Understanding Markups

Markups charged by staffing agencies are one of the most misunderstood and cloudy areas of the hiring process-- particularly when it comes to contingent labor. Companies have the ability to save millions of dollars, by getting underneath these costs with rate benchmarking tools like PeopleTicker.

The Markup rate is part of the total amount paid to a staffing agency by the hiring company.

Pay rate ($ paid to employee) + Markup ($ to Staffing agency) = Bill rate ($ Total paid by hiring company)

Because Markup rates vary widely (sometimes wildly), PeopleTicker weighs in the most common variables that contribute most heavily to the differences.

Common Markup differences include:

• Expertise of buying organization
• Corporate contracts
• Competitive solicitations
• Type of skill set, i.e. Programmer vs. Receptionist
• Volume of business
• Relationship of employee with agency, i.e. W2 employee, independent contractor, etc. (Paid holidays & vacation, medical coverage, life insurance, 401K, training, etc.)
• Number of vendors
• Length of assignment
• Other overhead and general & administrative expenses
• Profit
• Difficulty of recruit

Fixed Markup percentage As a way of controlling bill rates, a hiring company may negotiate a fixed Markup percentage that is added to the Pay rate . The percentage can be based on any number of factors including: skill type, geography, competitive solicitation, etc. This approach forces the overall Bill rate to rise (Pay rate + Markup), increasing the agency's margin.

Drawbacks: The main drawback to this approach is that the agency doesn't have any incentive to locate and place candidates at the lowest, most competitive pay rates. While low markups may seems like a great way to control costs, there are risks. Staffing agencies are inclined to place their most qualified individuals with companies that pay the highest Markups. PeopleTicker allows you to effectively manage these negotiations with current market knowledge.