Don’t you wish there was a way to see the itemized breakdown of a staffing agency’s invoice? You know how much you’re paying for the service, but after that it becomes far more ambiguous. As the labor market has adjusted over time, talent acquisition agencies have increased their offerings and “value adds” to remain competitive. Of course, this can translate to more service costs. While some of those additional perks can be beneficial to your company’s workforce, often it leads to gray areas and more questions.
Consider the additional overhead costs a car salesman builds into the total price at the time of sale, some of which are negotiable. Consumers often look to an objective source, such as the Kelly Blue Book, to educate themselves prior to the negotiation.
In order to truly understand staffing agency bill rates, you must first understand two fundamental pieces of the puzzle.
Pay Rate: the amount paid to the worker by the staffing firm. This should be the largest portion of the bill rate and doesn’t include any service charges. Pay rate will play the biggest role in retention, resource quality and time to fill.
Markup: the percentage that is added to the pay rate. This number varies based on state labor taxes, benefits costs (worker’s compensation, health insurance, etc) and the service charge for finding and placing the worker. Since this is based on a percentage of the pay rate, the cost can vary based on the worker’s experience, skill sets, length of employment, industry standard, volume of employment need, so on.
The Competitive Workforce and Staffing Agencies Expectations
The workforce has adjusted in a way so that companies expect increases in staffing agency bill rates for more sought after positions. For example, some industries, such as STEM, are in high demand and, as a result, have become highly competitive when staffing because of the overall cost of hire. Companies are rarely surprised to see higher costs for the most in-demand skill sets because they know their offerings must be better than their competitors. There are agencies who use this opportunity to remain extremely competitive in the eyes of talent by upping their offerings and, in turn, increasing the bottom line of their company.
There are pros and cons to each. Those companies who increase the markup may have access to more productive and sought after talent due to better benefits packaging. They may also have a more fully fledged vetting process which ensures the talent they place actually can produce the promised level of work. On the other hand, there is the always the possibility of an overinflated markup. The percentages vary, often ranging from 20% to 50% of the pay rate. But what exactly is included in those percentages? As a purchaser, the mystery of what a staffing agency is actually paying an employee versus their services is the big question.
What’s been missing thus far is the objective source of knowledge for the consumer. In this case, the consumer is the head of procurement, or the CHRO or head of Talent Acquisition. Simply put, there’s no Kelly Blue Book for the head of talent to look to and ensure they are getting the best possible deal.
Unveiling the Mystery
Unveiling the details of staffing agency rates requires asking the right questions, but also an understanding of the service offerings included. Here’s a breakdown of what you just might be paying for…
Recruiting and Sourcing: This includes all the work an agency will perform to identify your perfect candidate, including skills assessment and determining availability.
Talent Evaluations: These will help the agency be certain that the candidate they place will actually perform to the standards asked for by your company.
Selection Process: Interviews are important to understanding the capabilities of the potential hire, but this service can also include resume and reference reviews.
Competitive Landscape: When companies are in dire need for a specific candidate or skillset, they enlist the help of multiple agencies. The more competition an agency has for one placement, the less likely they will be committed.
Assignment Duration: The length of time the candidate will be employed affects the markup. Longer assignments often result in more competitive bill rates.
Safety Measures: Worker’s compensation insurance is always required in high risk environments and this will affect the markup.
Benefit Coverage: Though not typically benefit rich, temporary staffing agencies do sometimes offer extras like healthcare insurance and paid time off.
Volume of Needs: Cultural fit is a large part of the success of a placement, so staffing agencies will research the clients for which they are making placements. The further that research goes (i.e. the more employees they place), the lower the markup.
When it comes to purchasing talent, 94% of business buyers do some form of online research, yet only 52% of contingent labor is formally accounted for in corporate planning, budgeting and forecasting. That’s not including traditional research like soliciting feedback or suggestions from their networks. Technology has created a consumer who desires education before making a decision. Technology can open the curtains for companies who want informed decisions.
PeopleTicker uses real-time data from professionals all over the world to determine what they’re making. Underlined with more traditional forms of compensation benchmarking, this allows us to be the Kelly Blue Book for pay rates, ensuring when heads of procurement or talent acquisition negotiate for talent, they’re equipped and informed.
Take markup research into your own hands. Download our guide to learn the 7 Questions to Ask When Negotiating Your Staffing Agency’s Bill Rate.