Quick answer: A temp to hire conversion fee is what a staffing agency charges when you hire one of its temporary workers as your own employee before an agreed number of hours. Most agencies charge 15–25% of the worker’s first-year salary, and the fee usually shrinks on a sliding scale and drops to $0 after about 480–640 hours worked (roughly 12–16 weeks full-time).
If you’ve had a great temp on your team for a few weeks and want to make them permanent, the conversion fee is the number that decides when you make the offer. Below we explain how these fees are set, what’s normal in the US market, and how to plan a conversion so it costs as little as possible.
What is a temp-to-hire conversion fee?
When you use a temp-to-hire arrangement, the worker is on the staffing agency’s payroll. The agency recruits, screens, pays wages, and covers payroll taxes, unemployment insurance and workers’ compensation (this is the same setup behind our payroll services). You pay an hourly bill rate that includes the worker’s wage plus the agency’s markup.
The agency earns back its recruiting cost through that markup over time. If you hire the worker away early, the agency hasn’t recovered that cost yet, so the contract includes a conversion fee (also called a buyout, liquidated damages or placement fee) to make up the difference.
How much is a typical conversion fee?
Fees are set in your service agreement, so always check yours. Across the US market, these are the common structures:
| Fee structure | How it works | Typical range |
|---|---|---|
| Percentage of salary | A share of the worker’s first-year base salary | 15–25% |
| Sliding scale by hours | The percentage drops as the worker logs more billed hours | 25% → 0% |
| Hours-based waiver | No fee once the worker passes a set number of hours | 120–640+ hrs |
| Flat fee | A fixed dollar amount, common for hourly roles | Varies |
For context, Staffing Industry Analysts survey data shows 20% of first-year salary is the most common direct-hire placement fee in the US. USA Staffing Services, a U.S. staffing back-office provider, puts the typical temp-to-perm conversion fee at 15% to 25% of first-year salary, depending on the contract and the negotiated fee model. Conversion fees are often benchmarked against direct-hire rates, then discounted for the hours the worker has already billed.
How the sliding scale works: conversion fee after hours billed
A sliding scale is the most employer-friendly model, because the longer the temp works for you, the less you pay to convert. One widely published example from a large national staffing firm:
- 0–160 hours billed: 25% of annual starting salary
- 161–320 hours: 20%
- 321–480 hours: 15%
- 481–640 hours: 10%
- After 640 hours (about 16 weeks full-time): no fee
Not every agency uses a scale. Some set one cutoff instead, and USA Staffing Services’ temporary staffing agreement checklist notes that clients can often hire without a fee after 520 or 1,040 hours worked.
Worked example
You want to hire a warehouse lead at a $42,000 annual salary.
- Convert at week 3 (120 hours): 25% × $42,000 = $10,500
- Convert at week 10 (400 hours): 15% × $42,000 = $6,300
- Convert at week 17 (680 hours): $0, the worker simply moves to your payroll
Waiting has a cost too, because you keep paying the agency’s markup each week. If the worker’s wage is $20 an hour and the markup is 40%, you pay about $8 an hour above wages, or roughly $320 a week at 40 hours. Markups vary by role, so plug in your own quoted rate. Compare that weekly cost with the drop in conversion fee to find the cheapest week to convert.
Conversion fee vs. markup: what you’re paying for
Agency markups on hourly temp and temp-to-hire workers vary widely by role. USA Staffing Services’ conversion fee guide puts temporary staffing markups at roughly 25% to 75% of hourly pay, and specialized roles such as travel nurses, cybersecurity analysts or licensed engineers can push above 100%. That markup covers employer payroll taxes, workers’ comp, unemployment insurance, benefits where required, recruiting and the agency’s margin. The conversion fee only applies if you hire the worker before the agency has recovered those costs through the markup.
Can I hire a temp directly from the agency and skip the fee?
Not without breaking your contract. Almost every staffing agreement includes a non-solicitation clause that covers temps for a set period, often 6–12 months after their last day on assignment. Hiring a worker directly, or through another agency, during that window usually triggers the full fee, and some agreements add a penalty if you didn’t notify the agency first. Talk to your account manager instead. Most agencies would rather help you convert cleanly than lose the relationship.
How to keep conversion costs low
- Agree on the hours threshold up front. Before the first temp starts, ask exactly when the fee drops to zero and get it in writing.
- Plan a 12–16 week evaluation. That’s long enough to judge reliability and skills, and often long enough to clear most of the fee.
- Ask for a temp-to-hire rate, not a pure temp rate. Many agencies offer lower conversion terms when the role is set up as temp-to-hire from day one.
- Count the full cost, not just the fee. Add weekly markup to the fee at each possible conversion date and pick the lowest total.
- Ask about payroll-only options. If you’ve already found the person yourself, a payrolling arrangement usually costs far less than a recruited placement.
When temp-to-hire is worth the fee
Temp-to-hire makes sense when a bad hire would be costly, when you need someone fast, or when you aren’t sure the role will be permanent. You see the person’s real work before committing, and the agency carries payroll, taxes and compliance while you decide. For roles you’re certain about and can wait to fill, direct hire with a one-time placement fee may cost less overall. Not sure which fits? See how our temporary staffing and direct hire options compare.
Frequently asked questions
Is a temp-to-hire conversion fee negotiable?
Usually, yes. The percentage, the hours threshold and the non-solicitation period are all commonly negotiated, especially if you’re placing several workers or committing to a longer contract.
Does the worker pay the conversion fee?
No. The fee is paid by the employer under its agreement with the staffing agency. Charging the worker would be unusual, and many states restrict it.
How many hours before a temp can be hired without a fee?
It depends on the contract. Common thresholds range from about 120 hours to 640 hours, and some agreements use 520 or 1,040 hours. Ask your agency for its exact number.
What’s the difference between a conversion fee and a direct-hire fee?
A direct-hire fee is charged when the agency recruits someone who goes straight onto your payroll, often around 20% of first-year salary. A conversion fee applies when a worker starts as the agency’s temp and you hire them later.
Is a temp-to-perm fee the same thing as a temp-to-hire conversion fee?
Yes. Temp-to-perm and temp-to-hire describe the same arrangement. The charge for bringing the worker onto your payroll early is called a conversion fee, buyout or placement fee, depending on the agency.
Talk to a local recruiter
At Jomsom, early conversions are allowed under our written conversion terms, and there is no obligation to hire a temp permanently (see our employer FAQ). We have offices in Tampa, Las Vegas, Long Island, Monmouth Junction and Fort Bend County, and offer temp, temp-to-hire, direct hire and payroll services. Request talent and we’ll walk you through the numbers for your role before anyone starts.
Sources: USA Staffing Services, “Temp to Perm Conversion Fee Staffing Agency: Complete Guide”; USA Staffing Services, “Temporary Staffing Agreement: A Checklist for Independent Recruiters”. Fee examples are illustrative; terms vary by agency and contract.
