US · Margins
How do you calculate employer burden on a staffing pay rate?
The components of employer burden — FICA, FUTA, SUTA, workers' compensation, benefits — and the percentage to apply by job class.
The short answer
Burden is FICA at 7.65 percent, federal unemployment tax, state unemployment tax at your assigned rate, workers' compensation priced by job classification, plus any benefits, paid leave or ACA cost. For most US staffing that totals 12 to 22 percent of pay — higher in high-risk classes and states with expensive workers' compensation.
Key facts
- FICA (employer share)
- 7.65% of wages, to the annual wage base
- Unemployment insurance
- Federal plus state, rate varies by state and experience
- Workers' compensation
- Priced per $100 of payroll by job class
- Typical total burden
- 12–22% of pay
Burden is the difference between what a contractor earns and what they cost you, and it is the single most common source of phantom margin in a new staffing business. A desk that looks like it runs at 28 percent on raw pay can be at 14 percent once burden is loaded.
The variable components deserve attention. Workers' compensation is priced per hundred dollars of payroll by classification code, so the same pay rate can carry a two percent burden for a clerical worker and well over ten percent for a roofer. State unemployment rates also vary substantially, and a new employer starts on a default rate that improves — or worsens — with claims experience.
Overtime multiplies burden as well as pay. In a light industrial book with routine overtime, an average burden calculated on straight time understates real cost, so model burden on expected hours rather than nominal ones.
Health cover is the step change. Once you cross the applicable large employer threshold, the Affordable Care Act's employer provisions apply to your full-time equivalent count — and in staffing, contractors count. Plan for that before it arrives, because it lands mid-growth.
Recalculate at least annually and after any change in state mix or job classes. A rate card built on last year's burden is a slow leak that shows up as a shortfall at year-end rather than a bad decision at quote time.
Step by step
01
Start with the hourly pay rate
Use the actual offered rate, including any shift differential or overtime premium you expect to pay.
02
Add employer FICA
Social Security and Medicare at 7.65 percent of wages up to the Social Security wage base.
03
Add unemployment insurance
Federal unemployment tax plus your state rate, which varies by state and by your own claims experience.
04
Add workers' compensation
Take your rate per $100 of payroll for the correct job classification code and apply it to the pay rate.
05
Add benefits and statutory cost
Health cover where offered or required, paid sick leave where mandated locally, and any per-hour benefit contribution.
06
Express as a percentage
Divide total added cost by the pay rate. That percentage is what belongs in every bill rate calculation you do.
Run the numbers
Apply burden to a real wage
Burdened cost and bill rate at 20, 25 and 30 percent margin, on published wage medians.
Open the calculatorUnited States
How this differs by US state and metro
The answer above holds nationally. What changes locally is registration, insurance, wage rules and how much cash each contractor consumes — these are the states and metros founders ask us about most.
Illinois
Chicago · Naperville · Rockford
Illinois compliance costs are front-loaded, and light industrial margins are thin, so the funding line has to cover both the payroll gap and the administrative load. Model the long-assignment pay step-up into your bill rate from day one or it will eat the margin later.
Illinois guideOhio
Columbus · Cleveland · Cincinnati
Ohio's industrial base runs high headcount at moderate bill rates. That combination means the cash gap grows fast while margin per contractor stays modest, so a factoring line sized to invoice volume usually beats trying to self-fund.
Ohio guideGeorgia
Atlanta · Savannah · Augusta
Atlanta is a competitive, relationship-led market where clients push payment terms. Agencies that grow here usually secure a factoring facility early, because a single large logistics client can double your payroll requirement in a fortnight.
Georgia guidePennsylvania
Philadelphia · Pittsburgh · Allentown
Health systems are excellent clients and slow payers. If your first anchor client is a hospital network, assume 45 to 60 day terms and a credentialing lag before the first invoice, and secure funding that covers both.
Pennsylvania guideMetro-level wage, bill rate and startup cost detail:
Local questions
Does this change if I start in Illinois?
The national answer holds. What changes in Illinois is local: Illinois compliance costs are front-loaded, and light industrial margins are thin, so the funding line has to cover both the payroll gap and the administrative load. Model the long-assignment pay step-up into your bill rate from day one or it will eat the margin later. Check the Illinois page before you register anything, and model the cash gap on Illinois pay rates rather than national averages.
Is the answer different in Ohio than in Illinois?
The economics are the same shape; the local detail is not. In Ohio: Ohio's industrial base runs high headcount at moderate bill rates. That combination means the cash gap grows fast while margin per contractor stays modest, so a factoring line sized to invoice volume usually beats trying to self-fund. That affects your registration checklist and your working capital number, not the underlying principle.
Which US cities does this apply to?
All of them — but we publish metro-level bill rate, wage and startup cost detail for Cincinnati, Atlanta, Philadelphia, Pittsburgh and more, because pay rates and buyer mix vary far more between metros than between states.
Do I need a separate licence in every state I place in?
You register where you have employees and where you do business, not once nationally. Most states require unemployment insurance and withholding registration plus workers' compensation cover; a minority licence employment agencies, and some cities — New York City among them — licence separately from the state. Confirm each state and city before your first placement there.
Sources
- IRS — Employment taxes for small businesses
- US Department of Labor — State unemployment insurance for employers
- IRS — Affordable Care Act employer provisions
General information for recruitment and staffing founders, not legal, tax or accounting advice.
Go deeper
Staffing agency profit margins: gross, net and what buyers pay for
How staffing agency margins really work: gross margin after burden, net margin after overhead, why perm and contract behave differently, and which margin a buyer values.
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