How Much Do Staffing Agencies Make Per Employee

How Much Practise Staffing Agencies Accuse?

A quick guide to help you lot sympathize the direct costs and service fees built into the staffing bureau neb rate for your business.

Have you ever felt like calling upwards your staffing agency and maxim, "You've got to be kidding me… you are paying 'our' employee $20/hr. and billing us $32 – you must be rolling in dough!"

We've heard customers share this "honest perception" of our staffing bureau countless times, so it'southward time to prepare the record straight on our staffing agency neb rate. But more importantly, we'd like to arm your business with the facts about staffing agency bill rates so that when information technology comes to purchasing temporary or contract staff, y'all will know how to get the most out of your staffing agency dollar!

This blog post will reveal the dissimilar fees recruitment agencies charge and volition introduce you lot to two of the most pop pricing models used past staffing companies. Finally, nosotros'll explicate the pricing method our staffing visitor uses and bear witness how it helps employees, companies, and temp agencies flourish together.

Staffing Bureau Fees Explained

The largest and about meaning components in your staffing invoice are the costs associated with your staffing agency'southward legal responsibilities as an employer, non hiring process fees and staffing bacon.

Unless your business has an accountant or payroll experts on mitt, most recruitment bureau customers simply aren't aware of what it costs in today'south regulatory environment to be an employer – let alone what it costs staffing agencies to be "the employer" on their behalf. The Pacific surface area, which includes Washington land, has ane of the highest mandatory benefits costs of anywhere in the United states.

In the state of Washington, DIRECT (statutory mandated) COSTS stand for anywhere from 65-85% of a staffing agency'south bill rate!

These mandatory benefits include workers compensation, Social Security, Medicare, and unemployment insurance (both state and federal).

These are the same COSTS you would be paying if you hired the employee straight, which leaves simply 15-35% of the bill rate to cover the actual services provided – sourcing, recruiting, and assigning task seekers (temporary or contract workers).

As you can see, given that 65-85% of staffing agency fees are from mandatory benefits like workers compensation and only fifteen-35% of fees go towards hiring temporary staffing, staffing agencies don't make nearly as much as it seems.

Are you with me so far?

About Staffing Agency Pricing Models

We remember that part of the misconceptions related to staffing agency beak rates is created when agencies use pricing models that focus only on bill rate. In some areas of professional staffing, for example, it is considered impolite for customers to ask about pay rate, creating the false perception that all bureau pay plans, per hr rates, service packages, or turn a profit targets are the aforementioned – which is near never the case.

Pros & Cons of Bill Charge per unit But Pricing

While the upside of using "bill charge per unit only" pricing practise is its simplicity – making it easy to shop and compare different staffing agencies – the downside of this model is that it can cause confusion for companies due to its lack of transparency.

Buyers often accept no idea what their beak charge per unit pays for and accept no control over normalizing employee quality or service standards. Nib-charge per unit-but pricing practices are typically confined to "one-off" purchasing scenarios where ownership decisions are based more on a supplier/customer relationship than market competition.

Pros & Cons of Mark-Upward Over Pay Rate Pricing

A more pop pricing practise used by staffing agencies, designed to increase beak rate transparency and normalize staffing agency fees, is what is called a marking-up over pay rate pricing model.

In a markup pricing model, the client either sets or provides guidance effectually the employee's pay rate and asks their staffing bureau to quote them a mark up over that pay charge per unit.

This pricing practice is not without rationale. Mark-ups vary substantially between agencies and when normalized can have a significant bear on on overall agency costs. For example, if an employer specifies a $20/hour. pay charge per unit and Bureau A quotes a marker-upwardly of xl%, the bill charge per unit is $28/hr. If Bureau B quotes a sixty% marking-up, the bill rate is $32/hr. Other service elements equal, a purchaser selecting Supplier A will save $iv/hr. or fourteen%.

The mark-up over pay rate model is an internal pricing practice commonplace in the staffing industry but unfortunately fosters the mistaken belief that all agencies provide the same levels of service or will deliver the aforementioned quality of employee.

Marker-up over pay rate pricing models tend to work against agencies with a potent quality focus, that, simply stated, need a larger margin between pay and bill rates to afford the level of services delivered. Mark upwardly pricing models too don't take into consideration statutory differences in DIRECT COSTS that vary based on employee category or local mandates. While information technology may seem like these staffing agencies brand more than those offering lower fees, the high-cost of maintaining a superior level of service ways that their profit margins are comparable to staffing agencies charging less for temporary employees or straight hire.

The mark upward pricing model creates special challenges whenever marketplace competition drives down mark-ups, while the regulatory environment is driving up statutory mandated Directly COSTS such as the new mandatory healthcare and paid time off and family leave benefit programs for job seekers that accept hit Washington employers difficult over the last decade.

When employers require their staffing agencies to eat mandatory increases in direct costs, quality focused agencies volition leave the market, leaving only a sub performing supplier base for employers to cull between. We've seen situations where purchasers were requiring mark ups at rates below statutory mandated DIRECT COSTS, which basically sets up a scenario where only non-compliant vendors can afford to deliver service.

The reality is that all employers, staffing firms and your company included, face the same regulatory-based price challenges.

While Direct COSTS volition vary based on location and employee blazon (east.k. direct hire, temporary employees, and other kinds of job seekers) all agencies and their customers potable from the same employer-based regulatory pool and must notice a way to deal with increased costs, preferably, in our view, working together. At a minimum, buyers of staffing agency services should be wary of bill rates or mark-ups that seem too skillful to be truthful! Because given the astringent price of mandatory benefits, a temp agency or staffing firm that is charging a lower than average fee is likely delivering this price by reducing the hiring standards and quality of their staffing agency service.

PACE Staffing Network's Innovative Pricing Model

Another more innovative pricing model that addresses all the bug listed above is a model based on a MARK upwards over Directly COSTS.

It is the preferred pricing model of the PACE Staffing Network, reflecting our staffing agency'south total commitment to our vision of customer-staffing agency partnerships – a vision where we work together to solve staffing challenges!

Our staffing agency pricing model requires:

1) Full disclosure of Direct COSTS

ii) Conspicuously identified SERVICE needs

This means that pay rates are normalized, but Mark Ups are quoted over DIRECT COSTS, not pay charge per unit. The divergence betwixt Directly COSTS and Pecker RATE are the SERVICE FEES, which are negotiated with each client based on their real needs – not prepackaged assumptions !

This means Pace customers pay for the services they need without paying for services they don't!

For example, the following pay charge per unit judge outlines the Directly COSTS associated with a job seeker earning $20/hr. and assigned to work in an authoritative or professional role (impacting their workers comp insurance rate):

Employee Pay Rate/60 minutes.	$20.00
FICA Taxation	$1.24
Medicare Tax	$0.29
WSES (State Unemployment Tax)	$0.80
FES (Federal Unemployment Tax)	$0.12
Workers Bounty	$0.12
Seattle Ill and Safe Prepare Bated	$0.70
B and O Tax	$0.35
Prorated Background Cheque Costs	$0.08
Total Direct COSTS	$23.70

(18.5% of pay rate)

The neb rate is calculated as a marker-up over Direct COSTS. For example, if the marking-upward is set at 25%, the bill rate would be $29.63, which translates into a SERVICE FEE of $5.92/60 minutes. or $236.80/calendar week (assuming a xl hour week).

In the Directly COST PRICING model, when DIRECT COSTS change, bill rates alter in fully rationalized ways. SERVICE FEES are lowered (or increased) based on service requirements.

Bill rates are fully transparent with total disclosure of the fees actually paid to the staffing agency for the services they perform – taking the mystery out of your bill rate.

If the upside of this pricing model is its transparency, the downside is the amount of data that is made available to purchasers who aren't ever every bit interested in staffing math or employer costs as we are.

At PACE, we come across the importance of educating our clients who want to know more and simplifying our pricing conversations for those who don't.

Some of our clients prefer to practise their own calculations of directly costs and then they tin better decide if and when to hire directly; when to get work washed past using a temporary job seeker, contract worker, or direct hire. They have the math to know which the lowest cost staffing option is.

We believe the Straight Price PRICING model is the most transparent and like shooting fish in a barrel to manage pricing model in the staffing manufacture. It provides the right platform to have honest direct conversations about means to reduce your staffing bureau bill rate while protecting service and employee quality.

Larn More than About the Pricing Models Used by Staffing Agencies in the PNW

If y'all are interested in learning more almost staffing bureau pricing practices, including the Directly Toll PRICING model used by the PACE Staffing Network, or if you simply want to benchmark your current beak rates against what might be bachelor to your company in the staffing market place, our Partner Services and Solutions squad would be happy to answer your questions or concerns in a confidential chat.

Call us at 425-637-3312 or email us at partnerservices@pacestaffing.com.

We believe that pricing transparency is crucial to building trust betwixt our staffing firm and your business concern, so take pride in explaining our pricing model and helping customers build a pricing bundle based on the existent needs of your business.

A Staffing Agency That Works for the Heir-apparent & Job Seeker

PACE Staffing Network is i of the Puget Sound'south premier recruitment/staffing agencies and has been helping Northwest employers find and hire employees based on the "right fit" for over 40 years. As your staffing firm, we go higher up and across to notice qualified candidates for your business.

A 4-time winner of the coveted "All-time in Staffing" designation, PACE is ranked in the pinnacle 2% of staffing agencies nationwide based on almanac surveys of customer satisfaction.

PACE'southward staffing services include temporary and contract staffing, temp to hire auditions , directly hire professional recruiting services , Employer of Record (payroll) services , and a large bill of fare of candidate assessment services our clients can purchase a la carte.