How to Open a Temp Agency: Step-by-Step Guide to Starting a Staffing Business.

Temporary staffing agencies, also known as temp agencies, play a vital role in today’s job market by connecting businesses with short-term workers. Whether companies need seasonal help, project-based talent, or fill-ins for absent employees, temp agencies provide fast, flexible workforce solutions.

If you’re an entrepreneur with a knack for recruiting or HR experience, starting your own staffing agency can be highly profitable. This guide will walk you through how to open a temp agency, including legal steps, setup tips, marketing, and best practices.

What Is a Temp Agency?

A temp agency (short for “temporary employment agency”) is a business that recruits, screens, and places workers in short-term positions at client companies. These positions may last days, weeks, or months, depending on client needs.

Temp agencies typically:

• Source and vet candidates
• Manage payroll and benefits
• Match talent to job openings
• Fill roles in admin, healthcare, IT, construction, and more

Why Start a Temp Agency?

• High demand across industries
• Recurring revenue from contract placements
• Low overhead—can be started from home
• Opportunity to scale quickly with the right systems
• Build long-term B2B relationships

How to Open a Temp Agency: Step-by-Step

Step 1: Choose a Niche or Industry Focus

Targeting a specific industry helps you:

• Build reputation and credibility
• Attract specialized talent
• Serve your clients better

Popular niches include:

• Healthcare staffing
• IT and tech roles
• Administrative and clerical
• Industrial and warehouse labor
• Hospitality and events

Step 2: Create a Business Plan

A comprehensive staffing agency business plan should include:

• Executive summary
• Market research and target audience
• Services offered
• Pricing model and markup strategy
• Sales and marketing plan
• Financial projections and funding needs

Your pricing typically includes a markup (e.g., 25–75%) over the worker’s hourly wage.

Step 3: Register Your Business Legally

Depending on your location:

• Choose a business structure (LLC, Corp, Sole Proprietor)
• Register your business name (DBA)
• Get an Employer Identification Number (EIN)
• Apply for a business license
• Get liability insurance and workers’ compensation

Each state may have specific staffing regulations—check with your state’s labor department.

Step 4: Set Up Payroll and Back-Office Systems

You’ll be paying your temporary workers regularly—even if your client pays late. Set up:

• Payroll software or provider
• Time-tracking systems
• Tax compliance tools
• Accounting software (like QuickBooks)

Pro Tip: Use Employer of Record (EOR) services to manage worker classification and legal compliance.

Step 5: Build a Talent Pool

Start recruiting qualified candidates via:

• Job boards (Indeed, ZipRecruiter, LinkedIn)
• Social media groups
• Local job fairs and community centers
• Referrals and industry networks

Conduct interviews, verify references, and collect legal documentation (W-4, I-9, etc.).

Step 6: Find Clients and Businesses to Serve

You’ll need companies willing to hire temp workers. Use:

• Cold outreach to local businesses
• LinkedIn networking and content marketing
• Partnering with HR consultants
• Offering trial placements or free consultations

Emphasize your value proposition: quick hiring, reduced HR workload, and talent flexibility.

Step 7: Create Client Contracts and Agreements

Draft legal agreements that outline:

• Markup rates or billing structures
• Payment terms (net 15, net 30)
• Replacement guarantees
• Confidentiality and non-solicitation clauses

Work with a business attorney to draft compliant, enforceable contracts.

Step 8: Invest in Staffing Software

A good applicant tracking system (ATS) or staffing CRM will help you:

• Track candidate applications
• Manage client contacts
• Schedule interviews and placements
• Store legal documents

Top tools: Bullhorn, JobAdder, Avionté, CEIPAL

Step 9: Market Your Temp Agency

Use multi-channel marketing to attract both clients and candidates:

• Professional website with clear services and testimonials
• SEO blog content targeting keywords like “temporary staffing in [city]”
• Google Business Profile for local search
• Email marketing for HR leads
• Social media on LinkedIn, Facebook, and Instagram
• Local networking (chamber of commerce, BNI groups)

How Do Temp Agencies Make Money?

Temp agencies earn revenue through markup on hourly wages. For example:

• You pay the worker $20/hour
• You bill the client $30/hour
• You keep the $10/hour margin (minus expenses)

Other income sources:

• Direct placement fees
• Retainer models
• Temp-to-perm conversion fees

Estimated Startup Costs

ItemEstimated CostBusiness registration$200–$1,000Insurance and bonding$500–$3,000 annuallyWebsite and branding$500–$2,000Payroll setup and software$100–$500/monthMarketing and advertising$500–$2,000/month

You can scale your investment gradually as revenue grows.

Pros and Cons of Opening a Temp Agency

ProsConsRecurring income from long-term contractsMust cover worker pay even if clients pay lateHigh demand across multiple industriesCan be complex to manage legal complianceFlexible and scalable business modelRequires ongoing recruiting and client sourcingLow barriers to entryCompetitive market in some cities

Conclusion

Starting a staffing firm is one of the most rewarding paths in the HR and business world. As the gig economy and flexible work continue to grow, temp agencies are in higher demand than ever. With the right foundation—industry focus, compliance, and relationship-building—you can build a scalable and profitable business.

You’re not just placing people into jobs—you’re connecting talent with opportunity.

FAQs

1. Do I need HR or recruitment experience?

It helps, but it’s not required. With the right training, tools, and advisors, anyone with business acumen can succeed.

2. Is a physical office necessary?

No. Many temp agencies start as remote or home-based businesses, especially in the digital age.

3. How do I pay temp workers before clients pay me?

Options include:

• Business line of credit
• Invoice factoring
• Payroll funding companies
• Strict payment terms (e.g., net 7 or 15)

4. What legal compliance should I know about?

• Workers’ compensation
• I-9 verification
• OSHA rules (for certain industries)
• Anti-discrimination laws

5. How long does it take to become profitable?

Most temp agencies see positive cash flow within 6–12 months, depending on niche, location, and marketing strategy.