How Do Staffing Agencies Work? (and How myBasePay Can Help)

In today’s competitive hiring environment, many businesses need a lot of help filling open positions. As a result, they often turn to staffing agencies to streamline this process and ensure that the right talent gets matched to the right position.

Needless to say, this creates ample opportunity for those interested in forming their own staffing agency. Of course, if you want to succeed, you need a strong foundational understanding of how staffing agencies work and what they do. Recruiting talent is only one part of the equation.

Fortunately, you’re not on your own in this journey — as myBasePay is ready to help.

So, How Do Staffing Agencies Work?

Staffing agencies act on behalf of employers to fill open positions. Typically, a business that needs help filling a position will reach out to the staffing agency to provide information about what they need. This can include temporary contract positions, direct hires for permanent positions and even temporary assignments that can lead to full-time employment.

Many agencies will build their own internal pool of contractors and employees that they use to fill these open positions. Some provide more general services to fill a wide range of openings, while others specialize in specific industries. If the agency doesn’t already have someone available who would be a good match for the client’s opening, it will use the information provided by the client to create a job description and advertise it.

Regardless of the type of worker that will fill the position, the staffing agency is responsible for evaluating resumes, running background checks and performing screening interviews.

These are done both when adding a worker to a staffing agency’s own pool of workers, and to ensure someone is a good fit for an open position with a client. Depending on the type of position to be filled, the agency may fill the position without any client input, or the client may be responsible for the final hiring decision after the agency has vetted candidates.

Notably, staffing agencies are also often responsible for onboarding workers with a client, as well as managing the entire employment journey — especially with temporary positions. This includes responsibility for any applicable employment taxes, payroll processing and terminating the contract.

According to Indeed, most staffing agencies charge fees at a markup rate of 25 to 100 percent of the employee’s wages. While this may seem like a hefty markup, it is important to keep in mind that such rates are generally necessary for a staffing firm to cover its own operating expenses.

Key Issues Staffing Agencies Must Be Aware of

A changing employment landscape brings new challenges and opportunities to staffing firms. Chief among these are the complexities that arise when working with contingent workers.

With over 59 million freelancers in the U.S., staffing firms must be aware of how contingent workers differ from full-time employees. Proper classification is a must to avoid tax penalties from the IRS, which evaluates an agency’s behavioral and financial control over those it works with to determine whether someone should be considered a contractor or employee.

Employment law is constantly changing, and staffing firms must be aware of legal changes that can affect their clients and employees. Regulations can vary drastically from state to state. Running afoul of federal or state regulations (even accidentally) can result in significant fines for the staffing agency that disrupt its operations.

In addition, many who start a staffing firm have a strong recruiting background — but they may not have as strong of knowledge in the back-end operations necessary for managing workers before, during and after a placement.

Tasks such as invoicing clients or processing payroll for workers are vital for maintaining strong cash flow and building an employer brand, but they may fall outside your area of expertise. Combine all of this with a highly competitive job market, and it can be easy for those who are unprepared to fall short of their lofty goals.

How myBasePay Can Help

Whether you’ve just started your staffing firm or you’ve been in the industry for several years, myBasePay can help you streamline your operations and eliminate many of the risks associated with today’s staffing environment.

myBasePay provides comprehensive employer of record (EOR) services for staffing firms, serving as the employer for tax purposes and managing a host of back-office tasks that are vital for your day to day operations.

myBasePay’s turnkey EOR service provides the infrastructure your staffing agency needs to make more placements, while reducing your administrative burden. EOR services include employment liability, tax reporting, claim management, benefits administration, business insurance and more.

Our complete suite of solutions aids with payroll and onboarding to ensure a positive experience for all workers who partner with your firm on any level. Compliance administration ensures that you won’t have to worry about running afoul of relevant worker regulations, even when hiring international talent. Our experts use their world-class knowledge to help your firm remain compliant at all times.

myBasePay also provides end-to-end funding, with an upfront profit model that helps to eliminate cash flow concerns. With this model, you can pay your contingent workers and get your own payments in the same week, gaining the financial agility that is needed to fill client projects.

By reducing your administrative burden, you can ultimately focus on what you do best: recruiting top talent and helping clients get the right match for each open position. Quality placements backed by strong administrative support will help you consistently deliver great outcomes for your clients so you can earn their trust (and repeat business).

Setting Your Agency Up for Success

A staffing agency can be a highly profitable venture — but only when you have the right foundations for success. With myBasePay, you have access to a full suite of back-office solutions to help with crucial areas such as compliance administration, invoicing, payroll, onboarding and more.

By helping you manage these essential tasks, you can focus more of your time and efforts on sourcing top talent and making quality placements for your clients. You’ll have the infrastructure you need to scale quickly and turn your business into a thriving success.


Author: Cesar Jimenez, myBasePay CEO
Cesar A. Jimenez is an entrepreneur, investor, and military veteran with over 25 years of staffing industry expertise successfully leading technology staffing organizations. His expertise in the IT industry allows him to use his experience as a thought leader for talent acquisition, staffing, IT, and recruitment technologies with a passion for contingent workforce solutions. Cesar has held various leadership roles for both a global staffing organization and technology solutions companies. This expertise has enabled him to develop alternative workforce models that provide the agility for organizations to be competitive in today’s marketplace. In his spare time, he enjoys spending time with hisfamily, working out, and coaching high school baseball players.

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