Staffing Markup Explained: What Your Bill Rate Covers and Why the Lowest Rate Isn’t Always the Best Rate
Employers often ask, “What’s your markup?” A markup is the percentage added to a worker’s pay rate to get the bill rate, which is the hourly amount on your invoice. However, there is more to comparing staffing services than just the markup. A lower markup doesn’t always mean the lowest cost.
Markup is the first thing most employers ask about because it’s an easy number to compare.
The difference isn’t just profit. It covers the costs of recruiting, screening, hiring, employing, providing benefits and supporting that worker so you don’t have to. The lowest total cost isn’t always the lowest markup.
For example, a lower-markup staffing firm may have higher turnover, longer times to fill, more workers’ comp incidents, and more attendance issues. Factoring these additional costs into the comparison can make the lower-markup firm much more costly overall.
Pay Rate vs. Bill Rate
The pay rate is what the employee earns per hour. The bill rate is that wage plus the costs of employing them.
For example, if a worker earns $18 an hour and the bill rate is $27, the markup is 50%. Actual rates vary by workers’ comp classification, screening requirements, length of assignment, and other factors.
What’s Included
- Recruiting and Hiring. Finding qualified candidates takes time and resources. We advertise the job, reach out to passive candidates, and screen, interview, and match them to client requirements. Background checks, drug screens, and skills tests are included when the job calls for them. We then present the best-qualified candidate for our client’s position.
- Taxes and Benefits. As the employer, we pay the employer’s share of FICA, state and federal unemployment taxes, and workers’ compensation insurance. The bill rate also helps fund benefits like health insurance, holiday and vacation pay.
- Payroll and Support. We process weekly payroll, handle tax filings, and keep employee records. We also assume the risk of being the primary employer and are responsible for managing workplace injuries and unemployment claims.
- Insurance and Compliance. We carry workers’ comp, liability, crime bond, errors and omissions and cyber insurance, and we stay current on labor laws to protect our clients. It is our responsibility to file quarterly tax reports, W-2s, and other government reports.
Staffing does not eliminate every employment-related responsibility for a client, but a properly managed staffing relationship can reduce administrative burdens and help manage certain employment risks.
The Bottom Line
Look beyond the markup when selecting a staffing partner. Your staffing partner should provide the best combination of cost, quality, reliability and service. Successful staffing programs offer flexible workforces, reduced costs, time savings and the opportunity to evaluate candidates before making long-term commitments.
Since 1981, Personnel Services Unlimited has helped Western North Carolina employers hire with confidence.
Questions about staffing costs? Contact PSU at 704-484-0344 or www.PSUhasJobs.com. We want you to understand both the price and the value.