Pricing Definitions
Bill Rate
The rate a company pays to a staffing agency for the services of a temporary worker.
Burden Rate
Another name for statutory expenses, i.e. the taxes, insurance, and other charges required by law.
Pay Rate
The amount being paid to the contingent worker by the staffing agency.
Gross Margin
The amount of money a staffing firm gets to keep after paying the temporary workers payroll, benefits, payroll and other statutory expenses. Gross margin dollars are used to pay internal overhead expenses and owner’s profit.
Markup
A 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. Markups depend on a variety of factors and can vary greatly.
Profit Margin
A measure of profitability calculated by taking net profit (revenue-cost) and dividing it by revenue.
Federal Unemployment Tax (FUTA)
Unemployment taxes paid to the Federal government. The FUTA rate is 6.0% with a wage base of $7000, and employers can take a credit of up to 5.4% of taxable income if they pay state unemployment taxes. If you qualify for the highest credit, then the minimum FUTA rate is .6%.
Social Security and Medicare Tax Rate (FICA)
A single flat rate to all employers of 6.2% for social security and 1.45% for Medicare tax. This is capped at a salary of $137,700 for Social Security, for each employee in 2020. There is no cap on Medicare tax.
State Unemployment Insurance Tax (SUTA)
Rates and taxable wage limits vary greatly by state to state.
Statutory Expenses
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.
Overhead Expenses
Standard operating costs such as rent and equipment, and for staffing firms this also includes recruiting costs, sales commissions and your cost of money based on payment terms.
Worker's Compensation Insurance
An insurance policy that covers work related injury and illness. Workers comp insurance rates vary by skill type, vendor and state.