Hiring decisions often start with salary negotiations, but that’s just one piece of the puzzle. For professional roles, the true cost of bringing someone on board includes a wide range of additional expenses, many of which aren’t immediately obvious.
Whether you’re building out your accounting, human resources (HR), information technology (IT), business professional, or marketing teams, it’s important to understand how internal hiring costs compare to working with a staffing partner. This guide will take a closer look at the cost considerations so you can decide if working with a staffing agency is the right decision for you and your business.
The Full Cost of Internal Hiring
What are the hidden costs of hiring employees internally?
When your company hires directly, you’re responsible for much more than just base compensation. In addition to wages, your business must account for payroll taxes, employer-paid benefits, and insurance coverage like workers’ compensation and unemployment.
Benefits
Professional roles often come with higher expectations for benefits, such as health insurance, 401(k) matching, paid time off, and flexible work arrangements. Delivering on those expectations adds to your employment burden, and those costs can quickly scale as your team grows.
Internal Hiring Efforts
There’s also the investment required to recruit, screen, and onboard new employees. Advertising open roles, reviewing resumes, coordinating interviews, running background checks, and managing offer letters all take time and internal resources. Once hired, new team members may require weeks or months to ramp up and begin contributing at full capacity.
Overhead Costs
Even the tools your employees need, like software licenses, laptops, and training programs, can add up quickly when you’re scaling your team. While these overhead costs are typically managed internally, working with a staffing partner can ease the financial strain by streamlining your hiring process and reducing other associated costs.
The Cost Model When Working with a Staffing Partner
How does staffing agency pricing work?
Partnering with a staffing firm offers a different financial structure. Instead of absorbing all the costs and responsibilities internally, your business pays a single, all-inclusive hourly bill rate for contract or contract-to-hire employees.
The arrangement shifts to a one-time placement fee for direct hire placements, typically a percentage of the candidate’s first-year salary. Once the hire is made, the employee joins your internal team, and your company assumes all employment responsibilities, including payroll, benefits, and compliance.
What is a staffing agency’s bill rate, and what does it include?
A bill rate includes the employee’s pay rate plus a markup covering everything from payroll taxes and workers’ comp insurance to administrative overhead and compliance management. The markup also supports the staffing firm’s recruiting efforts, benefits administration, and operational infrastructure.
What is an employer of record (EOR), and how does it reduce risk?
Most importantly, staffing partners serve as the employer of record (EOR) for every individual who is placed on assignment. This means that the staffing agency takes on the legal and administrative responsibilities tied to employment, including managing payroll, filing taxes, and offering benefits that comply with ACA requirements. Overall, this structure simplifies your budgeting process and protects your business from costly compliance mistakes or misclassified employees.
What is the cost difference between hiring directly vs. using a staffing agency?
Here’s how the two models stack up financially for internal vs. contract/contract-to-hire vs. direct hire models:
Flexibility, Efficiency, and Reduced Risk
What are the cost-saving benefits of working with a staffing firm?
While the hourly bill rate may be higher than an employee’s pay rate alone, staffing services often lead to long-term savings through greater flexibility, faster time-to-hire, and reduced exposure to HR-related risks. You’re not responsible for unemployment claims, benefits administration, or the unexpected costs of a bad hire, making this model especially valuable for businesses navigating periods of market uncertainty.
Staffing also allows for greater agility. You can bring in professionals for short-term projects, fluctuating workloads, or specific expertise without committing to long-term headcount. And if a contract-to-hire route makes sense, you have the opportunity to evaluate talent before extending a full-time offer, an approach that can reduce turnover and improve team fit.
Making a Smarter Hiring Decision
When weighing the cost of internal hiring against staffing solutions, the comparison goes beyond dollars and cents. It’s about how you allocate your team’s time, reduce administrative overhead, and avoid hidden risks.
DAHL’s staffing solutions are designed to help businesses find qualified talent quickly while staying compliant, scalable, and financially sound. If you’re looking to make a cost-conscious hiring decision without compromising on quality, we’re here to help.
Interested in learning more about staffing pricing? Check out our Learning Center resources.