How Much Do Staffing Agencies Charge? Fees and Markups Explained

A staffing agency quotes $28 an hour for a warehouse temp whose going wage is closer to $20, and another wants 20% of an office manager’s first-year salary. Is that fair? What an agency charges depends on what you’re buying, so below we price each model and name the public source behind every range.

How much do staffing agencies charge?

Short answer: Staffing agencies bill temporary and contract workers at an hourly bill rate: the worker’s pay rate plus a markup, which Instawork’s guide puts at roughly 25% to 60% for W-2 workers. For a permanent hire, you usually pay a one-time fee worked out as a percentage of first-year pay, and Korn Ferry’s annual report says retained search fees are generally one-third of estimated first-year cash compensation.

Treat the percentages as reference points, not prices. In another section, the same Instawork guide gives 25% to 50% for W-2 workers. It says W-2 markups over 40% are rare in warehouse staffing and can run higher in hospitality. It puts 1099 contractors lower, at about 13% to 40%, since the agency pays no payroll taxes or workers’ comp on them.

No government agency or trade body publishes standard staffing fees, so most “average markup” figures online come from companies that sell staffing, and neither Instawork nor AIHR cites a survey behind its ranges. Where public data exists (the Bureau of Labor Statistics, the IRS, the American Staffing Association and listed staffing companies’ SEC filings), we use it below. The number that counts is the one in your written quote, and two quotes are only comparable once you know what’s inside each.

If you want a quote to line up against these, our temporary staffing team prices each role in writing before any work starts.

The temp market is smaller than it was a few years ago. BLS counted about 2.49 million jobs in temporary help services in September 2026 (preliminary), down from a peak of 3.16 million in March 2022, and the American Staffing Association counted nearly 2.2 million temp and contract workers on staffing payrolls in an average week of 2024.

How does a staffing agency markup work?

Short answer: A staffing agency pays the worker a pay rate and bills you a higher bill rate. The markup is the difference divided by the pay rate. Margin is the same difference divided by the bill rate, which is why “40% markup” and “29% margin” can describe the same deal.

Take a hypothetical temp paid $20.00 an hour and billed to you at $28.00:

• Spread: $28.00 − $20.00 = $8.00 an hour
• Markup: $8.00 ÷ $20.00 = 40%
• Margin on the bill rate: $8.00 ÷ $28.00 = 28.6%
• Multiplier: $28.00 ÷ $20.00 = 1.4

Salespeople use all four. Ask which one you’re hearing, because a 30% margin is a much bigger spread than a 30% markup.

Many agencies quote only the bill rate. That’s common and legal, but it means you can’t see how much reaches the worker, and the pay rate decides who accepts the assignment and who stays on it.

Our take: Ask every agency to show the pay rate and the bill rate on the same line. If an agency won’t share the pay rate, you’re being asked to compare a number you can’t check.

What does a staffing agency’s markup pay for?

Short answer: A staffing agency’s markup first covers the employer costs it carries for the worker, then recruiting, payroll, office costs and profit. The IRS puts the employer’s Social Security and Medicare share at 7.65% of wages, and unemployment taxes, workers’ compensation and any benefits come on top, so payroll costs take their share before the agency earns a cent.

When the agency is the employer, it carries the costs you’d otherwise carry:

• Social Security and Medicare: the employer pays 6.2% plus 1.45%, or 7.65% of wages, with Social Security applying up to $184,500 of wages in 2026 (IRS Topic 751).
• Federal unemployment tax (FUTA): 6.0% on the first $7,000 of each employee’s wages, which drops to 0.6% for employers that get the full state credit (IRS Topic 759).
• State unemployment tax and workers’ compensation: these vary by state and job. The SBA’s hiring guide lists workers’ compensation as required for businesses with employees, and disability insurance as required in California, Hawaii, New Jersey, New York, Rhode Island and Puerto Rico.
• The rest: recruiting and screening, payroll processing, any benefits the agency offers, sales and office costs, and profit.

For a yardstick, look at what employers spend on their own staff. In June 2026, private employers paid an average of $32.82 an hour in wages and $14.07 in benefits per hour worked, according to the BLS Employer Costs for Employee Compensation release. Legally required benefits alone, the category that holds payroll taxes and workers’ comp, came to $3.40 an hour, about 10% on top of wages. A temp may not get the same package as your staff, but those numbers explain why a 15% markup on a W-2 worker would leave very little for recruiting and overhead.

What’s left after the worker and the payroll costs? Listed staffing companies report it as gross margin. In their 2025 annual reports filed with the SEC, Kelly Services’ gross profit rate was 20.1%, TrueBlue’s was 22.8%, and Robert Half’s contract talent business was at 39.0% of revenue. Robert Half’s report names its main drivers as pay-bill spreads, fringe costs (payroll taxes and benefits) and conversion fees. Gross margin isn’t profit: the companies still pay recruiters, sales staff and offices out of it.

Robert Half’s figure covers specialized professionals, while the other two blend many kinds of staffing. And because these margins are measured on the bill rate after payroll costs, the markup on pay behind them is larger than the margin itself.

How much do staffing agencies charge for direct hire?

Short answer: A direct-hire placement fee is usually a one-time charge calculated as a percentage of the new employee’s first-year pay, due when the person is hired. AIHR’s and Instawork’s guides put contingency fees at about 15% to 30% of first-year salary. Retained executive search usually costs more and is billed in stages.

Contingency search means you pay only if you hire someone the agency presented. Robert Half’s 10-K describes the standard setup: fees are paid only by the employer, are “generally a percentage of the new employee’s annual compensation,” and nothing is charged to candidates. It also refers to a 90-day guarantee period, the window in which an early departure affects the fee.

Retained search is paid whether or not the role is filled, in installments. Korn Ferry’s annual report for the year ended April 30, 2026 says its executive and professional search fees are “generally one-third of the estimated first-year cash compensation,” plus a percentage to cover indirect expenses, and an “uptick” fee if the final pay package is higher than estimated.

A hypothetical example shows how the base matters. Say you hire an office manager at $55,000 with a 20% fee: that’s $11,000. Negotiate the offer up to $60,000 and the fee follows, to $12,000. Check whether “first-year compensation” in your agreement includes bonuses, commissions or a sign-on payment, since that changes the bill.

To put fees next to doing it yourself, SHRM reported in 2022 that its benchmarking data put the average cost per hire at nearly $4,700. That’s an average across many kinds of hires and counts an employer’s own recruiting costs, so treat it as a sanity check, not a like-for-like price. For the full process on a permanent role, see our permanent staffing page.

How are RPO and on-demand recruiters priced?

Short answer: Recruitment process outsourcing (RPO) is usually a contract with a setup phase, then ongoing fixed fees, variable fees or both. On-demand recruiters are billed for their time, by the hour or the month, without a placement fee. Neither has a public price benchmark.

Two listed companies describe how their RPO fees work. Korn Ferry’s 10-K says its RPO revenue comes in two phases: an implementation phase, then a recruiting phase “for which there are both fixed and variable fees.” TrueBlue’s 10-K says it generally bills RPO on the number of hires made each month multiplied by an agreed rate per hire. Most contracts mix the two, so ask:

• What does setup cost, and what happens to it if you end the contract early?
• Is there a monthly fee for the recruiting team, and what volume does it cover?
• What’s the fee per hire, and does it change with seniority?
• Are job ads, assessments and background checks included or passed through?

On-demand recruiters work as an extension of your team for a set period. The useful comparison is an in-house recruiter. BLS puts the median pay for human resources specialists, a group that includes recruiters, at $75,940 a year, or $36.51 an hour, as of May 2025. Using the private-industry benefits ratio from the BLS compensation data above, a full-time recruiter at that median would cost roughly $108,000 a year in wages and benefits, before software and job ads.

As a rule of thumb, contingency search suits one or two hires a year, on-demand recruiters suit a burst of hiring over a few months, and recruitment process outsourcing suits steady, high-volume hiring.

What affects staffing agency rates?

Short answer: Staffing agency rates depend mostly on the pay rate, how hard the role is to fill, how long the assignment lasts and how many workers you need, the job’s insurance risk, the state’s rules, who did the recruiting and overtime. Each one moves the quote.

• The pay rate itself. Markups are percentages, so a higher pay rate means a bigger dollar spread even at the same markup.
• Scarcity and speed. Night shifts, specialized licenses and same-week starts cost more to fill.
• Volume and length. A long assignment spreads the agency’s recruiting cost over more billable hours, which gives you room to negotiate.
• Job risk. Workers’ compensation is priced per $100 of payroll by job class code, and Colorado insurer Pinnacol Assurance notes that construction and similar trades typically carry more risk than office or retail work. Riskier jobs mean a higher insurance cost inside the markup.
• State law. Since April 1, 2024, Illinois has required agencies to pay a temp who works more than 720 hours within 12 months at the same client on an equal-pay basis, using either the client’s comparable employees or the BLS local median wage for the job (820 ILCS 175/42). Long Illinois assignments can cost more after that point.
• Who found the worker. If you recruit the person and the agency only employs them, known as payrolling, Instawork’s guide puts the markup at about 15% to 35%.
• Overtime. Under the Fair Labor Standards Act, non-exempt workers earn at least 1.5 times their regular rate for hours over 40 in a workweek (U.S. Department of Labor). Ask whether the agency applies its full markup to overtime pay, because the overtime bill rate rises with it.

Which hidden costs should you look for in a staffing agreement?

Short answer: The hidden costs in a staffing agreement that most often surprise employers are conversion (buyout) fees, minimum hours, overtime and holiday rates, and pass-through charges for screening. They’re in the contract, but rarely in the headline rate.

Read the agreement for these before you sign:

1. Conversion or buyout fees. Robert Half’s 10-K notes that clients who convert a contract worker to a permanent role typically pay a one-time fee. Instawork’s guide says such fees are often waived after 120 to 450 hours worked. Get the schedule in writing.
2. Non-solicitation terms. Some agreements charge a fee if you hire the worker directly within a set period after the assignment ends.
3. Minimum hours. Some states set pay floors that end up on your invoice. In Illinois, an agency must pay a temp at least 4 hours if the client doesn’t use them after they’re sent to the worksite (820 ILCS 175/30).
4. Overtime, holiday and short-notice rates. Check the multiplier and when it applies.
5. Screening pass-throughs. Background checks, drug tests and safety gear may be billed separately.
6. Rate increases. Look for clauses that raise the bill rate when minimum wages or insurance costs go up.
7. Payment terms and replacement terms. Late fees, and what happens if a worker doesn’t work out.

Watch out: A conversion clause can outlast the assignment. If there’s any chance you’ll hire the temp, settle the conversion terms before their first day, not when you’re about to make an offer.

Who is the employer when you use a staffing agency?

Short answer: For temps, the staffing agency is usually the employer of record: it runs payroll, withholds taxes and carries workers’ comp. You can still share legal responsibility as a joint employer under federal wage-and-hour law, the question the Department of Labor’s April 2026 proposed joint employer rule takes up. The agreement should say who handles what.

The employer duties the SBA lists for a first hire, from an EIN and payroll tax filings to unemployment insurance and workers’ comp, are the work the agency takes off your plate. That’s part of what the markup buys.

Joint employment is where the rules are moving. The Department of Labor’s proposal, published April 23, 2026, covers the Fair Labor Standards Act (FLSA), the FMLA and the farmworker protection law, and notes the department has had no joint employer regulation since 2021. Comments closed June 22, 2026, and as of October 2026 it’s still a proposal. If you’ll direct a temp’s daily work and schedule, have an employment lawyer review the agreement’s indemnity and compliance clauses.

Digital Storming recruits and screens; you make the hire. We aren’t a law firm, a PEO or an employer of record, and our temporary staffing quotes name who employs the worker before anyone starts.

How to compare staffing agency quotes

Line the quotes up on the same terms before you look at the price.

1. Describe the job the same way to everyone: pay range, hours, length, location, start date and must-have skills. Many states also require that range in the ad itself; see pay transparency laws by state. A clear brief gets you comparable quotes; our guide on how to write a job description covers what to include.
2. Ask for the pay rate, the bill rate and the overtime bill rate for temps, and the fee percentage and what counts as compensation for direct hires.
3. Turn every quote into a total. Bill rate times expected hours, plus any one-time fees.
4. Add the contract terms: conversion schedule, minimums, guarantee and payment terms.
5. Compare with doing it yourself. Use the BLS benefit costs and your own time as the baseline.
6. Get the final terms in writing before any recruiting starts.

Example: Picture a 12-week assignment at 40 hours a week that you may turn into a $45,000 job. Agency A bills $27 an hour (480 hours = $12,960) and charges 15% of salary to convert ($6,750), for $19,710 in total. Agency B bills $28.50 ($13,680) and waives the conversion fee after 480 hours. The cheaper hourly rate costs $6,030 more if you hire.

Where to start

Staffing prices are negotiable for buyers who come prepared. If you do nothing else, do these five things:

1. Pick the model first: temp, temp-to-hire, direct hire, RPO or on-demand recruiter.
2. Ask for the pay rate and the bill rate on every temp quote.
3. Settle conversion and minimum-hour terms before anyone starts.
4. Price the whole assignment, not the hourly rate.
5. Have an employment lawyer read the employer, indemnity and joint-employer clauses.

If you’d like a quote from us, Digital Storming prices each role individually and puts it in writing before any work starts; our HR and staffing services page explains what we do.