Temp vs Perm Recruitment: Which Model Should Your Agency Sell?
Temp vs perm recruitment from the agency side: cash flow, compliance, client types and how to sell both. UK and US view, no legal advice.
Perm recruitment earns a one-off fee per placement, while temp recruitment earns a margin on every hour worked but ties up cash and brings more compliance work. Most agencies do best when they pick one model as their core and add the other where clients clearly need it, for example temp-to-perm.
Sooner or later every agency owner asks the same question: should we stay perm, add temps, or go all in on staffing? The answer shapes almost everything else in the business, from cash flow and back office to the kind of clients you chase and how your consultants spend their day.
Most articles on temp vs perm are written for job seekers. This one is for you, the person who has to sell the service, fund the payroll and keep the compliance in order.
A quick note before we start: the legal points below are a simplified overview for orientation, not legal advice. Rules change, and the details depend on your contracts and your sector. Check them with a specialist solicitor or attorney before you build your offer around them.
What is the difference between temp and perm recruitment?
In perm recruitment you introduce a candidate who then joins the client's own payroll. You are paid a one-off fee, usually linked to the candidate's salary, and your job ends after the placement (apart from any rebate or guarantee period in your terms).
In temp recruitment the worker is supplied to the client for a period of time and you stay involved throughout the assignment. You typically pay the worker (or their umbrella or limited company), invoice the client a higher rate, and keep the difference as your margin.
UK law even uses different names for the two roles. Under the Employment Agencies Act 1973, an "employment agency" finds people work with employers, while an "employment business" supplies workers who work for and under the control of someone else. Many agencies are both.
In the US, the language is usually "direct hire" versus "staffing" or "contract". Temporary help firms are classed as supplying workers to clients for limited periods, and the workers are employees of the staffing firm, not the client.
How do temp and perm make money for an agency?
The two models produce very different revenue curves.
| Perm | Temp | |
|---|---|---|
| How you earn | One-off fee per placement | Margin on every hour or shift worked |
| When cash arrives | After the candidate starts (and the invoice is paid) | Weekly or monthly, for as long as the assignment runs |
| Working capital | Low | High: you often pay workers before the client pays you |
| Revenue predictability | Lumpy, depends on placements each month | Recurring, builds up as you add workers on assignment |
| Back office | Light: contracts, invoices, rebates | Heavy: timesheets, payroll, compliance checks, credit control |
| Risk | Rebate if the hire leaves early | Bad debt, payroll errors, compliance breaches |
| Typical sales cycle | Per vacancy | Per account, then ongoing bookings |
For the actual fee levels and how to set them, see our guide to recruitment agency fees. The important point here is structural: perm sells placements, temp sells capacity.
Why temp eats cash
With temps you usually pay your workers on a weekly cycle while your client pays on 30 days or more. Every new worker you put out widens that gap. Fast-growing temp desks can run out of cash precisely because they are winning. That is why many staffing agencies use invoice finance or a back-office funding partner. Plan for it before you sign your first big temp account, not after.
What does each model demand from your agency?
Temp: process, speed and compliance
A temp desk lives and dies on fulfilment. Clients ring at 4pm needing ten warehouse operatives in Leeds for the morning shift. That means:
- A pool of compliance-checked workers who are available at short notice.
- Systems for timesheets, payroll and invoicing that do not break at volume.
- Someone who owns compliance.
In the UK, the Agency Workers Regulations 2010 give agency workers some rights from day one, such as access to shared facilities like canteens and car parking, and equal treatment on pay and certain other conditions once they have done 12 weeks in the same job with the same hirer. Your pricing has to reflect that, because a worker's pay may change at week 12.
In the US, staffing firms usually employ and pay the workers they place, which brings payroll, tax and insurance duties. Requirements differ from state to state, so get local advice before you open a staffing desk in a new state.
Perm: search depth and consultative selling
Perm is about finding the right person, not the available one. Consultants spend more time on headhunting and managing the interview process, and you sell expertise and reach rather than speed of supply. Billings also swing more: two clients freezing hiring in the same month can hollow out a quarter, so you need a deep pipeline.
Which clients buy temp, which buy perm?
Clients rarely ask for "a temp model". They have a problem, and the problem points to the model.
| Client situation | Usually points to |
|---|---|
| Seasonal peaks, for example retail before Christmas or logistics in Q4 | Temp |
| Project work with a fixed end date | Temp or contract |
| Covering sickness, parental leave or holidays | Temp |
| Volume roles in logistics, manufacturing, hospitality, care | Temp |
| Key hires: managers, specialists, engineers | Perm |
| A role that keeps getting reposted and stays open for months | Perm, sometimes exclusive |
| "We want to try someone before we commit" | Temp-to-perm |
A practical way to qualify accounts: when you spot a company hiring, look at the type of vacancies. Several identical operative roles in Chicago or Manchester suggest temp demand. A single senior engineer role open for weeks in Dallas suggests a perm search. Our guide on how to find companies that are hiring shows where to look.
How does temp-to-perm work?
Temp-to-perm (or temp-to-hire in the US) combines both models: the worker starts as a temp, and the client can take them on permanently later, usually against a conversion or transfer fee set in your terms.
In the UK, the Conduct of Employment Agencies and Employment Businesses Regulations 2003 limit how these fees work. Broadly, a transfer fee is only enforceable if the client is offered the alternative of an extended period of hire instead of paying the fee. The fee can also only be charged if the worker moves across within a "relevant period": whichever ends later of 14 weeks from the start of the first assignment or 8 weeks after the last one. Make sure your terms of business are drafted with this in mind.
In the US, conversion fees are a matter of contract between you and the client. Spell out in your agreement how the fee is calculated and whether it reduces the longer the worker has been on assignment.
For agencies, temp-to-perm is a strong door opener. It lowers the client's risk, gets you on site, and gives you a reason to stay in touch with the hiring manager.
Should your agency offer both?
Doing both can work very well, but only if you are honest about what each desk needs. A few rules of thumb from practice:
- Pick a core. Decide which model drives most of your revenue and build your systems around it.
- Add the second model where clients pull you. If perm clients keep asking for cover, add temp for those accounts first, rather than chasing new temp clients from scratch.
- Separate the economics. Track temp margin and perm fees separately, and price each on its own merit.
- Do not let temp swallow perm. Temp fulfilment is urgent by nature. Without clear roles, consultants end up firefighting shifts and stop doing perm search.
If you are still deciding how to set up the business, contingency vs retained recruitment explains the commercial models within perm.
How do you pitch temp and perm to a new client?
Lead with the client's situation, not your service list. A short phone opener that works for both:
"Hi {FirstName}, it's {YourName} from {Agency}. I'm calling about the {Role} you're hiring for in {City}, and the operative roles at the same site. Those are still open, right?"
"Are those all permanent hires, or are some of them about covering peak demand?"
That second question qualifies the account in one go. If it is perm, talk about candidate quality and reach. If it is volume or cover, talk about availability, compliance and speed. Either way, the goal of the call is a short meeting to go through their needs, not closing the deal on the phone: "Let's get 20 minutes in the diary. How does tomorrow morning look?"
Whatever you sell, the first job is the same: finding companies that are hiring right now and the person who decides. LeadFlow delivers those companies and contacts to your CRM every day, so your consultants can spend their time on calls rather than research.
Key takeaways
- Perm earns a one-off fee per placement; temp earns a margin on every hour worked and builds recurring revenue.
- Temp needs working capital, robust payroll and someone who owns compliance. Plan the cash gap before you scale.
- The client's situation points to the model: peaks, cover and volume suggest temp; key hires and hard-to-fill roles suggest perm.
- Temp-to-perm is a strong door opener, but in the UK transfer fees are restricted by the Conduct Regulations.
- Offering both works best with one core model and clear ownership of each account.
- This is an overview, not legal advice. Check the rules for your market before you change your offer.
FAQ
Is temp or perm recruitment more profitable for an agency?
Neither is automatically more profitable. Perm brings higher one-off fees with little capital tied up, while temp builds recurring margin but needs working capital, payroll and compliance resources. Which works better depends on your niche, your clients and how much cash you can put into the business.
What is a temp-to-perm fee?
It is the fee a client pays when it takes on a temp worker permanently. In the UK, the Conduct Regulations 2003 only allow it under certain conditions, including offering the client an extended period of hire as an alternative. In the US it is set by contract between the staffing firm and the client.
Do agency workers get the same pay as permanent staff in the UK?
Under the Agency Workers Regulations 2010, agency workers are entitled to equal treatment on pay and some other conditions after 12 weeks in the same job with the same hirer. Some rights, such as access to shared facilities, apply from day one. This is a summary, not legal advice.
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