Staffing and recruiting  ·  4 min read

For temp workers, agencies charge a bill rate that is the worker's pay rate plus a markup, often somewhere between 40 and 75 percent of pay. A worker paid $20 an hour might be billed at $28 to $35. For direct hires, agencies charge a fee, often 15 to 25 percent of the first year's salary, paid once the person starts. For temp-to-hire, there is usually a conversion fee if the client hires the worker early. The exact numbers depend on the job, the state and the client.

How a temp staffing bill rate breaks down: pay rate, burden, cost, bill rate and gross marginPAY RATE$20.00what the worker getsBURDEN+ $3.40taxes, insurance, compYOUR COST$23.40per hour workedBILL RATE$30.0050% markup on payGROSS MARGIN$6.6022% of the billOne order that bounces twice eats the margin on about three good ones.Example numbers. Your burden and markup depend on the state, the job and the client.
The markup is not profit. Most of it is taxes, insurance and the recruiter's time.
1Staffing and recruiting

Temp staffing: the markup

The client pays a bill rate for every hour the worker works. The bill rate is the pay rate times a markup.

  • Pay rate $20, markup 50 percent, bill rate $30.
  • Light industrial and clerical markups tend to be lower. Skilled trades, IT and healthcare tend to be higher.

Out of the markup comes the burden: payroll taxes, unemployment insurance, workers' comp, and benefits. What is left is the agency's gross margin, often a few dollars an hour. The agency is the employer of record, so it also carries the payroll and much of the risk.

2Staffing and recruiting

Direct hire: the fee

The agency finds the person, the client hires them onto their own payroll, and the agency bills a one-time fee. Common range: 15 to 25 percent of the first-year salary, sometimes more for hard-to-fill or senior roles. Most fees come with a guarantee: if the person leaves within a set period, often 60 to 90 days, the agency replaces them or refunds part of the fee.

3Staffing and recruiting

Temp-to-hire: the conversion fee

The worker starts as a temp. If the client wants to hire them, the agency charges a conversion fee. Often the fee falls the longer the worker has been on assignment, and after a set number of hours, maybe 520 or more, it drops to zero. The idea is simple: the agency has already earned its margin on the hours.

4Staffing and recruiting

What clients feel they are paying for

Clients do not buy a markup. They buy four things.

  1. Speed. Someone at the gate Monday who was not there Friday.
  2. The screen. A person who has what the order asked for, proven, not promised.
  3. Payroll and risk. Taxes, insurance and compliance handled by someone else.
  4. A fix when it goes wrong. A replacement that morning, not a shrug.

When a client argues about the markup, they are usually unhappy about one of these four. Most often it is the screen: the person who showed up was not what they asked for.

5Staffing and recruiting

How to make the markup feel fair

The same markup feels expensive from an agency whose submittals bounce and cheap from one whose first candidate is right. Take the order in writing. Check each submittal against it. Confirm the start the night before. Clients pay for not having to check your work.

How M-Tracker helps

Where M-Tracker fits

The screen is the thing clients pay for and the thing hardest to show. M-Tracker checks each submittal against the written order before the client sees it, so the first candidate they meet answers what they asked for. And a client report, sent as a link they open without an account, shows them what was delivered on their orders.

Try M-Tracker free14-day trial. No credit card. No employee surveillance.

How a task moves through M-Tracker: brief, work, review, improve, then the manager1BriefResult, audience,must include, due.Files and linksattached.2WorkThe person does itand attaches whatthey made.3ReviewM-Tracker comparesthe work with thebrief. One plainparagraph.4ImproveThey fix what ismissing while it isfresh.5ManagerSees work thatalready passed itsown test.No screenshots. No scores. The person sees the review first.
FAQ

Questions people ask

Can a client negotiate the markup?

Yes, usually by volume. A client with twenty workers on assignment gets a better markup than one with two.

Do agencies charge the worker?

Legitimate staffing agencies do not. The client pays. See the post on whether agencies take a percentage of your pay.

What is a fair markup for a small agency?

Enough to cover burden, the recruiter and the office, with a margin that survives a bad month. Work it out per hour before you quote, not after.

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