How to Set a Finder's Fee With Temporary Agencies
Temporary agencies are an excellent way to overcome your company's short-term staffing challenges. Temp-to-hire arrangements with a local agency can allow you to try out potential new permanent employees without the risk or overhead. When you find a temporary employee you would like to have join your organization on a full-time basis, the agency may require a finder's fee. This fee releases you from the contracted length of time that the employee is required to remain on the agency's payroll and allows you to hire on the individual directly with your organization.
Temporary staffing agencies make money buy charging a markup on the hourly rate of the temporary employee. Depending on the industry, this rate tends to be between 25 and 40 percent. The contract with the temporary agency typically will have set a minimum number of hours or days the employee must work through the temporary agency before they can be made an offer of employment with your company. In some contracts, fulfilling the required hours is all that you must do to be in compliance, while others may require you pay a finder's fee as well.
Temp-to-hire fees, or finder's fees, are a fee assigned by a temporary staffing company, and used as a buy-out to terms of an employment contract. For example, if you hire a temp and your contract requires she remains on the staffing company's payroll for 90 days, you may have to pay a flat fee or the remaining balance of the 90-day contract to hire her directly. This fee makes up for the money the agency loses by cutting the contract length short and covers the agency's services as an employment intermediary.
Some temporary staffing agencies also offer recruiting services for upper-level positions or highly specialized occupations. The agency may require the candidate they recruit to work as a temporary employee for a set period of time, or they may offer contingency-based recruitment. In contingency agreements, a flat rate or percentage of the offer amount is paid only if the temporary agency successfully fills the vacant position.
Almost all temporary staffing companies have some flexibility in the rates they assign to new clients, especially regarding contingency-based recruitment fees. It is important to negotiate the fee to an amount you feel is acceptable. It is also important to look at the finder's fee listed on any temporary staffing agency contracts you sign. While you may not anticipate the need for hiring on a temp employee on a full-time basis, you do not want to miss out on the perfect employee just because the fee for hiring her is too high.