The Basics of Staffing Markups

The total size of contingent workforce payroll in the U.S. is expected to rise to $164 billion by 2018. The opportunity for companies to capitalize on this trend, increasing the productivity and flexibility of their workforce, has become more widely known in recent years. Additionally, companies are using contingent workers in more highly skilled roles to augment internal staff and in these roles the bill rates - hourly rates including all costs and fees charged to the client company by the staffing supplier - increases as the pay rate does.

In many cases, the companies that supply contingent labor to clients on an hourly basis use a fee model that based on a percentage of the pay rate, often referred to as a markup. This 'markup' consists of several components, including:

• “Burden” (employer taxes, payroll costs, workers compensation insurance, etc.)
•  Recruiting personnel and expenses
•  Overhead (general and administrative costs)
•  Profit margin

The pay rate (aka hourly rate) of the worker plus the markup is called the bill rate. Markups can range from 30% to 60%+ with an average in the high thirtieth percentiles across all skill disciplines. Some staffing suppliers promote rates below 30% and, conversely, some services may charge 75% to 100%+ markups.


The Burden costs vary based upon the worker’s skill specialization, the risk of the job, the State in which the worker is employed, the total volume of payroll with a client, and the payment terms. Recruiting costs and pay rates may differ from assignment to assignment, as different factors such as the availability of talent, ‘going’ market pay rates and length of assignment come into play. 

For example, if a contingent worker is engaged on a three (3) month assignment (12 weeks at 40 hours or 480 total hours) the following total costs would apply relative to the pay rate of the worker and markup:

		Total Payroll + Staffing Markup ("Billings")
Pay Rate	Total Payroll	30%	35%	40%	45%	50%
$15	$7,200	$9,360	$9,720	$10,080	$10,440	$10,800
$25	$12,000	$15,600	$16,200	$16,800	$17,400	$18,000
$50	$24,000	$31,200	$32,400	$33,600	$34,800	$36,000
$100	$48,000	$62,400	$64,800	$67,200	$69,600	$72,000

There are other ways that contingent labor is delivered to clients including fixed markup costs, statement of work or milestone based pricing, per unit or task pricing, or fixed bill rates. For the most part however contingent labor in the is delivered with a markup on pay rate. If your company is using or supplying contingent labor then it is helpful to understand how the marketplace prices these services in order to maximize profits and productivity.