The staffing industry has undergone some massive changes in the past decade, driven by rapid technological advancements, along with tectonic shifts in the nature of work — and where, when and how it gets done. What’s more, many staffing firms now offer a broader range of services for candidates and employers than ever before, so understanding what differentiates one type of staffing firm from the next isn’t always easy.
Here’s everything you need to know to distinguish between the four major types of staffing firms.
In everyday speech, you’ll occasionally hear "temp agency" used as a synonym for staffing firms in general. Of course, that's a mistake. What it masks are significant differences in the capabilities and services offered by different types of staffing companies.
As the name suggests, temp firms differ from full-service staffing firms in that they have one focus area: placing candidates on a temporary basis. And while there are any number of reasons why companies partner with staffing firms, seasonal spikes in the volume of work, or unforeseen talent needs related to a specific project or initiative, are some of the more common. Larger temp firms often have specialized practice areas as well as extensive rosters of talent ready to deploy on demand.
In most instances, the temp firm is regarded as the candidate's legal employer, holding responsibility for paying benefits, wages, workers' compensation claims and more. But that's not always the case — which is why it's one of five essential questions you should ask when evaluating a potential partner.
These companies offer broad-based services and have some of the most extensive capabilities for solving end-to-end business problems for their clients.
Full-service staffing firms are large companies, often with specialty business lines that can leverage domain expertise to clients in a wide range of talent markets — from life sciences to engineering, nursing and human resources. They’ll often bring proprietary technology solutions, with a focus on cost reduction, increased efficiency and growth.
To understand the potential bottom-line impact, you should ask for case studies involving your industry and company size when working with a full-service staffing firm.
Retained search and executive search firms are yet another staffing model, but be careful to distinguish between the two. While similar in many ways, they don't always overlap.
Let's start with retained search: "Retained" refers to the fact that these companies are contracted by employers. These are often exclusive relationships, meaning the retained firm oversees all candidate sourcing for the company, typically focusing on executive and higher-level roles. The idea behind the arrangement is that, when these companies hire, the retained search firm will have developed a nuanced understanding of their culture and needs, which will pay off in the form of higher-quality candidates.
Executive search is in most respects similar to retained search. However, whereas retained search is primarily used to source candidates for senior-level roles, executive search is exclusively for executive-level candidates. Typically, executive search firms also focus on nurturing relationships with "passive candidates" — executive-level leaders who aren’t actively seeking new employment opportunities but are open to learning about an enticing offer. Like retained search firms, executive search firms are generally paid a fee by the client, in addition to a percentage of the first-year salary of any new hire they sourced.
In evaluating these types of staffing firms, try to think holistically about your goals and needs when it comes to talent — after all, most companies tend to have more openings at the bottom than the top.
Boutique, niche and specialist firms make up the fastest-growing segment of the staffing ecosystem. These providers focus on building candidate pipelines within specific skill sets or geography. In many instances, these companies are tech-oriented — for instance, offering developers or programmers on demand. At the same time, that also means most of these companies are severely restricted in their ability to deliver value to clients outside of their geographic region and specialized skill sets.
When working with boutique, niche or specialist firms, be sure to ask about the scope and scale of the talent solutions they offer — and think about how well these align with your short- and long-term business goals.
Now that you understand the different types of staffing firms, you should have a clearer sense of the best partner for your business. And to help you out, we've also put together a guide to the pros and cons of working with each type of staffing firm discussed in this article.