Do Staffing Companies Charge a Buyout Fee?

Staffing firms recruit and hire qualified employees to fulfill the employment requests of client organizations. Many companies utilize services of staffing companies for short-term, long-term and temp-to-hire work positions. The companies may require temporary staff for seasonal employment or specific projects. Before an employee of the staffing company is sent to a client, the client must agree to the terms and conditions of using the services of the staffing firm, including any buyout fee.

The client contract specifies the rights and obligations of the staffing firm and the client organization. A client may not directly hire an employee of the staffing firm who performs work tasks pursuant to an agreement with the staffing firm without the consent of the staffing firm. For short-term, long-term and temp-to-permanent staffing needs, each worker remains an employee of the staffing agency until the client and staffing agency establish an agreement to transfer a worker to the client’s payroll. At that point, the staffing agency will release any future financial obligations that the client owes the agency regarding a particular employee.

Under a typical agreement, the staffing company submits invoices to the employer based upon a pre-negotiated hourly rate, and in return an employee of the staffing company is required to work a set number of hours or an indefinite employment term. Depending on how the employee is placed into a work position, the staffing company may allow clients to exercise buyout options after an employee has worked a specific number of hours with the client.

The buyout fee is determined by the manner in which an employee is hired into a position and the amount of hours worked when the employer selects to buy out the contract and hire the employee directly. However, a temp-to-hire or temporary-to-permanent placement agreement between the client and the staffing agency may allow an employer to hire the employee at no cost once the employee works a set amount of hours or days, such as 60 or 90 work days. There may be a buyout fee for employees placed in short-term or long-term work arrangements. The fee is usually a percentage of the employee’s first year salary.

The salary for each person who is contracted to perform work for a client is determined by an agreement between the staffing firm and the client at the time of placement. Because there may be a different pay arrangement for different job positions and employee qualifications, the staffing firm may establish a different salary agreement, which includes the buyout terms, for each placement.