Explained: How Do Locum Companies Make Money?

Locum companies are notorious for being an attractive field for healthcare staff who crave flexibility in their work schedule. They offer an alternative to full-time employment, providing physicians, nurses, and other healthcare professionals the opportunity to work on a temporary or part-time basis. But how do these companies make money? That’s the question many potential locums ask themselves when considering signing up with them.

The answer is simple: locum companies charge a premium for their services, providing healthcare facilities with a temporary workforce at a higher rate than traditional employees. This process allows healthcare facilities to fill necessary roles quickly and efficiently, without having to go through the lengthy hiring process. Not only does this save healthcare facilities time and money, but it also guarantees them flexibility in staffing their facilities, even during difficult times.

The locum industry operates on a simple business model that focuses on providing healthcare facilities with the temporary workforce they need while charging a premium for their services. While this premium can be costly, it is a practical solution for healthcare facilities that need staffing flexibility. Additionally, locums are an attractive option for healthcare professionals who enjoy the freedom of working with different facilities, gaining experience, and being able to work on their own schedule. The locum industry has clearly found a way to meet the needs of both healthcare facilities and professionals while making money in the process.

What are locum companies?

Locum companies, also known as locum tenens staffing agencies, provide temporary healthcare staffing solutions to healthcare facilities such as hospitals, clinics, and private practices. These staffing agencies specialize in supplying physicians, nurses, and other healthcare professionals to healthcare facilities requiring temporary staff.

The locum company acts as a middleman between the healthcare facility and the healthcare professional, managing all aspects of locum placement. The healthcare facility approaches the locum company with a staffing need, and the agency searches for a healthcare professional that fits the criteria of the job. Once a healthcare professional is found, the locum company coordinates all aspects of the placement including the healthcare professional’s travel, housing, and malpractice insurance.

How do locum companies make money?

  • Placement fee: Locum companies charge the healthcare facility for their staffing services which typically range from 20-50% of the healthcare professional’s hourly rate.
  • Markup: Locum companies charge the healthcare facility a markup on the healthcare professional’s hourly rate. The markups varies from company to company, but they typically range from 20-50% of the hourly rate.
  • Recruiting fees: Occasionally, healthcare facilities approach locum companies to help fill permanent job openings. In these cases, the locum company will typically charge a recruiting fee to the healthcare facility.
  • Volume discounts: Some locum companies offer volume discounts to healthcare facilities that use their services for a certain number of hours or a certain number of placements per year.

Benefits of using locum companies for healthcare facilities

Using locum companies can provide many benefits for healthcare facilities:

  • Quick access to qualified healthcare professionals to fill temporary staffing gaps.
  • Reduces the workload of internal staff tasked with finding temporary healthcare professionals.
  • Allows healthcare facilities to maintain patient care during periods of staffing shortages.
  • Can provide cost savings compared to hiring full-time staff for temporary needs.


Locum companies are a valuable resource for healthcare facilities looking to fill temporary staff gaps. These agencies provide quick access to qualified healthcare professionals while taking care of all aspects of placement. Locum companies make money by charging placement fees, markups, recruiting fees, and offering volume discounts. Overall, using locum companies can provide many benefits to healthcare facilities, including cost savings, maintaining patient care, and reducing staff workload.

Pros for Locum Companies Cons for Locum Companies
High demand for healthcare staffing creates a steady stream of business Difficulty in finding qualified professionals for certain specialties in certain areas
Large potential client pool including hospitals, clinics, and private practices Increased competition in the healthcare staffing industry
Ability to provide cost-effective solutions for healthcare facilities Inability to control the actions and performance of the healthcare professionals they place

Overall, the healthcare staffing industry continues to grow and evolve, and locum companies are an essential part of this industry’s success.

How do locum companies work?

Locum companies provide a valuable service to healthcare organizations by connecting them with healthcare professionals who are available for temporary work. These companies make money by charging a fee for their services. Here’s how it works:

  • Healthcare organizations contact locum companies when they need to fill temporary staffing needs.
  • The locum company then searches its database for available healthcare professionals who match the organization’s needs.
  • The locum company negotiates a contract between the healthcare organization and the healthcare professional, usually taking a percentage of the healthcare professional’s earnings as its fee.

For example, if a locum company placed a physician with a healthcare organization for a week and the physician earned $10,000, the locum company might take a 20% fee ($2,000) for its services.

Locum companies also provide additional services, such as credentialing, licensing, and travel arrangements, which can also generate revenue.

The benefits of using locum companies

  • Healthcare organizations can fill temporary staffing needs quickly and efficiently, without having to spend time and resources on recruiting and credentialing healthcare professionals.
  • Healthcare professionals can find temporary work easily and often earn higher hourly rates than they would in permanent positions.
  • Locum companies can provide support and guidance to both healthcare organizations and professionals throughout the placement process.

Challenges faced by locum companies

While locum companies provide a valuable service, they also face several challenges:

  • Competition from other locum companies can be fierce, making it difficult to attract healthcare organizations and healthcare professionals.
  • Healthcare organizations may have strict credentialing and licensing requirements that make it difficult to find qualified healthcare professionals quickly.
  • Healthcare professionals may have their own preferences regarding location, specialty, and work schedules that make it difficult to match them with available assignments.
  • Changes in healthcare policy and funding can affect demand for locum services.

Overall, locum companies play a vital role in the healthcare industry by providing flexible staffing solutions. While the industry faces challenges, there is plenty of opportunity for locum companies that are able to adapt to changing conditions and provide high-quality services to both healthcare organizations and professionals.

Pros Cons
Revenue stream through fees and additional services Competition from other locum companies
Provide valuable staffing solutions for healthcare organizations Strict credentialing and licensing requirements
Offer flexible and often higher-paying work opportunities for healthcare professionals Matching healthcare professionals with available assignments can be difficult
Provide support and guidance throughout the placement process Changes in healthcare policy and funding can affect demand for locum services

As with any industry, there are both pros and cons to working in locum staffing. However, for those who are willing to navigate the challenges, there is plenty of opportunity for success in this field.

The advantages and disadvantages of using locum companies.

Locum companies are businesses that connect healthcare institutions with temporary healthcare professionals such as doctors, nurses, and other allied health professionals. These companies provide services that can be beneficial to healthcare institutions and healthcare professionals, but there are also potential drawbacks to using their services.

  • Advantages:
  • Flexibility: Healthcare institutions can use locum companies to fill gaps in their staffing needs quickly and efficiently with experienced healthcare professionals.
  • Cost-effectiveness: Locum companies can provide cost-effective staffing options for healthcare institutions that may not have the resources to provide long-term employment to healthcare professionals.
  • Professional support: Locum companies can provide professional support to healthcare professionals, including assistance with locum assignments, support with compliance, and access to training and professional development opportunities.
  • Disadvantages:
  • Cost: Using locum companies often incurs additional costs for healthcare institutions as they pay for locum services on top of any other staffing costs. The cost of services provided by locum companies can also vary significantly, making it difficult for healthcare institutions to budget effectively.
  • Reliability: Locum companies may not be able to provide quality staffing services for healthcare professionals or may not be able to deliver the correct staffing level required. This can be a significant problem for healthcare institutions that require a particular skill set or staffing level.
  • Continuity of care: Use of locum healthcare professionals can disrupt continuity of care, which is a significant disadvantage in certain medical situations where a relationship and understanding of the patient are crucial.

The financial aspects of locum companies

The financial aspects of locum companies operate primarily on a commission-based model. These companies source, vet, and contract with temporary healthcare professionals to provide short-term staffing solutions, typically taking a percentage of the revenue generated from their assignments. The company may also charge additional fees for administrative services, such as compliance checks and handling insurance.

Source of Revenue Description
Commission-based revenue model The locum company takes a percentage of the revenue generated by the locum placement.
Additional Service fees Locum companies charge additional fees for administrative services, such as insurance and compliance checks.

Locum companies also need to manage healthcare professional’s payments, including accounting for taxes, benefits, and other employer obligations. They need to maintain a cash flow that enables them to pay the healthcare professionals and survive through periods of reduced demand.

The Role of Locum Agencies in the Recruitment Process

Locum companies serve as intermediaries between healthcare facilities and medical professionals seeking temporary work. These companies make money by charging a fee for their services, typically a percentage of the medical professional’s hourly pay rate. One of the main roles of locum agencies is to streamline the recruitment process, making it easier and more efficient for both healthcare facilities and medical professionals.

How Locum Companies Make Money

  • Fee-based structure: Locum agencies charge a percentage of the medical professional’s hourly pay rate as their fee. This fee can range from 20% to 40% depending on the agency and the specific placement.
  • Long-term relationships with healthcare facilities: Locum companies build relationships with healthcare facilities to ensure a steady stream of job placements, which gives them the competitive edge over their counterparts.
  • Additional services: Some locum agencies offer additional services such as credentialing, travel arrangements, and malpractice insurance at an additional cost to generate revenue.

The Recruitment Process with Locum Companies

Locum companies provide a valuable service to both healthcare facilities and medical professionals. Their main role is to match the right medical professional to the right healthcare facility, ensuring a good fit for both parties. The recruitment process typically goes as follows:

  • The healthcare facility reaches out to the locum agency with a job opening or a need for temporary medical staff.
  • The locum agency screens and identifies qualified medical professionals who meet the facility’s requirements and are interested in the job.
  • The locum agency presents the medical professional’s credentials and work history to the healthcare facility for review and consideration.
  • If the healthcare facility finds the medical professional a good fit, the locum agency handles the contract and negotiates the terms on behalf of both parties.
  • The locum agency provides ongoing support to both the medical professional and the healthcare facility throughout the assignment.

The Importance of Locum Companies in Today’s Healthcare Industry

Locum companies play a significant role in today’s healthcare industry. They provide a solution to staffing shortages and other challenges faced by healthcare facilities, while also offering flexibility and career opportunities for medical professionals. Their presence has helped improve the quality of healthcare by providing access to temporary medical staff when and where it is needed most.

Benefits of Locum Companies to Healthcare Facilities Benefits of Locum Companies to Medical Professionals
Access to a pool of qualified temporary medical professionals Flexibility and control over their work schedule
Cost-effective solution to staffing shortages Career advancement opportunities and exposure to different healthcare settings
Reduces staff burnout and promotes work-life balance Competitive pay rates and benefits packages

The difference between locum agencies and permanent placement agencies.

There are two main types of healthcare staffing agencies that exist: locum agencies and permanent placement agencies. While they both recruit healthcare professionals, they operate in different ways and serve different purposes.

  • Locum Agencies: Locum agencies (also known as locum tenens agencies) specialize in providing temporary coverage for healthcare facilities that have short or long term staffing gaps in their workforce. These gaps may be due to the need for a vacation, illness, maternity leave, or a sudden influx of patients. Locum agencies recruit healthcare professionals (doctors, nurses, therapists, among others) and match them with healthcare facilities in need of temporary staffing solutions.
  • Permanent Placement Agencies: Permanent placement agencies specialize in recruiting healthcare professionals for long term job opportunities. They work closely with healthcare facilities to understand their staffing needs and find healthcare professionals who meet their requirements. Permanent placement agencies typically receive a commission based on a percentage of the new hire’s salary for the first year of employment.

While both types of healthcare staffing agencies share the common goal of matching healthcare professionals with healthcare facilities, their processes and revenue streams are different.

How locum companies make money

Locum agencies make money by charging a fee to the healthcare facility for the services of the healthcare professional. The fee covers the healthcare professional’s salary, any necessary licensing or credentialing, and the agency’s profit margin.

The fee charged by the locum agency is typically higher than the hourly or daily rate paid to the healthcare professional. The difference between the two rates is where the locum agency makes its profit. For example, if a locum agency charges a healthcare facility $150 per hour for a doctor’s services, and pays the doctor $100 per hour, the locum agency would make a profit of $50 per hour.

Another way locum agencies make money is by charging a placement fee to the healthcare facility for each healthcare professional they place. This fee is typically a percentage of the healthcare professional’s hourly or annual salary, and can vary depending on the level of demand for the healthcare professional’s services.

Locum Agency Revenue Sources Examples
Service fees charged to healthcare facilities for healthcare professionals’ services $150 per hour charged to a healthcare facility for a doctor’s services
Placement fees charged to healthcare facilities for each healthcare professional placed 10% placement fee charged to a healthcare facility for a nurse’s $60,000 annual salary

Overall, locum agencies make their money by providing healthcare staffing solutions to healthcare facilities in need, often for a premium price.

The Costs Involved in Using a Locum Agency

Locum companies provide a valuable service to both healthcare professionals and healthcare providers. They help fill staffing shortages and ensure that patients continue to receive quality care. But how do locum agencies make money? Let’s dive into the costs involved in using a locum agency:

  • Recruitment Costs: Locum agencies have to spend time and money to recruit qualified healthcare professionals. This includes placing job ads, sourcing candidates, and conducting interviews.
  • Compliance Costs: Healthcare is a highly regulated industry, so locum agencies need to ensure their candidates are compliant with relevant laws and regulations. This includes verifying credentials, performing background checks, and ensuring they have appropriate insurance coverage.
  • Payroll and Benefits Costs: Once a healthcare professional is placed with a client, the locum agency is responsible for paying them and providing any necessary benefits, such as health insurance, retirement plans, and paid time off.

Additionally, locum agencies need to make a profit to stay in business. They typically charge a markup on the hourly rate of the healthcare professional, which varies depending on the agency and the type of position. This markup covers the agency’s overhead costs, such as rent, utilities, and staff salaries.

Here’s an example of how the costs might break down for a locum agency:

Expense Category Percentage of Revenue
Recruitment Costs 15%
Compliance Costs 10%
Payroll and Benefits Costs 45%
Overhead Costs 20%
Profit 10%

Of course, these percentages can vary widely depending on the agency and the specific situation. The important thing to remember is that locum agencies provide a valuable service to both healthcare professionals and healthcare providers, and they need to make a profit to stay in business.

The importance of reputational management for locum companies.

Locum companies rely heavily on their reputation in the healthcare industry in order to attract clients and generate income. It takes time and effort to build a reputation, but a tarnished one can be irreparable to a business. Below are 7 ways that reputational management can impact the success of a locum company:

  • Attracts clients: A locum company’s reputation is the first thing that clients will consider before doing business with them. A strong reputation will attract more clients, while a negative one can quickly repel them.
  • Drives revenue: A good reputation can drive revenue for a locum company, as clients are more likely to utilize their services and pay premium prices for their trustworthy services.
  • Creates trust: Trust is invaluable in the healthcare industry, and a locum company’s reputation is a direct reflection of the trust that clients can place in them. A positive reputation can build trust, while a negative one can erode it.
  • Retains clients: Happy clients are the key to success for a locum company. A positive reputation can help retain clients, while a negative reputation can lead to client loss.
  • Encourages referrals: Referrals are a major source of new business for locum companies. A good reputation can encourage clients to refer their colleagues, while a negative one will discourage them.
  • Increases credibility: Locum companies need to establish credibility in the healthcare industry. A good reputation can increase a locum company’s credibility and help them stand out among their competitors.
  • Builds loyalty: Loyalty is crucial for a locum company’s success. A positive reputation can build loyalty among clients, while a negative one can lead to clients looking elsewhere for services.

Managing a locum company’s reputation requires ongoing effort and attention to detail. It involves monitoring online reviews, engaging in public relations activities, and maintaining high standards of quality in the services provided. By prioritizing reputational management, locum companies can better attract clients, build loyalty, and drive revenue.

One way to maintain a positive reputation is by investing in a reliable and accurate time tracking software, such as Time Doctor, which can ensure that clients receive accurate reports and pay for only the time that was actually worked. Additionally, using tools like Hootsuite for monitoring online reviews and social media activity can help locum companies address any negative feedback quickly and communication professionally with their clients.

Benefits of Good Reputation: Consequences of Bad Reputation:
Attracts more clients Repels clients
Drives revenue Reduces revenue
Builds trust Erodes trust
Retains clients Loss of clients
Encourages referrals Decreases referrals
Increases credibility Decreases credibility
Builds loyalty Reduces loyalty

A locum company’s reputation is an essential factor in their success. By prioritizing reputational management, utilizing modern tools and resources, and upholding the highest standards of quality services, they can build a solid reputation throughout the healthcare industry.

FAQs: How do Locum Companies Make Money?

1. Do locum companies charge healthcare facilities?

Yes, locum companies provide temporary staffing solutions to healthcare facilities, and they charge a fee for their services.

2. How do locum companies determine their fees?

Locum companies determine their fees based on the level of demand for their services, the specialty of the healthcare professional needed, and the length of the assignment.

3. Do locum companies take a percentage from the locums?

Yes, some locum companies take a percentage from the locums’ pay as a form of commission or administrative fee.

4. Do locum companies receive any incentives or reimbursements from healthcare facilities?

Some healthcare facilities offer incentives or reimbursements to locum companies, such as travel expenses for the locums or referral bonuses.

5. Can healthcare facilities negotiate fees with locum companies?

Yes, healthcare facilities can negotiate fees with locum companies based on their budget and the services provided.

6. How do locum companies ensure timely payment from healthcare facilities?

Locum companies may require healthcare facilities to sign a contract with payment terms and may have their own billing and collection departments to ensure timely payment.

Thanks for Learning about How Locum Companies Make Money!

Now that you understand how locum companies make money, you can make informed decisions about your healthcare staffing needs. If you have any more questions, feel free to visit our website or contact us. Thanks for reading, and we hope to see you again soon!