25 May 2021

Staffing Agency Bill Rate: What is it?

John Clark
John Clark

“You charge your employees $20/hr and charge us $34… you have got to be kidding me?” - so, what exactly is staffing agency bill rate and what is included in those costs? 

For a large number of organizations around the world, engaging and managing staffing agencies to source non-employee workers on a temporary basis helps them realize a huge number of benefits from better access to hot skills, reduced workforce costs and greater flexibility. 

Yet for a large number of businesses, many are confused at the staffing agency bill rate and what it means. 

In this blog, we are going to dive into what the staffing agency bill rate is and what it typically includes. Remember, knowing exactly how much you are paying your staffing agencies will give you visibility into your non-employee workforce program and that will help you to make better staffing decisions moving forward.

With that in mind, let’s get started!

What is staffing agency bill rate? 

A staffing agency bill rate is the addition of the pay rate and markup. The pay rate is the amount of money that the staffing agency is paying the temporary workers (temp) that they are placing within your organization, while the markup is the additional cost they are adding for their services. 

In essence, the bill rate is the complete cost that you are paying for the temps works, government taxes and benefits as well as the efforts of the staffing agency to place the worker within your company. 

These elements are all added together to create the staffing agency bill rate. 

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What costs are included in the bill rate?

What can be included in the bill rate can differ substantially between staffing agencies. We recommend that before working with any staffing vendor it’s crucial that your business find out exactly what costs are included in the bill rate. 

A staffing agency should be able to tell you exactly what percentage of the bill rate is going to the temp, how much is going to the government and what cut the agency is taking.

There are a few different aspects that make up the bill rate for a staffing agency, these include:

Benefits - Since a temporary worker falls under the employee category for the staffing agency placing them, they are entitled to benefits such as insurance, disability, vacation and sick pay. Since the responsibility of this payment is transferred from the organization to the staffing agency, there will be an added cost to the bill rate.

Recruiting and operational costs - This covers all of the staffing agency’s operational costs of running their businesses, such as management, worker training, administration, compliance and recruiting costs. Therefore additional costs will be added to the bill rate.

Payroll burden - When sourcing temps through a staffing agency, these workers will still be on the payroll of that vendor. That means your organization will have absolutely no responsibility when it comes to payroll of temp workers. 

Profit-  Staffing agencies are profitable businesses too. That means they ultimately need to make a profit. Once all the costs are clearly identified,  the remainder is the staffing agency's gross profit on the resource(s) they have placed at your organization.  

Remember, when analyzing your staffing vendors and their bill rates you need to find a middle ground. 

Any staffing agency that is willing to go into lengthy negotiations and significantly reduce their markup is likely to place poor temps into your organization, and reduce your overall workforce quality. 

But at the same time - paying a markup that’s significantly over the industry standard will only end in your business paying too much money, and that’s going to have a negative impact on how profitable your company is. 

You’re going to have to find the balancing act between saving money, but also improving workforce quality. We will give you one tip to help, the use of a vendor management system (VMS) that consolidates your vendors and gives your clear visibility into staffing agency performance and spend will ensure you are able to continually improve your non-employee workforce program. 

Do you have any further questions about staffing agency bill rate and implementing smarter ways to manage your vendors? Contact Conexis VMS today. Our team of vendor management and contingent workforce experts would be happy to help. 

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John Clark

John Clark

A Co-Founder of Conexis, and Staffing Industry Analysts’ (SIA) top 40 under 40 recipient, John has more than 15 years experience in the Contingent Workforce, Managed Service Provider and VMS technology space. John has designed, built and run dozens of client workforce programs across multiple industries, managing over $1bn in spend. John’s expertise sits in both program design and delivery as well as VMS technology implementation and management.

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