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BFS Capital Blog

Should Your Small Business Use a Staffing Agency to Hire Employees?

May 13, 2015

Hiring employees is just after doing taxes on the list of things you love to do as a small business owner.

That’s why last year, according to the American Staffing Association, businesses hired more than 14 million temporary and contract employees via a staffing agency. And when the cost of replacing an employee is estimated by the Department of Labor and Industry to be about 1/3 of their salary, it might make sense to pay someone else to do it.

But not always. Like everything in life, hiring for your small business through a staffing agency has its advantages and drawbacks.

Advantages of Using a Staffing Agency for Your Business

Staffing agencies know more than you do. Though once you run a small business, you may refuse to admit anyone knows more than you do …. well, a staffing agency just might. They know more people and, from their years of experience, they may actually know more about what qualities make a successful employee.

Staffing agencies assume some costs. Unless you generally enjoy hiring people with multiple felonies and drug habits, you’ll need to conduct background checks and drug screenings. Agencies typically do that for you and build it into the cost.

They can find people you can’t. In addition to having a broader reach into active job seekers, employment agencies are especially useful in finding passive job seekers. That is, employed people who give their info to agencies in case “something great comes up.” If your small business is “something great,” then that agency is your best friend.

Hiring will get done quicker. Since essentially you ARE your small business’ HR department, chances are you won’t have time to deal with hiring new employees between the other 28 hours worth of stuff you have every day. Which means you’ll be shorthanded longer. Staffing agencies take this burden off of your business and speed up the process considerably.

Your business will avoid unemployment costs with temporary workers. Technically those temp workers work for the agency. Which means when you no longer need their services, their unemployment claim actually goes against the agency. Not your business.

You can utilize specialized staffing agencies. So instead of hitting up a large agency that deals with everything from heavy manufacturing to hot sauce companies, you can find an agency that focuses on your industry. Alternatively, you can select a staffing firm that specializes in finding candidates with a particular skillset such as information technology, accounting or graphic design.

You can try people out. Temp-to-hire positions are much more efficiently filled via an employment agency. And even if they don’t know much about your corporate culture, you can try an employee out without the risk of any false-termination retribution.

Disadvantages of Using a Staffing Agency for Your Business

The agency might not know your city. Let’s be honest: If you’re looking for an IT professional, then the talent pool in a city like San Francisco, California MIGHT be a little richer than, say, anywhere in Florida. So the level of qualifications you seek might be different than similar companies in other regions, and a national staffing agency might not know that.

There is an increased cost when using a staffing firm. Nothing in this world comes for free. So all those advantages we just mentioned just now? Those’ll cost you, typically 20% of a full-time employee’s salary in the form of a one-time fee, or a stiff markup on an hourly wage.

It’s a gamble of your time and your money. The staffing agency will never know how well an employee fits as well as you will, so you may waste both the time it took to find him and the money you paid the employment agency for nothing.

You lose total control over the hiring process. You don’t know much about your new hire until they show up at your door. And even if you do insist on an interview before hiring, you still won’t have nearly as much information as you would if you’d done the hiring yourself. And if you’re a small business owner that also happens to be a control-freak, then this might be a problem.

The agency’s motivation is different. Yes, they are there to help your business. But they are also there to make money. And if they don’t fill your position, they don’t make any money. So some agencies may supply you with less-than-qualified individuals lest you accuse them of not helping you out. They still want to find you the best candidate, but not as much as you do.

For some businesses, it’s just not practical. For businesses like accounting, consulting, and other office-type jobs which require checks beyond simple qualifications, it might make sense. However for a bar, restaurant, auto shop or beauty salon, you may find it much more practical to meet potential employees in person. Not only can you gain a grasp on how well they know the trade, but you can also tell immediately how well they will interact with customers.

If you are considering utilizing a staffing agency to hire employees for your small business, then consider all the advantages and disadvantages before making your decision. Using a staffing agency may be the right decision for your business if the advantages outlined above outweigh the negatives.

Image courtesy of SOMMAI /