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Staffing Agency Pricing Model & Average Markup Rates

Staffing Agency Pricing Model & Average Markup Rates

Starting a staffing agency can be an incredibly profitable business venture. You need to establish a pricing model that will work for your clients and your bottom line. One of the most important factors in determining your pricing model is the average markup rates you charge.

In this article, we’ll discuss what staffing agencies charge their clients and how markup rates are determined. We’ll also outline different pricing models and how to calculate the actual cost of labor.

 

How Much Do Staffing Agencies Charge?

The cost of labor can be one of the most significant expenses for staffing agencies. So, it’s important to markup staff wages.

Staffing agencies typically charge clients a percentage on the employee’s hourly wage. The average markup rate is around 25% but can vary depending on the type of position and the level of experience required.

 

How Do I Calculate My Bill Rate?

To calculate your bill rate, you need to know three things:

  • The employee’s hourly wage
  • The staffing agency’s markup rate
  • How many hours the employee will work

For example, let’s say an employee has an hourly wage of $50. The staffing agency has a markup rate of 25%. The employee will work for 20 hours.

The calculation would look like this:

($50 x 20 hours) * 1.25 = $1250

This means that the staffing agency would charge their client $1250 for the employee’s time.

 

Staffing Agency Pricing Models

Staffing agencies use a variety of pricing models to charge their clients. The most common models are the time and materials model, the flat fee model, and the hourly rate model.

Time and Materials Model

The time and materials model is the most common pricing model for staffing agencies. Under this model, staffing agencies bill their clients for the actual number of hours worked by employees, as well as the cost of any materials used.

Flat Fee Model

The flat fee model is another common pricing model for staffing agencies. Under this model, staffing agencies charge their clients a fixed price for a specific service or project.

Hourly Rate Model

Under the hourly rate model, staffing agencies charge their clients an hourly rate for services provided. This is typically used for short-term projects or when staffing agencies need to provide labor on an emergency basis.

 

How To Calculate the Actual Cost Of Labor

To calculate the actual cost of labor, you need to know two things:

  • The employee’s hourly wage
  • Hours the employee will work
  • Cost of benefits

Staffing agencies need to make a profit. Once you know the cost of labor, you need to markup those wages in order to turn a profit. The markup rate is what allows staffing agencies to make a profit on their services.

 

Average Staffing Agency Markup Rates

When staffing agencies are looking to establish a pricing model, it’s important to understand what the competition charges. This will help you to set rates that are competitive and still allow you to make a profit.

To pick the best markup rate, staffing agencies should consider the type of position and the level of experience required. They should also compare their rates to those of other staffing agencies in the area.

Markup allows staffing agencies to make a profit on their services. It allows them to cover the cost of labor, as well as any other expenses associated with staffing. staffing agencies need to markup their wages in order to turn a profit. The markup rate is what allows staffing agencies to make a profit on their services.

Sometimes a markup rate of 25% is best. However, you may need to make adjustments based on the market and competition.

 

Common Billing Terms

There are a few common billing terms that staffing agencies use:

  • Overtime: Time worked over eight hours in a day or forty hours in a week
  • Doubletime: Time worked over twelve hours in a day
  • Holiday pay: Pay received for working on holidays
  • On-Call: Wages paid for being available to work, but not actively working

It helps to know common billing terms because they can help staffing agencies protect their bottom line. By being familiar with these terms, staffing agencies can ensure that they are being charged correctly for the services they provide.

 

Scaling for Growth

While it helps to have a solid understanding of staffing firm pricing before getting started, as your staffing agency grows, you may need to adjust your pricing model in order to continue turning a profit. You may want to move from the time and materials model to the hourly rate model or the flat fee model. You may also need to increase your markup rates.