The Contracting Trap

Here’s something they don’t teach you about the tech industry’s hiring pipeline.

When a company hires a contractor through a staffing agency, they typically pay the agency $120-$180 per hour for a senior engineer. The engineer sees $40-$60 of that. The agency keeps the rest - not for providing tools, training, or support, but for making the introduction and handling payroll.

That’s a 60-70% markup. For context, a real estate agent takes 3-6%. A talent agent takes 10-15%. Staffing agencies take the majority.

The problem isn’t that agencies exist. Temporary staffing fills real needs. The problem is that for many engineers - especially those who face barriers to traditional job searching - contracting through agencies becomes the default, not the exception. And when it’s your default, you spend years being paid a third of what the company budgets for your seat.

The math adds up fast. A contractor seeing $60/hour ($125K annualized) might be filling a role the company budgeted at $350K total comp for a direct hire. The engineer does the same work. The company pays the same money. The difference goes to the agency.

If you’re in this situation, the way out is direct hire. W-2, no middleman, compensation based on what the company actually pays for your level - not what’s left after someone else’s cut. Washington State and several other states now require salary ranges in job postings, which means you can see what the role actually pays before you apply.

Know your market rate. It’s probably higher than what you’ve been getting.