Whether you are looking to recruit part-time workers or full-time employees, a reputable staffing agency is one way to screen and interview potential candidates. Before deciding to outsource hiring to a staffing company, it is important to know their fees and charges. Of course, one concern is, how much do staffing agencies charge? And what factors into those charges? We'll provide background about this so you can make an informed decision about whether contracting a staffing agency is a smart financial choice for your business.
Cost and Fees of Staffing Firms
All staffing agencies charge for their services, and these costs apply only to the company looking for employees, not job seekers. The fees for staffing agencies range anywhere between 20 to 50 percent of a hired employee’s pay rate. Agency fees are also influenced by the client company’s geographic location, area of expertise, supply and demand for the skillset they are trying to fill, among several other factors.
Other rules apply when using a staffing agency to hire temporary or contract workers from a staffing agency. Workers hired on a temporary basis are treated as an employee of the staffing agency, and there are minimum labor charges that the agency incurs under state and federal regulatory requirements, in addition to labor costs, insurance, and benefits. This amount varies but it is usually a substantial part of a staffing invoice. To set expectations, the Staffing Operations Benchmarking survey by the American Staffing Association found that on an hourly rate of $17, a staffing agency is required to bill a minimum rate of $25.76 to cover operating expenses and mandated labor costs.
Staffing Agency Pricing Terms to Know
Let's define some key terms used in the staffing and recruitment space. This will help make concepts around billing and pricing more clear when doing your research.
- Pay Rate is the compensation (hourly, daily, weekly, etc.) that the staffing agency pays the employee. It is usually the most significant component of a staffing invoice
- Markup Fee: A staffing agency charges a percentage of the employee's compensation for their services. This covers operating expenses like taxes, insurance, and benefits as well.
- Bill Rate is the sum of the pay rate and markup fee, the total amount the client pays on the invoice.
Markup Fees For Staffing Companies
Markup fees are what a staffing agency charges companies for its services, in addition to the wages it pays the employee, both of which must come out of the company’s pocket. Most staffing agencies will mark up their staffing fees between 15 to 40 percent. Average markup fees for staffing agencies can, however, vary depending on the location of the client, type and size of the client’s business, competition involved, and more.
For example, a staffing company recruiting IT professionals will have higher markup fees than those providing clerical or administrative staff. Reputable staffing companies want to build long-standing relationships with key clients. Some may negotiate lower markup fees to secure repeat business.
Top Benefits of Partnering With a Staffing Company
- A staffing agency offers value to a company looking to quickly fill vacant positions with skilled workers.
- Reduces the cost of staff turnover and bad hiring decisions.
- Eliminates staff vacancies that overburden other team members and negatively impact employee morale.
- Staffing agencies are designed to tailor to a company's unique hiring needs.
- Companies save valuable time filtering out unqualified candidates.
- A staffing agency handles pre- and post-recruitment processes, so you can focus on other important tasks.
- Reduces the need for in-house HR staff.