking for a certain number of temps to show up and On-Demand can be a great way to address this need. Likewise, the staffing industry has evolved with their clients and job seeker’s needs. Both are great tools for a company’s and job seeker’s arsenal.

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