Bill rate, workers compensation, FICA, statutory costs? What do these all have in common? These are all part of what it takes to create staffing bill rates. They’re also some of the terminology used by those of us in staffing every day, but may be confusing to those of you not in human resources or our industry. Let me explain what these all mean and how it relates to bill rates and costs.
When a staffing company places a person on assignment, at a client company, they become the employee of the staffing firm. The staffing company pays them, provides benefits and are responsible for their taxes and with holdings. And as their employer of record they are responsible for employer taxes.
The national average hourly wage is $17. To pay an employee that rate it costs a staffing company $25.27. What? How does that happen?Â
HERE IS THE COST BREAKDOWN
Legally mandated costs are FICA (Social Security & Medicare), FUTA (Federal Unemployment Tax), SUTA (State Unemployment Tax) and WC (Workers Compensation)
On a employee making $17/hour:
- FICA= $1.30 (7.65%)
- FUTA=$1.02 (6%)
- SUTA=.68 (4%)
- WC=.34 (1.99%-varies and can go a lot higher for mfg jobs)
General and administrative expenses for operating, overhead, rent, equipment and marketing is figured at 18.7%. Which for a person making $17 is $4.93/hour.
To achieve the industry’s national average net profit rate of 4.11% the bill rate would need to be $26.35.
Confusing, yes. The graphic at the top helps explain this visually and much more clearly. But the reality is the cost to put someone to work is much more complicated than you might have thought.
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