Temp-to-Hire Conversion Fees: The Ones a Staffing Firm Earned and Never Invoiced

How a conversion happens without an invoice

None of the patterns below needs anyone to act in bad faith. Each is a gap between the people who hear about a conversion and the people who bill for it. They are checks, not findings; the firm’s records say which, if any, apply.

• The assignment ends with no end reason, or with “assignment complete,” and the worker turns up on the client’s payroll a few weeks later.
• The account manager hears “we’d like to bring her on” in a call, and nobody tells billing.
• The agreement has a sliding scale — a fee that falls as hours worked through the firm rise — and nobody looks up the hours, so no invoice is raised at all rather than the wrong one.
• A fee is waived on a phone call to keep the client happy, with no written record of who agreed to it.
• The client hires the worker some weeks after the assignment ends, inside the window the agreement covers, when nobody at the firm is still watching that file.
• The work runs through a VMS or MSP program whose own rules govern conversions, and nobody reads them against the firm’s agreement.

The count: twelve months of assignment ends against conversion invoices

The count needs three exports and the signed client agreements. It answers one question per client: how many conversions happened, and how many were invoiced.

• From the ATS: every assignment that ended in the last twelve months, with the client, the end reason, the planned and actual end dates, and the hours worked through the firm.
• From the invoice register: every conversion or placement-fee invoice raised in the same period, with the worker it names.
• From the agreements: for each client, the conversion terms — the fee, how it changes with hours worked, and how long after an assignment ends a direct hire still triggers it.
• Match them. Every assignment ended as “hired by client” or “converted” should meet an invoice or a written waiver. Assignments that ended early with no reason go on a short list for the account manager to ask about.

Illustrative example: a firm ends 400 assignments in a year. Twenty carry the end reason “hired by client,” and the invoice register holds twelve conversion invoices. Of the other eight, two fell outside the agreement’s window, two were waived in writing by the owner, and four have nothing — no invoice and no waiver. If each of those four would have carried a $5,000 fee under its agreement, $20,000 of gross profit was earned and never invoiced, before anyone looks at the assignments that ended with no reason at all.

What to read in each client agreement

Whether a fee is owed, and how much, turns on the signed terms and on the law of the state where the work happens. The firm’s employment attorney is the person to ask before any invoice or letter that relies on the contract. What the operator can do first is read each agreement for the same five things, so the billing team knows what to look for.

• The trigger: what counts as a conversion — the client hiring the worker directly, through another firm or through a payrolling service.
• The window: how long after the assignment ends the terms still apply.
• The fee and its base: a flat amount, a percentage of a stated salary, or a figure tied to the bill rate, and how it falls with hours worked.
• Notice: whether the client must tell the firm before or when it makes an offer.
• Waivers: whether any waiver must be in writing and signed, and by whom on the firm’s side.

An agreement that is silent on one of these is worth raising with counsel at the next renewal, not argued with a client after the fact.

Illinois caps the placement fee for some temporary laborers: 820 ILCS 175/40

One state puts a rule about conversions in statute. The Illinois Day and Temporary Labor Services Act, section 40, opens: “No day and temporary labor service agency shall restrict the right of a day or temporary laborer to accept a permanent position with a third party client to whom the day or temporary laborer has been referred for work or restrict the right of such third party client to offer such employment to a day or temporary laborer.”

It then allows a fee and sets a ceiling. An agency “may charge a placement fee to a third party client for employing a day or temporary laborer for whom a contract for work was effected by the day and temporary labor service agency not to exceed the equivalent of the total daily commission rate the day and temporary labor service agency would have received over a 60-day period, reduced by the equivalent of the daily commission rate the day and temporary labor service agency would have received for each day the day or temporary laborer has performed work for the day and temporary labor service agency in the preceding 12 months.” The section adds that placement of a laborer contracted “to provide skilled labor shall not be subject to any placement fee cap,” and defines when that applies. Section 33 adds that an agency “shall attempt to place a current temporary laborer into a permanent position with a client” when the client says it plans to hire for a similar position at the same location.

The Act’s definitions also say that “day and temporary labor” does not include labor or employment of a professional or clerical nature. This is the text, quoted, not an interpretation. Whether and how it applies to a particular firm, worker or agreement is a question for an employment attorney licensed in Illinois, and other states have their own rules; ask counsel for each state where the firm places people.

Making the next conversion visible on the day it happens

The fixes are small and cost little. They move the moment the firm learns about a conversion from months later to the day it happens.

• Make the end reason a required pick list in the ATS, with “hired by client” as its own option, and no assignment closed without one.
• Ask at every early end, in the same call: is the client planning to hire this person? The end-of-assignment call to the worker is the second place it surfaces.
• Give billing a standing report: assignments ended as “hired by client” with no conversion invoice after five business days.
• Put every waiver in writing, approved by one named person, and keep it with the agreement.
• Load each client’s conversion terms — fee, scale, window — into the client record, so whoever bills does not need the contract to find them.

The worker’s side matters as much as the fee. A conversion is good news for the person converted, and the Illinois text above protects the right to accept the job. The point of the count is that the firm invoices what its own agreement says, not that anyone is slowed down.

When this is not worth a project, and where the Review fits

Skip a project if the firm runs few temp assignments, if every conversion runs through one MSP program that bills it, or if the count above takes an afternoon and comes back clean. A clean count is worth knowing; it is not a reason to buy anything.

It is worth a second look when end reasons are blank on a large share of closed assignments, when conversion terms differ client by client and live only in the contracts, or when nobody can say who decides a waiver. The page on staffing agency consulting lays out where a staffing firm’s money waits between the job order and the cleared payment. The Revenue Review is a read-only engagement that takes two weeks: we read the firm’s own assignments, invoices and agreements, count the conversions against the invoices, and put a monthly dollar figure on every leak we can price, with a written report and a 90-day plan. We contact no candidate, contractor or client, chase no invoice and give no legal advice on the agreements. A free 20-minute call is enough to tell whether a Review fits.