How to start a staffing agency: a step-by-step guide for 2026
The short answer
To start a staffing agency in the US, choose a niche and decide whether you will place people in permanent jobs, supply temporary workers on your own payroll, or both. Form a business entity with your state and get a free EIN from the IRS. Then check state and city licensing: New York, Massachusetts, Illinois and New Jersey, among others, license, register or certify employment or staffing agencies, and the rules often depend on whether job seekers pay a fee. If you employ temporary workers, you take on employer duties: payroll taxes, unemployment insurance, workers’ compensation, a Form I-9 for every hire, and wage-and-hour rules. Finally, set your terms of business, fund the gap between paying workers and being paid, and win your first clients.
Every legal, tax and fee figure links to an official source, read on 1 October 2026.
Starting a staffing agency, step by step
The official steps in order. Each is explained below with its source.
| Step | What to do | Where | Official cost |
|---|---|---|---|
| 1. Choose your model and niche | Permanent placement, temporary staffing or both, in sectors you know | Your own market research | – |
| 2. Form the business | Choose a structure and register with your state; register a DBA if you trade under another name | Your Secretary of State or state business agency | Set by your state |
| 3. Get an EIN | Apply online for an Employer Identification Number | IRS | Free |
| 4. Check licensing | State and city rules for employment, placement and staffing agencies | Your state labor department or consumer affairs agency | Varies; NYC: $125–$875 and a $5,000 bond |
| 5. Register as an employer | State tax accounts, unemployment insurance and new-hire reporting | Your state | State payroll taxes |
| 6. Set up payroll and insurance | Withhold income tax, pay FICA and FUTA, arrange workers’ compensation | IRS and your state | Payroll taxes and premiums |
| 7. Verify every hire | Complete Form I-9 for every employee; use E-Verify where required | USCIS | Free |
| 8. Win clients and candidates | Terms of business, a target client list and a screening process | Your market | Your time and software |
Choose your model: staffing, recruiting or both
Agencies make money in two main ways, and the choice shapes everything else, from licensing to cash flow.
In temporary or contract staffing, the workers are usually on your payroll. You pay them, bill the client an hourly rate, and keep the difference after wages, payroll taxes, insurance and other employer costs. You take on employer duties and you need cash to pay workers before clients pay your invoices.
In direct-hire recruiting, or permanent placement, the client employs the person you place and pays you a fee, often a percentage of first-year salary. You don’t run payroll for placed candidates, but revenue is lumpier and depends on placements closing.
Pick a niche you know: a sector, a role family and a geography where you already have contacts. A narrow niche makes it easier to win the first clients and to find candidates they can’t find themselves.
Form the business and get an EIN
The Small Business Administration says to choose a business structure before you register with your state, because it affects your taxes and your personal liability. With a sole proprietorship you can be held personally liable for the business’s debts; corporations offer owners the strongest protection. Many founders talk to an accountant before choosing between an LLC and a corporation.
Most states require you to register with the Secretary of State or a similar business agency, and you may need to register a “doing business as” name with your state, county or city.
Next, get an Employer Identification Number. The IRS issues EINs online, immediately if approved, and never charges for one. You need it to hire employees, including temporary workers on your payroll.
Check state and city licensing
The SBA’s licensing guide lists no federal license for employment or staffing agencies, but it notes that states regulate a broader range of activities than the federal government. Licensing for agencies is set by states and some cities, and it often turns on two questions: do job seekers pay you a fee, and are the workers on your payroll?
These examples come from each regulator’s own website. They are not a complete list; check the labor department and consumer affairs office for every state and city where you will recruit or supply workers.
| Where | Who is covered | Published fees and bonds |
|---|---|---|
| New York State (outside NYC) | Agencies that charge a fee for placing a candidate with a third-party employer; the state notes some exceptions | $125 to $700 for a two-year license, plus a $5,000 surety bond |
| New York City | Agencies providing job assistance for a fee. Not needed by staffing agencies whose workers are their own W-2 employees, or by employer-paid agencies placing commercial, clerical, executive, administrative and professional applicants who are never charged | $125 to $875 depending on headcount and filing date, plus a $5,000 bond; not allowed in a residential building |
| Illinois | Private employment agencies (recruiters paid solely by employers are excluded); day and temporary labor service agencies must register, though agencies staffing only clerical or professional workers may be exempt | Private agency: a $5,000 bond and a one-year license. Day and temporary labor: $3,000 a year plus $750 per branch |
| Massachusetts | Staffing agencies must be licensed as employment agencies or registered as placement agencies, even without an office in the state | Credentials last one year; fees are set by the Department of Labor Standards |
| New Jersey | Temporary help service firms must be certified by the Division of Consumer Affairs, and clients may not contract with uncertified firms | Not stated on the pages we read |
| California | Agencies paid by job seekers are regulated; agencies charging fees exclusively to employers are exempt, except for babysitting and domestic placement | A $3,000 bond for covered agencies, filed with the Secretary of State |
Agricultural staffing needs federal certification
The Department of Labor says the Migrant and Seasonal Agricultural Worker Protection Act requires a contractor to obtain federal certification before performing any farm labor contracting activities.
Your duties as the employer of temporary workers
When temporary or contract workers are on your payroll, you are their employer for tax, wage and immigration purposes. These are the federal basics; states add their own rules.
- Withhold federal income tax from wages, and pay Social Security tax (6.2% from you and 6.2% from the employee, on wages up to $184,500 in 2026) and Medicare tax (1.45% each).
- Pay federal unemployment tax (FUTA) from your own funds: 6.0% on the first $7,000 paid to each employee, with a credit of up to 5.4% for state unemployment taxes you pay.
- Register for state unemployment insurance. Each state runs its own program and sets its own tax rates.
- Arrange workers’ compensation through a commercial carrier, self-insurance or a state program, as your state requires.
- Report new hires to your state within 20 days of their hire date.
- Complete Form I-9 for every person you hire. E-Verify is voluntary at federal level, but it is required for some federal contracts and by some states.
- Pay at least the federal minimum wage of $7.25 an hour, or your state’s higher rate, and overtime at time and a half for covered employees after 40 hours in a workweek.
You may share employer status with your clients
EEOC guidance says a staffing firm and its client can both be employers of a worker when both have the right to control the work, and that a staffing firm is liable if it honors a client’s discriminatory assignment request. OSHA says staffing agencies and host employers are joint employers of temporary workers and are both responsible for a safe workplace. In April 2026 the Department of Labor proposed a new joint-employer rule under the FLSA, FMLA and MSPA, with comments closing on 22 June 2026; check whether a final rule has been issued.
Anti-discrimination law applies to agencies of any size
The EEOC says an employment agency, such as a temporary staffing agency or a recruitment company, is covered by the laws it enforces if it regularly refers employees to employers, even if it isn’t paid for the referral, and no matter how many employees it has. An agency may not discriminate against its own employees or in its referral practices.
In practice, that means job-related criteria agreed with each client, the same screening questions for every candidate on a role, and a record of why candidates were or weren’t put forward.
Fund the start and the payroll gap
Temporary staffing has a built-in cash gap: you pay workers on your payroll schedule, while clients pay invoices on their payment terms. Work out how big that gap gets as you grow, and how you will cover it, before you take on your first large contract.
The SBA’s 7(a) loans go up to $5 million and can be used for working capital. Its microloans go up to $50,000 through intermediary lenders, with an average of about $13,000. The SBA also describes CAPLines, 7(a) lines of credit for businesses with short-term or cyclical working capital needs.
How big the staffing market is
The Bureau of Labor Statistics counted about 2.52 million people employed in temporary help services in August 2026 (preliminary, seasonally adjusted). The American Staffing Association, an industry body, says nearly 2.2 million temporary and contract employees worked for US staffing companies in an average week in 2024.
From registered company to first placement
The practical work that wins the first clients, once the legal set-up is under way.
- 01
Step 01
List your first ten clients
Name ten companies in your niche you can reach this month, and the person at each who signs off on agency spend. Your first placement will almost certainly come from this list. - 02
Step 02
Write your terms of business
Fees or margins, payment terms, rebate or replacement periods, and what happens if a client hires a temporary worker directly. Have a lawyer review them before the first client signs. - 03
Step 03
Choose a small software stack
An ATS or recruitment CRM for candidates and clients, a job board or two, and a way to screen applications quickly. Our guides compare agency software and list published prices. - 04
Step 04
Build a repeatable screening process
Use the same phone screening questions, structured interview questions and scorecard for every candidate on a role, so clients get comparable shortlists from day one. - 05
Step 05
Track a few KPIs from week one
Placements, fill rate, time to first shortlist and interview-to-offer ratio are enough to start. The business plan template includes the formulas.
Screen every applicant without hiring a team first.
A new agency usually has more applicants than consultant hours. Beatview screens every application against the criteria you agree with each client and runs structured AI video interviews, so you can present evidence-backed shortlists quickly and spend your time on clients. The Free plan covers one active job with unlimited candidates; AI interviews are on Pro.
Starting an agency: frequently asked questions
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It depends on where you operate and how you charge. There is no federal license listed for staffing agencies, but states and some cities license, register or certify them. New York, Massachusetts, Illinois and New Jersey are examples, and rules often differ for agencies that charge job seekers a fee. Check the labor department and consumer affairs office in each state and city where you work.
There is no single figure. Some costs are fixed by government: an EIN is free, state registration fees vary, and licensing can range from nothing to fees and bonds such as New York City’s $125 to $875 plus a $5,000 bond, or Illinois’s $3,000 a year for day and temporary labor agencies. For temporary staffing, the largest need is usually the cash to pay workers before clients pay you.
A staffing agency usually employs temporary or contract workers and supplies them to clients, earning a margin on each hour worked. A recruiting agency places candidates directly with the client, which employs them, and earns a placement fee. Many agencies do both.
Usually, when the workers are on its payroll. The agency withholds and pays payroll taxes and completes Form I-9. For some purposes the client can also be an employer: EEOC guidance and OSHA both describe staffing firms and clients as joint employers in many cases.
Sometimes, but check local rules first. New York City, for example, says a licensed employment agency cannot operate in a residential building. Zoning and licensing rules differ by city and state.
Through placement fees on permanent hires, often a percentage of first-year salary, and through the margin between the bill rate charged to clients and the cost of temporary workers, including wages, payroll taxes and insurance.
About this guide
This guide is general information, not legal, tax or financial advice. Rules differ by state and city and change over time; check the official sources and talk to a qualified adviser before you start. Beatview publishes this guide and sells screening software to recruitment agencies. Spotted something out of date? Tell us.