Yes. A staffing business can be very profitable, because it earns a margin on every hour its workers bill, week after week. But the margin on each hour is thin. After pay, taxes, insurance and workers' comp, a temp firm often keeps a few dollars an hour before its own costs. One order that bounces twice can eat the margin on three good ones. Staffing is profitable until rework eats it.
How the money works, in one hour
Take one warehouse worker on a temp order.
- Pay rate: $20.00 an hour. What the worker gets.
- Burden: about $3.40. Payroll taxes, unemployment insurance, workers' comp, and any benefits.
- Your cost: $23.40 an hour.
- Bill rate: $30.00 an hour. A 50 percent markup on pay.
- Gross margin: $6.60 an hour, or 22 percent of the bill.
Out of that $6.60 come the recruiter's salary, the office, the software, insurance, and the owner's profit. On a 40-hour week, one worker brings in $264 of gross margin. Twenty workers on assignment bring in about $5,000 a week. That is how a small firm makes a living, and a larger one makes a lot.
Your numbers will differ by state, by job and by client. Skilled and healthcare work carries higher bill rates and higher burden. The shape is the same.
Where the profit goes
Most of the gross margin is not lost to competition. It is lost to doing the same work twice. Here is one order that bounced twice.
Monday. The order comes in by email: "five forklift people for Monday." The recruiter sources from the title, screens six people and sends five. Hours: about nine.
Tuesday. Two are rejected. The site wanted current forklift cards with dates, and the submittal said "forklift experience." Re-source, re-screen, re-send. Hours: about five.
Monday, 6 a.m. One of the five does not show. The confirmation note never mentioned the gate or the 5:45 start. Replace them that morning. Hours: about three, plus a client who now wonders about your firm.
Seventeen hours of recruiter time for an order that should have taken nine. The extra eight hours, at a recruiter's loaded cost, cost more than the gross margin the order will earn in its first week. And the client may not send the next one.
What profitable firms do differently
They do not have cheaper recruiters or higher markups. They have less rework. The order is taken in writing. The submittal is checked against it before it goes. The confirmation has the four lines that stop no-shows. Each of those takes minutes and saves hours that were coming out of the margin.
Where M-Tracker fits
M-Tracker checks each submittal and confirmation against the written order before the client sees it, so the two bounces in the story above get caught on Monday afternoon instead of Tuesday and 6 a.m. It also shows, for admins, the billable value against labor cost on tracked time, with revision time on its own line, so the owner can see where the margin is going.
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Questions people ask
What is a normal gross margin for temp staffing?
Often somewhere between the high teens and the mid twenties as a share of the bill, lower for light industrial and higher for skilled and healthcare work. Your own number, tracked monthly, matters more than the average.
Is direct hire more profitable than temp?
Per placement, the fee is larger. Per year, temp is steadier, because the margin arrives every week. Many firms do both.
What is the biggest hidden cost?
Recruiter hours spent on work that comes back. It never shows on an invoice, and it is usually the largest leak.
Work you can trust, without redoing it.
Your team gets feedback before work reaches you, or your client.
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