Do Staffing Agencies use “Wage Skimming”?

Ask a Recruiter

Q: I just read something that said staffing agencies use “wage skimming” when it comes to paying temporary contract employees. What did they mean by that?  

A: “Wage skimming” often comes up in discussions about temporary work, with the perception that staffing agencies pay workers less than what they might get if employed directly by the company they’re working for.  

There are a lot of nuances when it comes to compensation on a staffing agency’s payroll!

First of all, any difference in pay (the hourly rate you receive from a staffing agency vs. the rate paid by a company) reflects the costs agencies bear as the employer of record, which include: 

  • Unemployment insurance

  • Worker’s compensation 

  • Social security 

  • Medicare 

  • State & federal taxes  

At Boly:Welch, these costs also include our commitment to providing health insurance and a 401(k) to contract employees, as well as our service costs like recruiting, onboarding, and running payroll. These are all factored into the bill rate charged to the client company, who gets the benefit of labor without the associated employment burdens listed above. These fees are not deducted from the worker’s paycheck, but they may play a role in the pay rate set by the client company.  

This may go without saying, but because our service fee is tied to the rate our temporary employees earn, we want you to make as much money as possible! The more money you make, the more money the staffing agency makes.  

Apart from wages, there are other value-adds that come from working on a temporary contract. While the hourly wage may be lower, temporary workers often gain diverse experiences in various industries and can take on multiple assignments that suit their scheduling needs.  

Temporary roles can also lead to permanent employment: they’re often a way for companies to assess a worker’s fit for a long-term position, which can open doors to higher-paying roles.  

Hopefully this provides a clearer picture of the nuances of wage practices in temporary work, as well as some of the benefits beyond pay.  


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