Staffing Markup

Staffing markup is a term used by staffing companies to describe the fees charged over and above wages paid to a contract or temporary employee. The implication is that you, the client, has input into the decision on pay rate of the temp or contract employee.

Example

If a company hires a temporary and agrees to pay the person $10/hr and there is a 60% markup rate, the hourly cost to your company will be calculated as follows;

$10 + $10*60% = $16/hr

Should the salary offered be $15/hr, the client will be billed $24/hr and so on.

Staffing Markup vs. Bill Rate

The staffing markup option for pricing is often used when the salary is open or has a range. For positions where the wages are fixed like in a manufacturing company on the assembly line, often a flat bill rate is used. The benefit of this option to you is a single fixed cost for any person working. You don't have to worry about who gets paid what amount, that is up to the staffing company. All you care about is that each hour worked will be fixed at a specific rate. This simplifies labor calculations.

What is Included in the Rate?

Sorry to say, that depends. Look at the contract before you sign but it should include, just about everything related to payroll related taxes and expenses. Including if your state requires, workers compensation insurance.

Caution, if you do use a staffing company and your state requires workers compensation insurance, be sure to ask for proof of insurance. You do not want to get stuck with a medical claim because your staffing company does not have the right kind of insurance!

Okay back to what is included. All federal payroll taxes, state and local payroll taxes. Additionally worker's compensation insurance and unemployment insurance should be included as well.

Optional items may include, paid leave, holiday pay or health benefits. It pays to find out because all rates are not equal! Be sure to compare apples to apples. If one company is offering a slightly higher rate and it includes holidays. Those employees are probably going to stay longer at your company, the one with benefits or the one without.

This is especially true with $10 and under people. A $.50 increase in pay is a lot of money to them so they will be more likely to jump to another position. If their deal included vacation days even though they were temporary employees, they might find it better to stay on at the lower pay but with paid holidays!

Final Note

The staffing markup rate is often driven by 2 factors, workers compensation rates and quantity. You can use these to your advantage in negotiating rates. If you know the Workers Compensation rates are low for the position you can negotiate the rates down.

The second factor is quantity. If you have large numbers of people working through the same staffing service, there are efficiencies in the billing process where they can save time and money. These savings should be passed on to you the client!

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