Finding the best employees for your company can be difficult in today’s highly competitive talent market. You want to attract the top people for your open positions, yet advertising jobs online or in print will often produce disappointing results. To take recruitment efforts to the next level, meet top candidates and build sustainable staffing solutions, many companies choose to partner with an agency like ETS. Our specialty is weeding out the undesirable candidates, saving our clients’ time and money, and producing more favorable hires.
The good news is that the costs associated with working with a staffing firm are a lot less than one might expect (Spoiler Alert: Candidate Pay Rate and Mandatory Direct Costs make up the largest percentage of any bill rate). Here’s an overview.
Hourly Fees and Direct Fees
There are two common fee schedules that staffing firms get when placing employees with companies – hourly and direct fees. Direct fees are charged when the placement is direct hire (in other words, ETS finds the talent and that person goes directly on the client’s payroll). The hourly fee is paid when the contract is either a temporary one or a contract to hire. The agency is the employer of record and the client pays the staffing firm an hourly fee for each hour of work the employee works. The hourly fee is made up of the following:
- Direct Costs
The largest and most significant component of your staffing invoice are the costs associated with the employer requirements that every employer has in New York and Vermont.We have learned that unless you are an accountant or payroll specialist, most customers (especially employers who are used to hiring in Canada) simply aren’t aware of what it costs to be an employer – let alone what it costs a staffing company to be “the employer” on their behalf.In the state of New York, DIRECT (statutory mandated) COSTS represent anywhere from 65-85% of a staffing agency’s bill rate! And important to note is that these are the same DIRECT COSTS you would be paying if you hired the employee directly, which leaves only 15-35% of the bill rate to cover the actual services provided – sourcing, recruiting and assigning the temporary or contract worker, HR and payroll services – a percentage very different than most customers assume their staffing agency pockets for service and profits.Direct Cost Example:
- Staffing Agency Fee
The other part of the total hourly bill rate is component of your bill rate dedicated to service delivery – the work ETS performs to source, recruit, retain, refer, and manage the employee(s) they assign to your workforce. This portion of the hourly fee can be anywhere from 15% to 30% depending on a number of factors related to the particular job we are recruiting for. The following is a breakdown of what is included in this fee.
What am I getting from ETS?
1. Recruiting Services
This includes all the work we perform to source and recruit candidates. This is the most costly of all service offerings and will vary depending on:
- Candidate Availability which is directly related to the employee’s job category, skill or experience level, and location.
- Job Appeal. The more appealing the job you are trying to fill in terms of its content, pay, location, etc., the easier it is for ETS to recruit candidates for placement. If the job you are trying to fill isn’t that attractive or requires skill sets that are hard to find, expect to pay a higher bill rate.
2. Candidate Evaluations or Screenings
The more extensive your screening requirements or the number of pre-assignment screenings and testing the client requires, the higher the fee will be.
- TIP: Make sure you ask ETS to screen on factors important to placement success! Understanding what skills have been successful in the past is key.
3. Selection Process
The role you want to play in the candidate selection process has direct impact on ETS’ costs. Employers who don’t require a pre assignment interview should expect to pay less than employers who want to review multiple candidates or resumes before selecting their preferred candidate.
4. Competitive Landscape
The more agencies you enlist to help you locate the right employee, the less likely you are to get the full engagement of any one agency. Many agencies will reduce their resource commitments if too many agencies or other recruiting resources are competing to fill the same job. ETS gives significant discounts for exclusive clients.
- TIP: Don’t make the mistake of assuming that competition between multiple staffing agencies ensures faster response or better quality. Asking for a discount in bill rates in exchange for an exclusive listing is a better “best practice!”
5. Length of Assignment
The longer the temporary or contract assignment, the more up-front recruiting costs ETS can recoup over the life of the assignment. The longer an assignment, the lower your mark up or bill rate should be.
6. Work Environment and Safety Concerns
All employers will pay more for their worker’s compensation insurance for individuals working in high risk environments. In New York and Vermont, workers compensation insurance is part of our Direct Costs.
7. Preferred or Mandated Benefit Costs
We are all affected by the high costs of benefits—healthcare insurance, paid time off, etc. The temporary staffing business in general is not benefit rich, and while some agencies will claim to offer benefits, when you look closer, the benefits they offer are either minimal or employee funded. ETS offers a robust benefits package for your temporary employees— Health Insurance, a 5% matched 401k plan and holiday pay if certain requirements are met.
- TIP: If you expect or require your staffing agency to provide a full package employer paid healthcare benefit, holiday or personal time off, expect the costs of these benefits to be reflected in a higher mark up or bill rate.
8. Volume Purchasing
Last but not least, one of the factors that has a significant impact on your ETS’ service costs are the costs incurred to learn more about you and your staffing needs. Because these are upfront costs, when you use the same agency for repeated or volume needs, purchasers of staffing services should expect “volume based” discounts.
All Staffing Agencies Charge Fees For Their Services
Staffing agencies have proven their worth. With almost $90 billion in annual revenue, the staffing industry employs about 3 million workers daily. These companies play an important role in meeting the growing demand for skilled, qualified employees in the U.S. In the same way people hire accountants to do their taxes or doctors to perform surgery, finding, screening and hiring employees should be left to the experts! Unless you’ve had a bad experience with a staffing firm, you already know the value in the partnership but you may not understand exactly what the fee breakdown encompasses.
Live chat or call ETS today (518.562.4673) for a more in-depth discussion about our services and our cost breakdown.