Why Do Staffing Agencies Charge So Much?
Where the money goes, when the fee is worth it, and when it isn’t.
TL;DR
- Most agencies charge about 20% of a new hire’s first-year salary, and the fee starts over with every hire.
- That fee covers the recruiter’s commission, the agency’s overhead, and the searches that never pay off.
- Temp agencies charge an hourly markup, plus a buyout fee if you want to keep the worker.
- If a hire leaves early, you usually get a replacement, not your money back.
- For companies making several hires a year, a flat monthly fee costs far less for the same work.
If you’ve hired through a staffing agency or headhunter, you know the feeling. The invoice shows up, you see the number, and you wonder what exactly you paid for. Many of the contractors who come to Edisto Consulting Group come right after a bill like that. Here’s where the money goes, when it’s worth it, and when it isn’t.
In this article
What you’re actually paying for
Agencies aren’t overcharging for no reason. Their fee covers a recruiter’s commission, office costs, job board subscriptions, and sales staff. Most of them only get paid when you hire someone, so every successful placement also pays for the searches that went nowhere.
That’s the catch. You’re not only paying for your hire. You’re paying for the agency’s misses too.
How the math adds up
Many of Lori’s clients were paying about 20% of salary per hire before they called her. On a $60,000 service tech, that’s $12,000. Hire five people in a year and you’ve spent $60,000 on fees alone.
And the fee goes up with the salary. A senior superintendent or project manager can cost you $25,000 to $35,000 per placement. If that person quits a few months in, most agencies give you a replacement, not a refund. Business owners have told us about paying $30,000 for one placement that didn’t work out and getting nothing back. We broke down the full headhunter math here.
The temp agency version
Temp and staffing agencies charge differently. The worker stays on the agency’s payroll, and you pay a markup on every hour they work. That covers payroll, insurance, and the agency’s profit.
For a three-week project that needs extra hands, that’s fair. But if you want to keep a good worker, most agencies charge a buyout fee to hire them directly. Their best workers are their income, so they don’t make it cheap to take them.
When the fee is worth it
Sometimes paying the agency is the right call. If you need one hard-to-find senior hire and won’t hire again this year, a percentage fee can make sense. If you need a crew for a short job and don’t plan to keep anyone, a temp agency does exactly that.
The fee stops making sense when you hire several people a year. Every new hire is a brand-new bill, and the costs stack up fast. See one contractor’s real year of hiring priced four ways.
A different way to pay
Edisto works on one flat monthly fee. You can hire as many people as you need while we’re working for you, and the price doesn’t change. No placement fees, no percentage of salary, no contract. When your roles are filled, you turn us off.
Every candidate we present comes with a recorded interview, so you see them before you spend an hour meeting them in person. One general contractor hired a Senior Superintendent and a Project Manager in 60 days for $6,000 total. A headhunter would have charged $62,500 for the same two people. Read the full case study.
Staffing agencies charge a lot because their model depends on it. That works for one-off searches and short-term crews. For contractors who hire throughout the year, there’s a better deal available.
How to use this
- Add up what you paid in placement fees or markups last year.
- Count how many hires you plan to make in the next 12 months.
- Compare that total to a flat monthly fee for the months you’d actually be hiring.
- Visit our contact page to set up a call.
- Bring your numbers, and we’ll show you the side-by-side cost.
Tired of paying per hire?
Tell us what you’re hiring for this year and we’ll show you what it would cost on a flat monthly fee.
Talk With LoriFAQ
How much do staffing agencies charge?
Most recruiting agencies and headhunters charge about 20% of a new hire’s first-year salary, and the fee applies to every hire. Temp agencies instead charge an hourly markup on each hour the worker is on your job, plus a buyout fee if you hire the worker permanently.
Why are agency fees so high?
Most agencies only get paid when you make a hire, so each fee covers the recruiter’s commission, the agency’s overhead, and all the searches that never ended in a placement. You pay for their misses as well as your hire.
Do I get my money back if the hire quits?
Usually not. Most agencies offer a replacement candidate if the hire leaves within a guarantee window, not a refund. Once the window closes, you get nothing back.
Is a flat monthly recruiting fee cheaper than an agency?
For companies making more than one or two hires a year, almost always. A percentage fee starts over with every hire. A flat monthly fee covers every hire made while the service is on, and you can turn it off when your roles are filled.
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