Escort agencies are companies that operate a booking and dispatch service that temporarily provides customers with a female or male companion at the customer's house or hotel room. Some agencies also provide escorts for longer durations, who may stay with the client or travel along on a holiday or business trip.  The escort agency is paid a fee for this service and generally the fee only includes the presence of the companion with the person who engaged the escort.
Distinction from prostitution
While it is commonly assumed that the reason for hiring an escort is to participate in a sex act, that is not always the case. Some escort agencies derive at least part of their income from providing companions at dinner functions or similar events to which the client wants to be able to go with a 'date' or a 'partner'. In some countries, sex in the escort agency context is illegal (counting as prostitution), though circumventing such laws where they exist is the purpose of many (but not all) escort agencies. Also, even if sex for money occurs, the escort has a higher degree of flexibility in refusing it than in other forms of prostitution.
From a legal perspective, escort agencies claim that they are dispatching these individuals to provide a social or conversational service, since prostitution laws often forbid taking payment for sex or communicating for the purpose of arranging a contract for sexual services. Advertisements for escort agencies often carefully skirt the legal line, and avoid specifically offering prostitution or sexual services. This fact in turn is well-known to police and the political powers, who, where prostitution is illegal, usually prefer to act against more visible and problematic street prostitution. This has been criticised as hypocrisy, especially where government licenses and taxes the escort agencies. 
Escort agencies often recruit individuals to work as escorts by placing employment advertisements in a magazine or newspaper. Escort agencies typically maintain a list of escorts of different ages and appearances to cater to the varying interests of clients. Some agencies may specifically deal in a certain type of escort. There are male-for-male, female-for-male, and female-for-female escort agencies, as well as a few male-for-female agencies. Agencies commonly specialise in only one sex. Transsexuals are available from some escort agencies.
Escort agencies typically advertise in regional publications and telephone listings such as the Yellow Pages. Some larger escort agencies maintain websites with photo galleries of their escorts. Clients contact agencies by telephone and offer a description of what kind of escorts are sought. The agency will then suggest an escort who might fit that client's need.
The agency collects the client's contact information and calls the escort. Usually, to protect the identity of the escort and ensure effective communication with the client, the agency arranges the appointment. Sometimes it may be up to the escort to contact the client directly to make arrangements for location and time of an appointment. Generally the escort is also expected to call the agency upon arrival at the location and upon leaving, which improves the safety of the escort.
The arm's length relationship between the escort and the escort agency is designed to protect the escort agency (to some degree) from prosecution for breaking laws against prostitution. If the employee is solely responsible for arranging any illegal prostitution-oriented activities, the agency can maintain plausible deniability should an arrest be made.
Income and commission
The amount of money that is made by an escort is different depending on race, appearance, age, experience (eg. pornography and magazine work), gender, services rendered, and location. Generally male escorts command less on an hourly basis than do women. Caucasian women and younger women (e.g., 18 and 19-year-olds) may earn higher fees. The gay escort agency "TOPPS", based in Washington, D.C., charges $150 an hour for male escorts, and $250 an hour for transsexuals. That agency takes $50 an hour from the contractor. In larger metropolitan areas such as New York City, female escorts working for the high-end escort agencies can charge $1000 per hour, of which the agency takes a 50% commission.
Typically, an agency will charge their escorts either a flat fee for each client connection or a percentage of the pre-arranged rate. In San Francisco, heterosexual-market escort agencies may take a $100 commission (up to a full 50% of reported earnings, not counting any gratuity received). Most transactions occur in cash, and optional tipping of escorts by clients in most major US cities is customary but not compulsory. Credit card processing offered by larger scale agencies is often available for a service charge.
In the UK, most escort agencies typically charge approximately 30% of the value of the appointment across the board and executive class agencies will be found in most metropolitan cities. Only a handful of agencies accept credit cards in the UK because of the restrictions placed by the card processing companies for cardholder not present transactions, therefore the agencies able to process such transactions tend to be the more well known and established companies.
The escort is generally allowed to charge additional fees over what the agency is being paid. This extra fees are based on the services provided. Any income earned during the encounter is generally split between the agency and the escort.
Independent escorts, also known as providers, have differing fees depending on the season, or whether the client is a regular or semi-regular customer. An escort who works less often may be able to command a premium for their exclusivity. One who sees several clients each day may charge less. Independent escorts tend to see clients for extended meetings involving dinner or social activities whereas escorts who work through agencies generally provide only sexual services.
A 2005 government survey in New Zealand (where prostitution was regulated and for most part legalized in 2003), estimated that of the 6,000 prostitutes surveyed, around 20% worked for escort agencies, while 70% were in massage parlours and 10 per cent worked privately.