Choosing an HR Staffing Agency

When I shared the news that I was joining the leadership team of an HR staffing agency with my fellow HR colleagues, I was met with more than one quizzical look. Many asked, “Why would you do that?” And as a career HR person, I understood why they were questioning the move. Agencies and external recruiters have a pretty bad reputation in the collective. Most internal talent acquisition and human resource leaders use agencies as a last resort, a necessary evil. At Merit HR, a company founded and led by former internal HR people, our concern about the negative perception of “recruiters” or “agency” was so strong that for the first 25 years of our existence, we purposely didn’t use the terms.

And there are many great reasons to use an agency as well, the top of which is faster access to better talent. HR staffing agency teams spend a significant amount of their time cultivating a talent pool. Given the frequent touch points with talent – even in the absence of a potential role – they have expertise in market conditions that an internal recruiter might not have. Or, there is no internal recruiter, “outsourcing” a search – temporary or direct hire – allows internal staff to focus on other priorities, saving valuable time spent to source and evaluate candidates until a few finalists who are “pre-qualified” are identified. In the case of a temporary role, the agency also is the employer of record, providing a mitigator for liability for employment claims as well as greater flexibility in terms of varying demand.

With more than 10,000 staffing agencies in the United States, there are bound to be a good percentage of “bad” ones, the ones we all have stories about, and which create the negative stereotype. And, logically, a good number of “good” ones as well.

With three decades of HR leadership experience and now six as a staffing agency leader, a few perspectives on finding a “good” HR staffing agency.

  1. What kind of support do you need?

The staffing industry is very broad. Agencies can vary greatly.  Are you looking for an HR staffing agency to only provide temporary staffing support? Do you anticipate converting (hiring) temps that are assigned to you? Do you want a partner who also provides direct hire search (“head hunting”) services or consulting? Do you have a national or global presence and want a single partner? How important is experience in the role? With the geography? The industry? For example, Merit HR has only filled HR roles for the past thirty years – any industry and any size organization but only HR.

General service agencies tend to work on every type of role and for any industry. Others, like Merit HR, are niche or specialty agencies. Both offer advantages. What is most important to you?

Working with an agency should produce faster and better results than one can achieve on one’s own. If it doesn’t, then perhaps it is time to look for another agency.

  1. What does it “feel” like to work with them?

Sure, it’s business and some think “feelings” don’t matter. We can use the term “evaluate your interactions” to be more professional. And your interactions during the vetting process are a likely a good reflection of what a potential member of your team – the candidates- might experience. A good agency will work to understand the role in terms of desired skills, attributes and outcomes as well as how the role fits into the larger organization and with whom the potential team member will interact. They will want to know about your culture and “fit”. In many ways, choosing a staffing/search partner is like choosing a member of your internal team. They will ask questions that move beyond “what” to “how”. This is particularly true for professional level roles like HR. Do they “fit” with how you work best? The best agencies can adjust their own processes to integrate into yours.

The firm will be, after all, your agent, which by definition is someone representing or working on your behalf. Will they represent you and your opportunity well? In the world of talent, everything counts. That includes the candidates experience with the agency itself. The best talent is not going to respond to a recruiter from an agency who isn’t knowledgeable and responsive. Therefore, if your “agent” isn’t both of those things, you will miss out on the best talent. An agency’s reputation matters both with other clients and candidates

  1. What are their fees and how are they determined?

When it comes to temporary staffing – where an individual is assigned to your organization and the agency is the employer of record – most staffing agencies work on the concept of markup which is a percentage multiplied against the agencies cost. Generally, the fee is cost plus mark, “bill rate” in the industry parlance, is charged per hour. Mark ups can vary greatly – between 30-150%. Another variable is what is included in the cost against which the markup percentage is applied. Some agencies only have direct expense (payroll, taxes, mandated benefits), others include overhead costs as well. Most agencies will not reveal their exact markup as they consider it confidential pricing information.

For example, at Merit HR the difficulty of the role to fill and the dynamics of the market can impact the markup. We work within a markup depending on circumstances, most notably, what it is going to “cost” Merit HR to secure the talent you seek.

For a direct hire search, fees are generally a percentage of first year compensation. For contingent firms the percentage is typically in the 20-30% of base cash compensation (meaning excluding any incentive or variable compensation, signing bonuses, etc. the successful candidate might receive). A fee is only due IF a candidate is selected and hired. Basically, the agency works for free sourcing and screening candidates on your behalf until and unless you select someone.

Retained search firms tend to be the 30+% range and often include all compensation. Fees are generally paid at the beginning of the search and at predetermined timeframes during the search.

A third but less common fee arrangement for a direct hire search is a hybrid of contingent and retained, often referred to as “contained” search. Generally, a small deposit is paid at the outset of the search with the remainder of the fee.

  1. Do they offer guarantees?

Guarantees typically only apply to direct hire search roles. The industry standard for a contingent search guarantee is 90 days, meaning that if the candidate leaves voluntarily or involuntarily during the first 90 days of employment, the agency will perform another search without earning an additional fee. Few agencies offer money back guarantees as the selection of the successful candidate is the client’s decision.

In retained search, guarantees are typically longer.

  1. How do they source candidates for your role?

Working with an agency should be more than outsourcing who “posts” the job. The best agencies use a variety of methods from posting on relevant HR job boards to having an internal data base to “hunting” candidates who meet the desired profile on places like LinkedIn as well as doing direct outreach to asking folks in their network for referrals to others who might be a fit. The goal should not be to give you the best of who applied or the best of who they already know but rather the best that can be found for your role after employing ALL of these strategies. Cultivating and maintaining an engaged talent pool is a core function in any agency environment.

  1. What is their internal screening process before a resume comes to you?

The complexity of the screening process is usually a reflection of the complexity of the role. For high volume roles such as warehouse workers, it might only be a paper review against a set of criteria before a person is sent out on an assignment, though most agencies conduct at lease a cursory interview.

For professional level roles, there are generally multiple conversations about the role based on the profile the recruiter has developed with you. The candidate is given information about your organization as well as who they will be working with so that they can do their own research and determine interest level. The recruiter will then “write up” the candidate, detailing key reasons the agency feels they are a fit, sending the write up along with a resume for your review. Some clients prefer these presentations to be verbal. Most agencies include the bill rate if it is a temporary or staffing candidate or the desired annual compensation if it is a direct hire role with the presentation so that you know the investment level for the talents they might bring.

Receiving a mountain of resumes with no write up or talking with agency referred candidates who don’t know anything about the role or your company when you speak with them are two red flags that your agency might not be earning their fees and that might be a better partner.

  1. What do they do after the fill?

Good agencies continue to follow up with both the placed candidate and the client contact after the first day. The best relationships are just that – a relationship in the ongoing sense.


  1. Do they keep customer satisfaction metrics and what are the results?

Just like good examples of every industry, good agencies are obsessed with continuous improvement and engaging their clients to help them progress. Whether is through conversation or an official survey of some sort, the agency should want to know how they did in filling your role as well as how they can do better.

At Merit HR, we use the Net Promoter Score (NPS) methodology and are proud of our 88% result in an industry whose average is a-2%.

  1. Do they consider the talent a client as well?

The candidate experience – whether internal or with an agency – can’t be overemphasized. The best agencies understand how important great talent is in the success of any organization. They view the candidates as clients just as much as the paying customer, helping them find great fits for their career goals and staying in touch over time.

  1. Do they have expectations of you?

Like any top performer, a good agency doesn’t consider the relationship one-sided. They want to do good work for you and earn their fees through sending you quality candidates who produce results and accomplish your organizations goals. To do that, the agency professionals need to understand your preferred operating style and your internal hiring process. The bane of any agency recruiter’s existence is a non-responsive contact at the client as it makes it impossible to keep the candidate informed of their status or progress, thereby damaging the relationship with the talent and the reputation of the agency in the marketplace. To best engage for a successful result the agency will ask if there is internal alignment on the role, if the selection process has been defined, what the anticipated timeframe for bringing someone on board is, and, most importantly, they will ask for regular feedback. First so that they might give the candidates the disposition of their application and thereby maintain that relationship even if the candidate is not moving forward and just as importantly, to hone the search. Feedback on what skills and characteristics you like or dislike – from either the review of documents or after interviews – is crucial to making adjustments to the search. The more feedback and the more direct and immediate the feedback, the better the result.

Working with the right staffing agency partner can produce phenomenal results saving both time and money. Like most things in life, the devil is in the details. Having sat on both sides of the desk – HR leader and now staffing/recruiting agency leader—my perspective is that the best fit is a fit for both the you and the agency. Working through the above details in the vetting process will produce better outcomes.


Happy hunting!