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:
Pay Rate
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.
Markup
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:
Pay Rate
(ex: Graphic Designer in Tampa, FL)
$30/hr
The hourly rate paid to a contingent worker by a staffing agency.
+
Markup
Pay Rate x Markup (ex: 40%)
$12/hr
Paid to the staffing agency and includes overhead, mandatory employers taxes, and a profit factor.
=
Bill Rate
Pay Rate + Markup = Bill Rate
$42/hr
Total that Client or hiring company pays to the staffing agency.