How to Price Your Staffing Services

A brief explainer video on how to price out your staffing firm services.
Video Text:
In staffing, determining how much to charge for your staffing services on each contract is a big decision. Charge too much, and you risk losing business to your competitors. Charge too little, and you run the risk of shrinking your profit margin, or your customer thinking you don’t know your own worth.
Now, let's discuss some common terms when it comes to pricing, as well as the three main components that make it up.
Bill rate means the rate a company pays to you, the staffing agency, for the services of your temporary employees.
Burden Rate refers to all statutory expenses which are the taxes, insurance, and other charges required by law. For staffing firms it includes the Federal Unemployment Tax, the State Unemployment Insurance Tax, Social Security and Medicare Tax Rate, and Worker’s Compensation Insurance. This would also include any additional fees such as VMS rate.
Pay Rate means the amount you pay to your temporary employee.
A Markup is the percentage charged by the staffing firm on top of the pay rate that includes the costs of statutory expenses as well as gross margin dollars to pay for overhead expenses and profit.
Gross Margin refers to the amount of money a staffing firm gets to keep after paying the temporary workers’ payroll, benefits, payroll and other statutory expenses.
Now let's discuss some different profit scenarios and see how changing your markup affects your gross margin.
Let’s say your temporary worker has a pay rate of $15. Assume your burden
rate is 12%, and your markup is 50%. Let’s calculate your Bill Rate. Bill Rate=Pay Rate * (1 + Markup). $15 * (1 + .50) = $22.50
Now, the Direct Cost of Labor. Direct Cost of Labor=Pay Rate * 1 + Burden Rate. $15 * (1 + .12) = $16.80
And finally, your Gross Margin. Gross Margin=Bill Rate - Direct Cost of Labor. $22.5 - $16.80 = $5.70 per hour
Instead of 50%, let’s say you did 30%. Changing your markup has a significant impact on your gross margin. $19.5 - $16.80 = $2.70 per hour
The gross margin among staffing firms is typically between 14 and 41 percent, with the average aggregrate among temporary staffing firms being 25%.
For more information, visit advancepartners.com/staffing-profit-margin-calculator to use our Profit Margin calculator.
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[@lifewithkendy]

good info

[@emilymarler9328]

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