Question 1

What is a good gross margin for a staffing agency?

Accepted Answer

Healthy US contract staffing gross margins run roughly 18 to 28 percent in light industrial, 22 to 32 percent in healthcare and allied, and 25 to 40 percent in IT and professional. Below 15 percent a temp desk rarely covers its own cost of funding. Executive search and perm are priced as a fee, not a margin.

Question 2

How do you set a bill rate for a staffing placement?

Accepted Answer

Start with the pay rate, add employer burden of roughly 12 to 22 percent, then divide by one minus your target gross margin. A $25 pay rate at 18 percent burden costs $29.50; at a 25 percent target margin the bill rate is $39.33, a markup multiple of about 1.57.

Question 3

What is the difference between markup and margin in staffing?

Accepted Answer

Markup is expressed on your cost; margin is expressed on the bill rate. A 40 percent markup on a $25 burdened cost gives a $35 bill rate and a 28.6 percent gross margin. Clients negotiate in markup, funders and investors measure in margin, and confusing the two overstates profitability by several points.

Question 4

How do you calculate employer burden on a staffing pay rate?

Accepted 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.

Question 5

What percentage should a recruitment agency charge for a permanent placement?

Accepted Answer

Contingent permanent placement fees typically run 15 to 25 percent of first-year salary in both the US and UK, with 20 percent the common midpoint. Executive and retained search runs 25 to 35 percent, often in three instalments. Volume agreements and preferred-supplier terms compress fees toward the lower end.

Question 6

How does a temp-to-perm conversion fee work?

Accepted Answer

A conversion fee is charged when a client hires your contractor directly. Standard practice is a percentage of the annual salary — often 15 to 20 percent — reducing as the worker completes hours on assignment, and reaching zero after a defined period, commonly 1,000 to 1,500 hours or twelve months.

Question 7

How do MSP and VMS programmes affect staffing margins?

Accepted Answer

MSP and VMS programmes typically cap markups, deduct a supplier fee of roughly 2 to 4 percent of spend, extend payment terms and put you in competition with many suppliers per requisition. Expect several points of margin compression in exchange for volume you do not have to sell for individually.

Question 8

How much do staffing agencies charge clients?

Accepted Answer

US temporary staffing agencies often charge a markup of roughly 30 to 70 percent over pay, depending on the niche, risk and client volume; that is not the same as margin because employer burden sits inside the markup. Permanent recruitment commonly charges 15 to 25 percent of first-year salary. Price from burdened cost, not raw pay.

Staffing agency margins and pricing

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