[txcwpalpha]

IME this is very common and in some situations can be beneficial for everyone involved. The company hiring the consultants get the flexibility of being able to quickly hire you/fire you if needed, rather than going through a lengthy recruiting/hiring/firing process. They pay the premium for it, but it can be worth it.

Then the consulting agency obviously makes a nice profit off of it.

And then the consultant themselves can usually benefit from it as well, because typically they get a higher wage than the average employee to begin with, and also it becomes a very easy conversation to have with the company "just hire me as a FTE instead of paying the consulting company. My salary is currently $50/hr, you're paying them $150/hr for my work. Instead you can just pay me $100/hr, and we both benefit." I've seen a lot of consultant -> FTE transitions happen like that.

That only does work if the company is actually looking for a long-term FTE, though. Like I mentioned above, a lot of the time the company is paying the premium in the first place is so that they can quickly and easily drop you off their payroll if needed. They lose out on that by bringing you on as FTE.