How Do Locum Agencies Make Money? The Secrets to Their Business Model Revealed

If you’re looking to take up a locum position, you may find yourself questioning how locum agencies make money. Locum agencies are businesses that provide temporary staffing solutions to healthcare providers, mainly hospitals, clinics, and pharmacies. They’re the bridge that connects healthcare professionals with facilities that are in dire need of their services. Therefore, it’s essential to understand how these agencies operate and what their revenue streams are so that you can negotiate better terms of employment.

Firstly, locum agencies make money by charging a commission fee for their services; they add a varying percentage on top of the professional fee paid to you as a healthcare professional. This fee covers advertising, background checks, legal registration, and extra admin costs. Usually, the commission fee ranges between 10% to 35% of the total cost, which the healthcare providers pay. It’s worth noting that this fee shouldn’t come from your pay; it’s the healthcare provider’s responsibility to cover the cost.

Additionally, some locum agencies may charge a mark-up fee. This fee is charged to the healthcare providers when the agency provides the professional’s services. The mark-up fee covers the agency’s costs of overheads, insurances, taxes, and profits. It’s advisable to get a clear breakdown of the markup fee before agreeing to any contract, as it can vary significantly between agencies and professions.

Lastly, locum agencies operate on a volume-based business model. They earn profits when healthcare professionals continuously use their services, and also, when healthcare providers repeatedly employ healthcare professionals through their platform. Therefore, excellent customer service and building long-term relationships are integral aspects of their business.

The Role of Locum Agencies in Healthcare

In the modern healthcare industry, locum tenens (temporary staffing) is a rapidly growing trend. It involves medical professionals who work on a short-term basis to help fill gaps in staffing for hospitals, clinics, and healthcare facilities. This is where locum agencies come in to play a significant role.

  • Recruiting and Placement Services: Locum agencies act as intermediaries between healthcare facilities and medical professionals looking for temporary assignments. They maintain a pool of qualified and experienced physicians, nurses, and other healthcare professionals available to work on short notice. Their primary role is to recruit, screen, and match the right professionals to the right facility based on their specialty, qualifications, and availability.
  • Scheduling and Coordination: Locum agencies handle all the scheduling and coordination of temporary healthcare staffing assignments. They work closely with both the healthcare facility and the medical professional to ensure that the assignment runs smoothly. They coordinate the details, such as travel arrangements and lodging, to make it as easy as possible for the medical professional during the duration of their temporary assignment.
  • Legal Compliance and Liability: Locum agencies ensure that all medical professionals are legally compliant and licensed to practice in the state where the assignment will take place. They also provide malpractice insurance coverage for the medical professional during their assignment. This relieves the healthcare facility of any liabilities that may arise as a result of the temporary staffing arrangement.

Locum agencies make a commission off the hourly rate charged to the healthcare facility for the temporary staffing assignment. The commission charged by locum agencies varies and tends to be between 20% and 40% of the hourly rate paid to the medical professional. This commission covers the cost involved in recruiting, screening, coordinating and placing the right candidate for the role. It also covers other overhead costs like malpractice insurance, travel and lodging arrangements.

Factors Affecting Commission Rates Explanation
Short-term vs Long-term Assignments Long-term assignments with stable shifts are likely to pay lower commission rates compared to one-time, short-term assignments that require more effort and time investment
Location of Healthcare Facility Location affects staffing demand and supply and may result in higher commission rates if demand outweighs supply for a particular location
Specialty of Medical Professional Commission rates also depend on the specialty of the medical professional. In general, more specialized medical professionals such as surgeons or radiologists might demand higher commission rates

Overall, assistance from locum agencies can help healthcare facilities maintain a steady and reliable level of temporary staffing and provide their patients with quality healthcare.

Contract and Permanent Staffing

Locum agencies make their money by providing temporary staffing solutions for healthcare facilities. These solutions include contract and permanent staffing options. Both options generate revenue for the agency, albeit in different ways.

  • Contract Staffing: Contract staffing involves placing temporary healthcare professionals in healthcare facilities for a specific period. The locum agency takes on the responsibility of recruiting and screening healthcare professionals to match the specific needs of the healthcare facility. They also handle the contract negotiations and payroll for the healthcare professional. In return, the locum agency receives a percentage of the healthcare professional’s hourly rate as their commission.
  • Permanent Staffing: Permanent staffing involves placing permanent healthcare professionals in healthcare facilities. Locum agencies charge a placement fee for permanent staffing solutions. This fee is usually a percentage of the healthcare professional’s annual salary and can range from 15% to 30% depending on the position’s seniority.

Locum agencies benefit from contract and permanent staffing solutions in various ways. They can expand their network of professionals and healthcare facilities, build long-term relationships with clients and healthcare professionals, and gain a competitive edge over their rivals. They also gain a deeper understanding of the healthcare market, which can help them tailor their services to meet the needs of their clients better.

However, contract and permanent staffing solutions are not without their challenges. Healthcare professionals may not be readily available for contract staffing positions, and the contract’s length may not be long enough to attract high-quality candidates. For permanent staffing solutions, the locum agency needs to have a database of qualified healthcare professionals and the resources to screen them effectively. They also need to find the right balance between the placement fee and the healthcare facility’s budget.

Pros Cons
Expand network of professionals and healthcare facilities Healthcare professionals may not be readily available for contract staffing positions
Build long-term relationships with clients and healthcare professionals The contract’s length may not be long enough to attract high-quality candidates
Gain a competitive edge over rivals Locum agency needs to have a database of qualified healthcare professionals for permanent staffing solutions
Deeper understanding of the healthcare market Locum agency needs to find the right balance between the placement fee and the healthcare facility’s budget

Despite these challenges, contract and permanent staffing solutions are essential revenue streams for locum agencies. By providing a reliable staffing solution that meets the specific needs of healthcare facilities, locum agencies not only help fill the talent gap in the healthcare industry but also generate revenue for themselves.

Revenue Streams of Locum Agencies

Locum agencies are third-party staffing firms that provide temporary and short-term healthcare staffing solutions for their clients. These agencies are responsible for recruiting, hiring, scheduling, and managing healthcare professionals such as doctors, nurses, and other healthcare staff. Locum agencies operate in a highly competitive market and rely on revenue streams to maintain profitability.

Revenue Streams of Locum Agencies

  • Placement Fees – Locum agencies charge placement fees to clients who require temporary healthcare staffing services. These fees are typically paid up-front and are based on the number of healthcare professionals required, the length of the placement, and the skill level of the staff.
  • Management Fees – Locum agencies charge management fees to clients who require the agency to manage the staffing process. These fees are typically paid over the duration of the placement and are based on a percentage of the staff’s hourly rate.
  • Markup Fees – Locum agencies also charge markup fees to clients, which are added on top of the staff’s hourly rate. This markup fee covers the agency’s expenses, such as recruiting and training costs, as well as the agency’s profit margin.

Revenue Streams of Locum Agencies

Another source of revenue for locum agencies is through partnerships with healthcare facilities and institutions. These partnerships allow the agency to provide exclusive staffing solutions to the healthcare facility, thus generating a steady stream of revenue. Additionally, locum agencies may offer value-added services such as training and development programs to healthcare professionals, which are paid for by the individual healthcare professionals or the healthcare facility.

Locum agencies rely on effective management of their staffing process to ensure profitability. These agencies must maintain close relationships with healthcare facilities, healthcare professionals, and other stakeholders in the healthcare industry. By offering competitive pricing, a comprehensive staffing process, and value-added services, locum agencies can generate substantial revenue streams and maintain their position in the highly competitive healthcare staffing industry.

Revenue Streams of Locum Agencies

The following table provides a breakdown of the revenue streams of locum agencies:

Revenue Stream Description
Placement fees Fees charged to clients for temporary healthcare staffing services
Management fees Fees charged to clients for managing the staffing process
Markup fees Fees charged to clients on top of the staff’s hourly rate to cover expenses and profit
Partnerships Revenue generated through partnerships with healthcare facilities and institutions
Value-added services Revenue generated through training and development programs for healthcare professionals

By diversifying their revenue streams and focusing on the quality of their staffing process, locum agencies can establish themselves as reliable and profitable players in the healthcare industry.

Analysis of the UK Locum Agency Market

Locum agencies are businesses that provide temporary healthcare workers to healthcare providers such as hospitals, clinics, and nursing homes. They make money by charging a fee to both the healthcare provider and the healthcare worker for their services. In the UK, the locum agency market is thriving, with the demand for temporary healthcare workers increasing due to the shortage of permanent staff in the industry.

How do Locum Agencies Make Money?

  • The healthcare provider pays a fee to the locum agency for finding and providing them with a temporary healthcare worker. The fee charged is usually a percentage of the worker’s hourly or daily rate. This fee can range from 20% to 50% depending on the agency.
  • The healthcare worker pays a fee to the locum agency for finding them temporary work. This fee is usually a percentage of the worker’s hourly or daily rate. The fee charged can range from 5% to 20% depending on the agency.

As you can see, locum agencies make money by charging fees to both healthcare providers and healthcare workers. The more workers they provide, the more money they can make. Therefore, it is in their best interest to ensure that they have a large pool of qualified healthcare workers available for temporary assignments.

Market Analysis

The UK locum agency market is highly fragmented, with a large number of small agencies servicing local healthcare providers. However, in recent years, larger agencies have emerged, consolidating the market. These larger agencies have the advantage of being able to negotiate better rates with healthcare providers, as well as having a larger pool of workers to choose from.

In addition, technology is playing an increasingly important role in the market, with many agencies using online platforms to match healthcare providers with healthcare workers. This has made the process of finding and providing temporary staff more efficient, reducing costs and increasing profits.

Market Size (2019) £3.7 billion
Market Growth (2019-2024) 6.4% CAGR
Number of Agencies Over 3,000

Overall, the UK locum agency market is expected to continue to grow in the coming years, driven by the shortage of permanent healthcare workers and the increasing demand for temporary staff. This presents an opportunity for locum agencies to increase their profits, as long as they can effectively manage their costs and maintain a high level of service.

Innovations in Locum Staffing

Locum tenens staffing agencies have been around for decades, but recently, there have been some innovations that are changing the game.

  • Online platforms: Locum agencies are now utilizing online platforms to connect healthcare facilities with locum tenens providers. This not only streamlines the hiring process but also expands the reach of agencies to a wider audience.
  • Scheduling software: To optimize staffing needs, many locum agencies have implemented scheduling software that helps match providers with open shifts based on their skills and availability.
  • Virtual staffing: With the rise of telemedicine, some locum agencies are now providing virtual staffing options to healthcare facilities, enabling them to connect with providers remotely and expand their service capabilities.

These innovations have allowed locum agencies to increase their efficiency, flexibility, and adaptability to the changing demands of the healthcare industry.

One of the biggest concerns with locum staffing is ensuring quality and continuity of care for patients. To address this, locum agencies have also developed new procedures to improve their vetting and onboarding process for providers.

Additionally, many locum agencies offer benefits such as malpractice insurance and continuing education opportunities to attract top-quality providers and retain them as long-term partners.

Traditional Model Innovative Model
Providers work short-term assignments for a limited number of agencies Providers have access to multiple agencies through a centralized platform
Managers use manual processes to fill staffing needs Scheduling software automates staffing assignments
Providers must work on-site at healthcare facilities Agencies offer virtual staffing options to work remotely

These innovations have not only improved the hiring process for healthcare facilities but also created a platform for locum tenens providers to have greater control over their careers.

As the healthcare industry continues to evolve, locum agencies will need to adapt to new technologies and market demands to continue providing essential services to healthcare facilities and quality care to patients.

Impact of Brexit on Locum Agencies

Since the UK voted to leave the European Union, there has been uncertainty and speculation about the potential impact of Brexit on various industries. The healthcare industry, particularly for locum agencies, is one of the sectors that will be significantly affected by Brexit. Here are some of the ways Brexit may impact locum agencies:

  • Lack of EU Healthcare Professionals: The majority of healthcare professionals in the UK are from the EU. With Brexit, there may be a significant decline in the number of EU healthcare professionals that will be willing to work in the UK. This can result in a shortage of staff for locum agencies, which can lead to increased demand for their services.
  • Increased Administrative Burden: Locum agencies that work with EU workers may encounter various changes in regulations, licensing, and paperwork. The agencies will have to ensure that their staff has the correct visas, comply with the different regulations regarding healthcare professionals, and face different protocols from NHS Trusts in their newly-independent country. As a result, more work will be needed in HR departments, to fill in any gaps in administrative data and paperwork to ensure compliance. Additionally, there is the cost of doing business, including the onboarding of locums and transport, which changes the charges agencies have to make on clients.
  • Exchange Rates: The uncertainty with the Brexit deal can cause significant exchange rate fluctuations that can impact locum agencies. This result in potential upticks on the cost of locums for agencies.
  • More Competitive Market: As a result of Brexit, the UK economy has come under pressure. And in times of economic stress, businesses look for cheaper and profitable ways of running their business. The locum agencies market is already so competitive, due to the number of locum agencies, and Brexit may make it even more so. Duplicate services that are available for a lower price could drive many locum agencies out of business.

Overall, Brexit is expected to have a profound effect on the locum agency industry, and agencies will need to be constantly monitoring and adapting to the changes in the market to sustain their business.

National Health Service (NHS) Impact

The NHS is already under a lot of pressure with staff capacity concerns and equipment shortages. Among healthcare professionals who work in the NHS, a significant proportion of them are EU residents. With Brexit, many of them might choose to leave the UK or be less likely to come and work in the UK, leading to a shortfall in staffing for the NHS. To mitigate this and as an expression of the importance of EEA healthcare workers, there was an announcement in late 2019 that all EEA healthcare workers would be granted fast-track visas to enter the UK.

This move follows the creation of a proposed financial compensation scheme to streamline the visa costs that the individuals would have incurred from the proposed points-based system. However, the recruitment process would consider those from all nationalities equally.


Ultimately the risks that Brexit brings to the healthcare industry cannot be overstated, and locum agencies will have to adapt to stay in business. This is where technology can help, with more of the industry moving online to make staff management and logistics more efficient. For locum agencies, it will be a case of innovating and evolving quickly to keep up in what is expected to be a challenging market.

Brexit impact on Locum Agencies Brexit impact on National Health Service (NHS)
• Lack of EU Healthcare Professional
• Increased Administrative Burden
• Exchange Rates
• More Competitive Market
• Shortfall in staffing for the NHS
• EEA healthcare workers to be granted fast-tracks to enter the UK
• Proposed financial compensation scheme to streamline visa costs

Brexit will affect locum agencies and the NHS in various ways. While some of these changes will create opportunities, there are also challenges to overcome. Locum agencies that can adapt and innovate will be the ones who are well-positioned to thrive in the new healthcare landscape after Brexit.

Future Prospects of Locum Staffing

The locum staffing industry has seen a significant growth in recent years, and this trend is expected to continue in the future. Here are some of the future prospects of locum staffing:

  • The demand for locum staff is expected to increase due to the aging population, rise in chronic diseases, and increasing healthcare needs.
  • Advancements in telemedicine and other healthcare technologies are expected to create new opportunities for locum staffing.
  • Locum staffing agencies are expected to expand their services to other industries such as education and IT.

As the industry grows, locum agencies are also finding new ways to make money.

Revenue Streams of Locum Staffing Agencies

Locum staffing agencies make money through several revenue streams:

  • Commission: A percentage of the hourly rate paid to the locum staff is charged as commission by the agency.
  • Placement fees: A one-time fee is charged for placing a locum staff with a healthcare facility or organization.
  • Contract fees: A fixed fee is charged for providing a locum staff for a specific duration, usually a minimum of six months.
  • Managed services: Some locum staffing agencies provide managed services to healthcare organizations, which involves running the entire staffing process for the organization, including recruitment, payroll, and compliance.
  • Training and education: Locum staffing agencies may offer training and education services to their staff, which can be another source of revenue.

Locum staffing agencies also benefit from economies of scale, as they can negotiate better rates with healthcare organizations and have access to a larger pool of talented staff.


The future looks bright for locum staffing agencies, as the demand for their services is expected to increase in the coming years. With their diverse revenue streams and economies of scale, locum agencies are well-positioned to capitalize on this growth and continue to make money.

Revenue Streams Description
Commission Percentage of hourly rate charged as commission.
Placement fees One-time fee for placing a locum staff.
Contract fees Fixed fee for providing locum staff for a specific duration.
Managed services Running the entire staffing process for a healthcare organization.
Training and education Offering training and education services to locum staff.

Locum staffing agencies use various revenue streams to make money, including commission, placement fees, contract fees, managed services, and training and education. They are well-positioned to capitalize on the growth of the industry and provide valuable staffing solutions to healthcare organizations.

FAQs: How Do Locum Agencies Make Money?

Q: How do locum agencies earn income?
A: Locum agencies make money by charging a percentage of the fee paid by the healthcare facility to the locum provider.

Q: Do locum agencies charge fees to the locums they place?
A: Typically, no. Locum agencies do not charge fees to the locums they place. The locum agency’s fee is usually included in the payment made by the healthcare facility.

Q: How much do locum agencies charge healthcare facilities?
A: The fee charged by locum agencies varies, but it is typically in the range of 20-30% of the fee paid to the locum provider.

Q: Are locum agencies required to disclose their fees?
A: Yes. Locum agencies are required to disclose their fees to both the healthcare facility and the locum provider.

Q: Do all locum agencies charge the same fees?
A: No. The fees charged by locum agencies can vary depending on the agency, the type of provider needed, and the location of the facility.

Q: Are there any additional costs associated with using a locum agency?
A: Some locum agencies may charge additional fees for services such as travel and accommodations for the locum provider.

Closing: Thanks For Reading!

We hope this article has answered your questions about how locum agencies make money. Remember, locum agencies earn income by charging a percentage of the fee paid by healthcare facilities to the locum provider. If you’re a healthcare provider looking to work as a locum, it’s important to know that locum agencies typically do not charge fees to the locums they place. Thanks for reading, and be sure to visit again soon for more informative articles!