One of the common complaints we get is from unhappy contractors. They feel their staffing agencies charge huge markups and make an unfair amount of profit margins on them.
We suspect this misunderstanding is because contractors don’t know the costs a staffing agency incurs in employing them- like overhead costs and taxes they pay the Government on behalf of the employed workers. We thought it would be good to share what the typical costs are for a staffing agency and the profits/markups they make on a per contractor basis. Recruiters can also use this rate calculator to quickly quote rates to their clients or during negotiations of salaries with potential employees.
As you can see below, even when the pay rate to the contractor is 64% of the client's bill rate, the net margin could be as low as 8% because of all the costs a staffing agency incurs in employing contractors.
Our costs are based on a staffing agency in Bellevue, WA.
We’ve left some (white) cells editable so you can play around with your own numbers if your costs (for the * items) are different.
Overhead costs are assumed to be 13%, which we feel is reasonable across small staffing agencies as well as big ones.
Staffing agencies have different policies around paid vacation, holidays and medical benefits.
We’ve assumed a common scenario but you can modify these to see the effect of getting these benefits.
Paid an annual salary? See table below