How staffing, recruitment, outsourcing and work platforms work
The four business types, who employs the worker in each, how each charges, and the measures every firm watches.
Industry brief, with a one-minute summary: Staffing and outsourcingKey takeaways
- These firms sell other people's work.
- Bill rate and pay rate: what the client pays per hour, and what the worker earns per hour.
- Markup: the bill rate above the pay rate, as a share of the pay rate. A USD 30 bill rate on USD 20 of pay is a 50 percent markup, but much of that goes on employer taxes and insurance.
- Gross margin: gross profit as a share of revenue. The Adecco Group's was 19.2 percent in 2025.
Key idea
These firms sell other people's work. A staffing agency employs temporary workers and bills clients a little more per hour than it pays them, so most of its revenue passes straight through as pay: the large agencies keep about 17 to 19 percent as gross margin and about 3 percent as operating profit. Recruiters earn a fee for each permanent hire. Outsourcing firms run whole processes, such as customer service, for a client. Online platforms take a cut of payments between clients and freelancers.
| Business | What the client buys | How it charges | What decides profit |
|---|---|---|---|
| Temporary staffing | Workers for days, weeks or months: warehouse, factory, office, nursing, IT | An hourly bill rate; the agency employs and pays the worker | The spread between bill rate and the cost of the worker, and how many hours are billed |
| Permanent recruitment and search | Help to find and hire a permanent employee | A fee, often a share of the new hire's first-year salary, paid when the person starts | Placements per recruiter and the fee rate |
| Business process outsourcing (BPO) and contact centres | A whole process run for the client: customer service, claims, payroll, content checks | Per hour of agent time, per transaction, or per outcome, under multi-year contracts | Billable hours per paid hour, agent cost, attrition, automation |
| Online work platforms (gig platforms for work) | Access to freelancers or shift workers through an app or website | A fee on each payment (the take rate), plus subscriptions and ads | Volume of work on the platform and the take rate, against marketing and trust costs |
So-what
Temp staffing is a thin-margin volume business, recruitment is a high-margin but cyclical fee business, outsourcing is a utilization business, and platforms are marketplaces.
- One hour of temp work
- Key: Client pays the bill rateFor example USD 30 an hour for a warehouse picker
- Worker's payThe pay rate, for example USD 20.50 an hour
- Employer costsPayroll taxes, insurance, holiday pay and benefits the law requires
- Gross profit (the spread)Pays for recruiters, branches, sales, systems and profit
The agency is the legal employer. It pays the worker and the employer taxes, and bills the client a higher rate per hour.
Permanent recruiters work differently. A common rule of thumb is a contingency fee of about 15 to 25 percent of the hire's first-year salary, paid only if the person is hired, and 25 to 40 percent for retained executive search, where part is paid up front. Because there is almost no cost of goods, nearly all of a placement fee is gross profit, which is why recruitment profits soar in good years and collapse when companies stop hiring. Many firms also run whole hiring departments for clients, called recruitment process outsourcing (RPO).
Key measures, in plain words
- Bill rate and pay rate: what the client pays per hour, and what the worker earns per hour.
- Markup: the bill rate above the pay rate, as a share of the pay rate. A USD 30 bill rate on USD 20 of pay is a 50 percent markup, but much of that goes on employer taxes and insurance.
- Gross margin: gross profit as a share of revenue. The Adecco Group's was 19.2 percent in 2025.
- Fill rate and time to fill: the share of orders the agency fills, and how fast.
- Conversion ratio: operating profit (EBITA) as a share of gross profit, which shows how much of each gross profit dollar survives branch and staff costs.
- For outsourcing and contact centres: billable hours as a share of paid hours, average handle time per call, first-contact resolution, agent attrition, and cost per contact.
- For platforms: gross services volume (all money paid through the platform), take rate (the share the platform keeps), and active clients.
An agency in Manchester bills a client GBP 18 an hour for a temp it pays GBP 12 an hour. What is the markup on pay, as a decimal?
Why does a temporary staffing agency have a much lower gross margin than a recruiter that only places permanent staff?
Companies cut temp workers first when the economy slows. What does that mean for staffing firms?
Sources for this lesson (5)
- Recognized public explanations of case-interview concepts and terms
- The Adecco Group, Q4 and full year 2025 results, 25 February 2026
- Randstad, Q4 and full year 2025 press release (PDF: revenue EUR 23,077 million; underlying EBITA EUR 720 million, a 3.1 percent margin), 11 February 2026
- ManpowerGroup, "ManpowerGroup Reports 4th Quarter 2025 Results" (full year revenue USD 17,957 million, up 0.6 percent, down 2.1 percent in constant currency; gross profit down 2.9 percent)
- Taggd, "Recruitment fees" (contingency fees typically 15 to 25 percent of annual salary; retained search 25 to 40 percent; an industry rule of thumb)
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