Just to add a few comments. I agree with all the others here.
My sick parents hired attendents the last few years, through an agency. Initially, they paid the agency $11.00/hour, and found out the attendents get paid around $7.00/hour, and then SS and taxes withheld. Currently the rate to the agency is $14/hour with the attendents making $10/hour.
Some years back, in the IT field, I was a project manager for an SAP implementation, where we paid the contractor around $100/hour to $150/hour, and found the programmers were paid around $65/hour.
Around the same time, I was talking to an IBM mainframe programmer when the agency bills the client around $40/hour, and pays him around $25.00/hour.
From what I see, what agencies charge clients, compared to what they pay the temp workers is around the range of what your agency bills, relative to what you are being paid. This I see from low paid attendents to highly paid SAP programmers.
What about your contract restrictions?? My parents went through several attendents in the last several years. For the first three, they all asked my parents to drop the agency and pay them direct the very first month or two they got there. What is boils down to is it's better getting paid $14/hour (in some cases off the books) compared to getting paid $10/hour, and then having to pay taxes on it. Apparently, they look at their temp agency as a "free booking" agency where they get a client lead, drop the agency like a rock, and then work direct for the client.
So, agencies got smart and protect themselves with contracts. It's true, it's hard to enforce. I know of cases where temp workers initially coming through agencies then work directly for the client, is not found out at all. But as others have pointed out, both the worker and the client can be sued.
How valuable is an agency??
I spoke with an SAP programmer and he tells me that he makes $10,000/month, and I know and he knows we got billed for around $15,000/month. Why didn't he go it alone?? He tells me that when he was making $15,000/month direct, he'll have a project for 6 months, then spend another 6 months trying to land another project.
With this agency, he's working day after day, month after month, year after year, and they keep him busy all the time. He makes more at $10,000/month, working 12 months of the year, much better than making $15,000/month, and only working 6 months.
And how about low paid attendents.
We did look into paying them on the books at one time. But by the time we got hold of payroll services, buying UI, WC, and general liability insurance, it's just simpler to pay them via an agency paying a few dollars extra. The big advantage too is if the attendent get sick, or goes on vacation, the agency finds another "body" for you right away.
Which why agencies are referred to as "body shops".
People don't go through temp agencies to cheat on taxes. The agencies cover the UI, WC, and in the case of the SAP project, we don't have a layer of insanely high paid people around when the project hits a low point. I was one of the company systems analysts, though I got paid well, but I would be resentful if someone got on the payroll at $150 hour, which is the going rate, and I got paid only half as much.