Negotiating Bill Rates with your Staffing Agency!
Buy the Staffing Services You Need Without Paying for the Services You Don’t!
In previous blogs on the topic of temporary staffing pricing practices, we outlined the various pricing models used by staffing companies and listed the DIRECT COSTS that make up 70-85% of a typical temporary staffing agency bill rate.
In this blog we list the services typically covered in your staffing agency bill rate, while providing you with some tips on how to negotiate with your staffing agency to arrive at a bill rate that meets your service needs!
As most employers are keenly aware, the last two decades have seen significant increases in the DIRECT COSTS all employers face just to meet tax and mandatory benefit reqirements. SERVICE COSTS have increased as well – in large part created by clients asking their staffing agencies to do more.
While some temporary staffing agencies have consistently added to their service offerings, others have resisted that trend, preferring to compete in the low cost/low service segment of the marketplace. The problem for purchasers is that it’s not always clear which agency is which. There are times when all staffing agencies sound the same, unless you dig deeper.
TIP: When comparing one staffing agency’s bill rates to another, always make sure you understand the services each is offering. Some services you may not need so by eliminating them from your service requirements, you have room to negotiate a lower bill rate. Other services you may need, but will not get if you are selecting your staffing agency based only on cost!
Here are EIGHT areas where staffing companies normally provide service, along with some tips for negotiating bill rates based on some changes in the service process.
1. Recruiting Services.
Includes all the work an agency must 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. If the employee you need is readily available in a local marketplace, you likely have room to negotiate for a lowered bill rate. On the reverse, the more “one off” the employee is in terms of availability, the higher the bill rate.
- TIP: The more you know about the local job market and the availability of the type of employee you are seeking, the easier it will be for you to negotiate a bill rate that makes sense – for both you and your staffing agency!
- 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 your staffing agency 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.
- TIP: Ask your staffing agency to help you organize the work or adjust your skills or experience requirements to keep your bill rates within budget. Some skills or experiences may not be worth the price you would need to pay to get them. For similar reasons, asking your staffing agency to find a $30/hr employee for a job paying only $20 is never a win for you or your staffing agency!
2. Candidate Evaluations.
The more extensive your screening requirements or the number of pre-assignment screenings you ask them to perform, the more your agency needs to charge.
- TIP: Make sure you only ask your temporary staffing agency to screen on factors important to placement success!
3. Selection Process.
The role you want to play in the selection process and the processes you use to select candidates has direct impact on your agency’s SERVICE 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.
- TIP: Anything you can do to make it easy for your staffing agency to present candidates and enlist your prompt response to the candidates presented will reduce your staffing agency’s SERVICE COSTS—and ultimately your bill rate!
4. Competitive Landscape.
The more resources you enlist to help you locate the right employee, the less likely you are to get the full engagement of any one staffing agency. Many agencies will reduce their resource commitments if too many agencies or other recruiting resources are competing to fill the same req. Others will offer discounts for exclusive listings.
- TIP: Don’t make the mistake of assuming that competition between multiple staffing agencies assures 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 of the up ront recruiting costs your staffing agency will be able recoup over the life of the assignment. The longer an assignment, the lower should be your mark up or bill rate.
- TIP: Be aware of the impact of length of assignment on staffing agency costs and negotiate bill rates accordingly. Some agencies will offer discounted rates from day one of the assignment. Others will be willing to lower their rates after 6 or 12 months.
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 the state of Washington, workers compensation insurance is part of our Direct Costs.
- TIP: if you are an employer with a high rate of injury or workers comp claims, expect your staffing agency to charge you a premium to place workers in your work environment.
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.
- 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 agency bill rate.
8. Volume Purchasing.
Last but not least, one of the factors that has significant impact on your staffing agency’s service costs are the costs they incur 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.
- TIP: If you know of more than one temporary or contract positions coming up soon, place requests for both employees at the same time. If you are a regular user of temporary or contract staffing, talk with your staffing agencies about contract level pricing where you earn discounts in exchange for ongoing business. Contract level pricing should earn you discounts in the 10-15% range.
Conclusion: As tempting as it might be to ask your staffing agency to sharpen their pencil to lower their markup or bill rates, if you press too hard the result can be inferior service or candidates. Negotiating with your staffing company around all the issues that impact their SERVICE COSTS is the best way to strike up a win-win relationship with your staffing provider.
The PACE Staffing Network prides itself on our fully transparent pricing strategies, willing to reveal all direct costs and service costs on all transactions. For a complimentary discussion with a member of our partnership team on all the elements of our pricing model and ways for you to either lower your current bill rates or improve the services you get from monies being spent, contact us at email@example.com or call us at 425-637-3312.
This article was written by Jeanne Knutzen, founder and CEO of the PACE Staffing Network.