Workers Compensation Insurance For Staffing Companies - Whether you're moving into a leadership role at a staffing agency or considering starting your own shop, there are three key terms you need to understand in order to properly evaluate your services.
Billing Rate: This is the hourly rate your temporary employees work for the client
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Employment Costs: This is the combined hourly cost of a collection of fixed costs associated with hiring someone Some are requirements such as worker's compensation Other fixed costs are optional, such as account leave
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Your gross profit per job can be calculated as: Billing Rate - Charges (Pay Rate + Job Expenses).
Always know your billing rate (you have to tell your customers) and your payment rate (you have to tell your employees). Calculating load rates is the magic behind the looking glass that makes some staffing firms more effective than others.
There is no universal load rate calculator and there never will be Staffing agencies in neighboring counties will have different burden rates for the same job Loading rates will also vary between companies: loading rates for dock workers in warehouses will differ from those for paper vendors in the office upstairs.
These differences exist because the burden rate includes a combination of expenses mandated by local law (which have all the requirements and rates) and expenses you choose to incur on behalf of the employee (such as providing a 401K match).
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We wish we could give you a simple calculator that allows you to plug in some basic numbers and spit out your load rate. But since labor regulations are so complex, calculations are bound to be wrong The location of your company, the size of your company, and the type of job you're hiring may (or may not) change the charge rate.
This is a common expense if you are an employer in the United States
The Federal Insurance Contributions Act requires both employees and employers to contribute to Social Security and Medicare. These programs provide cash assistance to retired workers, the disabled and children whose working parents have died.
FICA is perhaps the easiest of the regulatory costs because it applies nationwide, to almost all workers. The current withholding rate for employers is 7.65% (6.2% for Social Security, up to $117,000; and 1.45% for Medicare on all wages).
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Note: Employees must also contribute the same percentage This comes directly from their paycheck and is not usually considered a cost to the staffing agency, although you want to make sure employees understand that the hourly rate you pay for them will not appear on their payslips.
State governments, with the help of the central government, provide compensation to those who lose their jobs through no fault of their own These fees are paid through an employer's levy Employers must factor in both federal and state taxes
The federal unemployment insurance rate is standard for all employers: 0.6% of employee earnings up to $7,000.
Unemployment insurance tax rates vary by state and also depend on the employer's "experience rating," which is how likely the company is to fire employees. Generally, this rate is around 4% and is applicable up to a certain amount of earnings. The amount varies by state
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Workers' compensation insurance provides cash payments to employees injured on the job Instead of protection from this system, workers are not allowed to sue for injury compensation (in most cases). Every US state except Texas requires employers to cover workers' compensation
Professional accident insurance rates depend on the question The higher the risk of injury, the higher the rate for insurance The cost may also depend on the insurer you choose In some states, the state government administers the program and sets the fee.
Workers' compensation costs are generally stated as an hourly rate, ranging from $0.10 per hour to $2.50 per hour.
Under the Affordable Care Act, employers employing more than 50 people are required to offer health insurance. This is another cost that needs to be factored into the charge rate calculation This amount will depend on the cost of the health insurance you pay (or whatever your employer chooses).
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US states have broad jurisdiction over taxation. In some states, counties and cities levy an additional employment tax If you are calculating your burden rate for the first time, please contact the local tax authority in your area They will help you find out if there are any additional local taxes in your situation
Let's look at a real-world example of a regulatory cost burden rate Our example employee is an executive assistant to the CEO of a Seattle-based commercial real estate company while the regular executive assistant is on paternity leave. Accepting. The executive assistant salary is $30 per hour and the contract period is full time for 15 weeks or 600 hours.
Based on job duties and job location, these are regulatory expenses that a staffing agency should incur in addition to salary.
Discretionary expenses are additional expenses that you decide to incur as part of hiring an employee The trick is that you account for everyone
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Why would you incur additional costs when you are paying an employee? Because the bells and whistles of discretionary value can help you attract top-tier candidates and clients.
It should go without saying that prospects are more likely to partner with your agency if you offer 401k contributions, paid vacation, childcare reimbursement, and other benefits. What may not be obvious is that client companies love it when you offer these benefits Employee benefits can be a force that differentiates you from your competitors
Some expenses that are within your discretionary budget may actually be required by your client, such as background checks or drug tests.
Returning to our example of a temporary executive assistant in Seattle, here's how discretionary spending might look.
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Regulatory costs are 20.4% of the employee's wages, or $6.13 per hour Discretionary expenses are an additional 18.8% of the employee's salary, or $5.63 per hour
Now comes the fun part: playing with the numbers to figure out how much money to make per hour Different agencies call it different things (service fee, gross margin) but the most important thing is to understand your gross service fee.
Few staffing firms share this information with their clients unless it is a major client who actually leads for this assessment. A common way to communicate is, "Once we've calculated the employee's taxes, benefits and hourly wages, we collect a small service fee of about $5 per hour."
The higher the price of the service, the more money you make, but you need to be careful to keep the price in line with your customer's expectations. It's a fine balance of setting the markup as high as possible to go above and beyond other agencies and still attract a lot of clients. That's why knowing your load rate is critical Without it, you may find yourself trading on a commission that doesn't generate gross profit dollars for your company.
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Load rates and service charges represent the gross markup over the employee's direct wage rate A good rough calculation for this ratio is 1.65:1, or to put it another way, the billing rate is 65% of the payout rate. In this case, if we add $5 to the hourly service rate of $11.76 per hour, we get $16.76 per hour in wages, or 55.9% of the $30 hourly rate.
However, for a high-visibility position like executive assistant to the CEO, you may be able to charge a premium. This calculation is more art than science It depends on what you consider the value you offer your customers and how effectively you can communicate that value.
To justify a higher billing rate for your executive assistant, you may want to partner with the hiring manager to provide significant value to your agency's hiring process that goes far beyond what any other agency can provide. An extra layer of care, evaluation, screening – that adds to the overall cost But they also ensure that you are offering the right candidate with the right skills who will excel in the role
Modern staffing agency software can help you strengthen your case and track duty rates, billing, and service charges by client, job type, location, and any other custom variables you need. There are many types of workers compensation plans available At Nixer Comp, we strive to find solutions that are the best fit for our insured clients This may mean using a traditional price-guarantee policy, however, through the success of our program pillars and strategic partnerships, our aim is to deliver.
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