Bill Rate vs. Pay Rate
How do you rate?
See what's behind the numbers. Understand how market conditions affect your recruiting efforts.
A Bill Rate is the rate a company pays to a staffing agency for the services of a temporary worker.
Bill rates are the sum of two fundamental parts; a Pay Rate and a Markup. To effectively manage Bill Rates,
it's important to understand the components:
The Pay Rate is the amount being paid to the contingent worker by the staffing agency. Pay Rates are the largest component of the Bill Rate, and plays a significant role in retention, resource quality, and time to fill. The Pay Rate is the #1 factor for enabling a supplier to recruit a resource and provide great service.
Markups are generally applied as a percentage on top of the Pay Rate. Markups can be considered to have three elements:
- Pass through costs that adjust over the contract (employment taxes)
- Fixed Pass through costs (agreed to costs like worker’s comp, insurance etc)
- Gross Profit (for the supplier)
The markup depends on a variety of factors - types of workers and skill sets, market demand, buyer's knowledge, duration of assignment, volumes of business, etc. - and can vary greatly. Typical markups range from as low as 20% to 50% or more.
Let's break it down with an example:
(ex: Graphic Designer in Tampa, FL)
The hourly rate paid to a contingent worker by a staffing agency.
Pay Rate x Markup (ex: 40%)
Paid to the staffing agency and includes overhead, mandatory employers taxes, and a profit factor.
Pay Rate + Markup = Bill Rate
Total that Client or hiring company pays to the staffing agency.
How do you rate?
Question: Do staffing agencies use the same pricing for all clients?
No. Typically an agency will develop a Bill Rate structure based on a client's anticipated volume and knowledge relative to the applicable Bill Rates. Often, agencies are trapped by having to cover all scenarios with a single Bill Rate. Depending on RFP structures, differing rate management approaches, volume of business, etc an agency usually defines custom pricing for each client.
Question: Do staffing agencies pay the same amount to workers with similar skills?
Sometimes. Agencies are subject to supply and demand in the labor market, which results in different pay rates for similar skill sets. For buying clients, it is critical to understand the pay rate labor market to ensure your suppliers can recruit within an effective and realistic range.
Question: Does RFP Pricing equate to what agencies are truly billing?
No, in fact negotiated rates are often 3-7% lower than initial RFP Pricing.
Question: Are statutory costs constant?
No statutory fees can vary as much as 10% based on location and skill set. SUI costs can vary by state as well as supplier. One supplier may have 8% higher SUI fees in the same state compared to another supplier.