The Murky Middleman – How Contracting Agencies Profit in Tech

June 16, 2021
Overview shot of one person offering the other a contract on a wooden table.

This whitepaper is the second in our series on the Contract Worker Disparity Project. Over the next few months, we’ll be sharing our insights and learnings from first-person interviews with contract workers and our industry-wide contract worker survey. To learn more about the project, check out our announcement article and our overview of contract working conditions.

Tech companies famously provide great benefits, handsome salaries, and perks that lead many to regard them as employers of choice. As we highlight through the Contract Worker Disparity Project, these coveted jobs are not the reality for everyone working in tech. 

In this whitepaper, we’re examining how contracting agencies operate, how they extract profit directly from contract workers, and how the entire system is shrouded in obscurity.

Here are some of our key takeaways:  Contracting agencies exist to supply companies with “temporary” work for a specific issue  Contracting agencies (or staffing agencies, payroll agencies, or temp firms) are an old phenomenon that got legs after World War II  Tech companies use contracting agencies for a variety of reasons - including the flexibility  of not having permanent employees on a department’s budget and the reduced legal and financial liability  There is a major lack of transparency for everyone in this process - it isn’t entirely clear how much the tech companies pay to hire the agencies, how much of a profit margin the agencies take on the contract, and how much the contract workers get paid when compared to their directly-employed counterparts at the tech company. This causes information asymmetries that result in harms to the workers.  The lack of transparency also allows the staffing agencies to avoid scrutiny in their hiring, employment and business practices.

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