What is a temp agency? And how does it work?

If you’ve ever had to cover a sudden staff gap or take on a short-term project, you’ve probably heard of a temp agency.

Temporary staffing is a big part of today’s flexible workforce. In fact, the American Staffing Association reports that nearly 2.2 million temporary and contract employees worked for U.S. staffing companies in an average week in 2024.

Temp agencies help businesses find workers fast, while giving job seekers flexible work. So whether you’re a business facing a busy season or a worker between jobs, knowing how they work can save time, money, and stress.

This guide answers the question “what is a temp agency?” It also explains how temp agencies work and when they’re the right choice.

What is a temp agency?

A temp agency, short for temporary staffing agency, is a firm that connects businesses with short-term workers. These workers, often called temps, fill positions for a set period, from a few days to several months.

Companies turn to temp agencies when they need help quickly. For example, an employee goes on leave, demand spikes, or a project needs extra hands.

The agency recruits, screens, and hires the workers. Those workers are usually the agency’s employees, but they do their work at the client’s business.

For businesses, this means less payroll, tax, and compliance admin. For workers, it offers income, experience, and sometimes a path to a permanent job.

Temp agency vs. staffing agency

People often use “temp agency” and “staffing agency” interchangeably. However, there’s a useful difference.

A temp agency focuses on short-term roles. These cover immediate gaps, such as an absent employee, a seasonal rush, or a one-off project.

A staffing agency, on the other hand, offers a wider range of services. It fills both temporary and permanent roles, and many also offer temp-to-hire placements. In those, a worker starts on a temporary basis and moves to a full-time role if it’s a good fit.

In short:

• Temp agency: short-term work
• Staffing agency: temporary, permanent, or temp-to-hire positions

If you only need help for a limited time, a temp agency is often the most cost-effective option. If you want long-term talent, a staffing agency gives you more flexibility.

How do temp agencies work?

Temp agencies act as the link between businesses and job seekers. The process usually follows five steps.

1. The client company defines its needs

First, the business tells the agency what it needs: the role, required skills, duration, and budget. That brief helps the agency find the right person.

2. The agency recruits and screens candidates

Most agencies keep a pool of pre-screened candidates. When an order comes in, they match it to suitable people, run interviews, check references, and confirm each candidate meets the brief.

3. The agency hires the worker

Once a candidate is chosen, the agency employs them. As a result, the agency handles the worker’s pay, payroll taxes, and any benefits.

4. The worker is assigned to the client

Next, the temp starts work at the client’s site, or remotely if the role allows. They take direction from the client but stay on the agency’s payroll.

Responsibility is still shared, though. The U.S. Equal Employment Opportunity Commission notes that staffing firms and their clients share EEO responsibilities toward temporary workers. So both must follow anti-discrimination laws.

5. The agency manages payment and performance

Finally, the client pays the agency, and the agency pays the worker. The agency may also handle performance issues and send a replacement if needed.

This setup works for both sides. Companies skip most of the recruiting and onboarding work, while workers get assignments that fit their schedule and skills.

When to use temp agency services

A temp agency isn’t right for every situation. However, it’s often the smartest choice in these five cases.

• Seasonal or peak workloads: Retailers, hospitality firms, and manufacturers often face busy seasons. Temps help with seasonal employment needs without long-term commitments.
• Absences or sudden turnover: When an employee goes on leave or resigns, a temp keeps work moving until you find a replacement.
• Project-based work: For a short project, a temp agency can supply people with the exact skills you need.
• Testing new roles or markets: Temporary staff let you test a new function before committing to permanent hires. That lowers your financial risk.
• Budget or headcount limits: Temps help you meet demand without adding permanent headcount, which is useful when the economy is uncertain.

Fill skill gaps fast with temporary workers

One of the biggest advantages of a temp agency is speed. Agencies can help you fill skill gaps quickly with people ready to start, from administrative staff to IT specialists.

For small and midsize businesses, that means scaling your team up or down with demand, without long-term employment costs. Temps also keep work moving when permanent staff are away.

Temps benefit, too. They gain experience across industries, grow their networks, and sometimes land permanent roles. In a 2014 American Staffing Association survey, about a third of staffing employees were offered a permanent job by a client.

Temps are one part of a wider contingent workforce. As work becomes more project-based, a reliable temp agency helps you stay efficient and cost-effective.