7 Reasons Why Companies Use Temp Agencies


Employees are one of the most dynamic resources in the company. With the fast and ever-changing business scenario, there are bound to arise several uncertainties, one of which is managing the employees themselves. 

There might arise scenarios where organisations would be short-staffed for various reasons including, but not limited to, personal leaves, lay-offs, resignations and retirements, business expansions, etc. The choice to invest in hiring employees is something that they have to make while predicting the business because the process, end-to-end, from inviting applications to sending out offer letters is a long-drawn one.

why do companies use temp agencies

In case of small or medium companies, there is another issue to be dealt with which is the opportunity cost of maintaining an HR department. This is particularly pertinent considering the fact that most organisations today are based on projects and each such project can prove to be a unique one. 

For that purpose, you can’t afford to hire staff on roll if you might need to terminate them in the near future. Added to this is the fact that you have to provide them additional benefits including but not limited to health insurance, bonuses and hikes. It is in these cases that temp agencies are a cost-effective alternative. 

How Do Temp Agencies Work?

Temporary staffing agencies, or just temp agencies are HR consultancy agencies that provided employees on a contract basis for temporary assignments. Since they are specialised agencies, they source talent from numerous sources providing you respite from the hassle of going through candidates before selecting the ones that you need. 

The uncertainty element of employee attendance is largely reduced when you hire a temp agency because they provide you a replacement if the one they allotted you fails to show up. You are also freed from the problems of payroll. 

While the employees might be entirely on your staff, they will be on the temp agency’s payroll which means that the temp agency will be responsible for all payments towards the employee’s services. This, however, does not absolve you of the liability as a principal employer towards ensuring that the temp agency employees are paid. It just removes the onus from you.

Benefits of temporary agencies

Temp agencies are a fairly straightforward form of HR consultancy business. They source talent and the candidates applying to be part of the temp agency submit their areas of talent and their skill level, followed by an assessment on part of the temp agency to verify the same. 

Whenever a job opportunity arises, the temp agency contacts the relevant candidate and forwards the profile to the company. That means the company can be assured that the candidate being referred to them possesses the required skill set to work on the job, removing the hassle of training them afresh.

How Do the Payments Work with Temp Agencies?

The payment is pretty straightforward too. Temp agencies, in the contract with the company, provide a flat hourly rate, or a fixed rate for a fixed duration. This typically includes the markup over and above what is paid to the employee. The markup is typically 50% or above of the employee’s hourly rate. 

Everything else is taken care of by the temp agency, including the health benefits and statutory compliances. The company typically negotiates the payments to the employees including the additional benefits they’d like the employees to be provided with and the fee varies depending on that. 

Apart from this, the organisation need not pay the employees anything. While this might seem costly prima facie, in the long run, it proves cheaper for the organisation especially if the organisation’s projects are seasonal in nature or the projects are case-to-case unique. 

How PaySquare Assists Organisations?

With PaySquare, organisations can hire talent from the temp agencies and enrol the staff members on PaySquare’s payroll system thus removing the accounting and the calculations of each employee who has worked during the said period. 

With the employment terms being flexible, organisations can let the employees go if the project is not seen through, or if the employee is no longer needed for any purpose. Therefore, all the formalities from joining to administering benefits can be taken care of by PaySquare which means the individual contributions to the organisation and the individual differences in payroll are accounted for accurately. 

PaySquare also provides a horde of services including providing required documents from the CTC break-up to the policies and practices of the organisation regarding the accident policies, health benefit policies and retirement policies.

Reasons to Hire Temp Agencies

Having said all that, here are 7 reasons why organisations should hire temp agencies:

 1.)    Reduces Costs

Employing a temp agency reduces the cost of maintaining a dedicated in-house HR department whose job it is to take care of all the employment requirements from inviting applications to issuing offer letters. This funding can be utilised elsewhere by the organisation to strengthen its market standing.

 2.)    Helps Small and Medium Organisations

Small and medium organisations would still need to expand so that they can increase the scope of their business. Temp agencies and payroll organisations like PaySquare assist these companies by removing that burden thereby ensuring that these organisations divert those resources elsewhere so that they can generate return on their investment.

3.)    Seasonal Requirements

Organisations might have a sudden and seasonal spike in employee requirements. These requirements might generally be short-lived which means organisations can’t really afford to hire employees. In that period, it is usually easier to contact a temp agency to hire a temporary worker to meet the seasonal need of the organisation.

4.)    Talent Sourcing

Temp agencies typically have a lot of experience because they are specialised in this field. This means that you get the appropriate skillset for the job that you require. If the performance is satisfactory, then the organisation can get the employee released and be on the permanent rolls of the organisation after paying the temp agency a certain fee for releasing the employee.

5.)    Increased Flexibility 

Whether an organisation is planning expanding or downsizing, vertical, horizontal or concurrent expansion, they have the flexibility to hire or let go of employees when they go through temp agencies. 

They are not obliged to retain the employees and therefore most certainly are not obliged to pay any severance pays or retirement packages which can cost the organisation a sizeable chunk of money depending upon the position that the temp agency employee has been hired for.

6.)    Saves on Training

Since most of the candidates that the temp agency sends are qualified personnel, the organisation can save a lot of time in training and acclimatisation into the work culture of the organisation and directly put the employee into work which saves the productivity per man-hour and the rate of efficiency gleaned from the employee. The resultant savings help boost the profits of the organisation

7.)    Legal Compliances

Temp agencies and payroll companies like PaySquare keep themselves updated with the statutory requirements which means that the organisation need not keep abreast of the rules that are applicable to the organisation beyond what are applicable to them. Therefore, organisation is saved from the hassle of remembering and following the legal requirements and the investment that goes into maintaining a roster of the statutory compliances.

 Why Hire Temp Agencies over Independent Contractors?

One of the main arguments that one can make in favour of choosing temp agencies is that the employees are part of the organisation itself. That means the employees use the organisation’s equipment and are integrated into the organisation’s work culture. Independent contractors on the other hand, are not really part of the organisation. It is only leasing them for the work to be completed. 

benefits of temp agency

That means organisations won’t have complete control over the project; only oversight and supervision. They can’t assure the requisite or planned quality in the work delivered. The training that is provided to the temp agency workers is to the organisation’s standard and therefore consistency can be maintained. Independent contractors on the other hand, work their own hours, come with their own training and it is hard to vet their training and expertise. 

These factors come into critical play when organisations are choosing employees for projects that are required to be completed under a strict deadline, or those that require vetted skillset and experience.