If staffing agencies pay employees only half of what they charge the companies, how come when transitioning full time salaries are often lower than on a contract (because benefits are added, etc..)? I heard that many times.
On a contract, companies don't have to deal with the hassle of hiring/firing people, don't have to keep a record of employees on file and why they laid them off, reorgs are easy and short term projects can be handled well. They also get to chose between different staffing companies and can switch anytime so they pay higher rates to keep that flexibility. There are 2 kinds of staffing agencies: First, keeps 50-60% of the contract amount, pays you benefits like leaves and insurance, pays you a full time salary, and if you project ends you continue to get your paycheck while they find a new project for you. In other words, it's almost like a full time job except that your project changes and you work from client office. Second are the staffing agencies which take 5-15% of the contract amount. They just hold your Visa status and are not involved in anything beyond than that. This means no benefits, PTO, or insurance. Once the project ends, you are on your own but you would have made a lot of money by then. Hope this helps.
Your 1st example is more of a consulting organization than a staffing company. Staffing companies work almost exclusively off the 2nd arrangement as when I did staffing we would never pay or hold a candidate unless we could bill a client for it. Generally the target markup is between 50 to 100 percent depending on the relationship with a client and how much work we were getting. Generally when you see a staffing company that does work exclusively for an organization without competitors the rate will be as low as 30%
Most agencies nowadays mark up to 60%. By law they have to offer insurance since you're on their W2, even though you are working for another company. However, they put restrictions on their benefits and most usually do not pay for holiday or PTO. They only offer sick time required by law which even getting paid on that is restricted. Since most companies don't want to pay for benefits, they rather pay higher rates to an agency and relieve themselves of any hassle or risk of getting sued in the future
Typically, 2-3x amount paid to hourly contractor. If FTE placement usually first 1-2 months salary paid on signing.
My fiance was a recruiter at a staffing firm and generally it was a 40% markup. That's usually a really good deal to a company because that includes the employers contribution for taxes, cost savings of internal hr trying to source candidates and costs of benefits. In my experiences in a consulting environment an employees burden of hire is usually 60-80% of their salary. Plus some companies pay the employee lower due to the percentage of their salary that it costs to buy them from a staffing firm.