How Do Corporate Staffing Companies Make Money?
When you operate a corporate staffing company, you place applicants in positions at companies that are hiring. If you place permanent employees, they work for the company that is your client and get paid by that company. You must know how you get paid. If you place temporary employees, they actually work for you and you pay them. You still get paid, of course, but in a different way than you get paid for permanent employees.
When the staffing company that you own places an employee in a permanent position, it charges the hiring employer a percentage of the annual salary for that employee. For example, your company can negotiate with a company to charge 25 percent of any employee’s salary if you find that company a suitable applicant. If the position pays $50,000 per year, you would receive 25 percent, or $12,500. The person you place becomes an employee of the company you place her with. You do not pay any wages or benefits because the hiring company puts the employee on its payroll and takes on this responsibility.
When a company needs temporary employees to fill in for vacations, cover maternity leaves or help a department catch up on its deadlines, your company can provide the temporary staffing. You charge an hourly markup for each hour the temporary employee works. For example, if you place a temporary worker who receives $25 per hour, you could charge the company $37.50 per hour. The temporary worker remains your employee, and you must pay all payroll taxes for that employee. If you offer benefits, you must pay those as well.
You can earn extra income from a related line of work. Companies that search for CEOs, chief operating officers and other executives will pay a retainer to your agency to find the best talent. You can charge $5,000 and up as a retainer to cover your expenses and time to find high-level executives. You can then charge a percentage of that executive’s annual salary once you find a suitable candidate and that candidate is hired by your client. Although firms that look for executives are often called headhunters or executive search firms, you can make the retained search department part of your staffing agency.
You can cut your fees for multiple placements. If a company needs 20 to 100 employees, you can offer a discount rate in exchange for getting all of that company’s business. For example, if you normally mark up temporary wages 50 percent, you can offer a 35 percent markup for a company that hires at least 25 employees from you. For permanent employees, you can lower your usual rate of 25 percent of annual salary to 20 percent for companies that let you fill all of their openings.