Negotiating Staffing Agency Bill Rates – the Inside Scoop!
The Key to Negotiating Staffing Agency Bill Rates is to Understand Your Needs for Service!
In previous blogs we have covered the components of the staffing agency bill rate, identifying those components that are fixed because they represent costs that are mandated (that any employer would need to pay), different from those components of the bill rate that cover the costs of providing service. As most employers are keenly aware, the last two decades have seen significant increases in the DIRECT COSTS that all employers face just to meet tax and mandatory benefit requirements, but SERVICE COSTS have increased as well – in large part created by tight recruiting markets and clients asking their staffing agencies to do more. Negotiating a bill rate that accurately reflects your service needs is key to ensuring market competitive rates.
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 many employer purchasers have 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. If one is offering services you don’t need, you have room to negotiate a lower bill rate by asking that these services not be provided. 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 without being willing to bend on some of their service offerings, the result can be inferior service or candidates.
Here are several tips for negotiating lower bill rates by being more aware of agency services and their costs.
Your Staffing Agencies Costs for Sourcing the Candidates you Need.
A big part of any staffing agency bill rate have to cover the costs for work your agency agency must perform in order to source and recruit the type of candidates you want to hire. This is the most time consuming of an agency’s typical service offerings and will vary depending on:
- Candidate Availability – which varies depending on 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!
Your Staffing Agency’s Costs for Screening, Vetting, Evaluating Candidates
The more extensive your screening requirements or the number of pre-assignment screenings your agency performs, the more your agency needs to charge for their vetting services.
TIP: Make sure you only ask your temporary staffing agency to screen on factors important to placement success!
How Much (or Little) Do You Want to Get Involved in Selecting the Candidates for an Assignment?
The role you want to play in the selection process and the processes you use to select candidates for a temporary assignment 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 to begin in a temporary role.
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! If you’ve been working with a staffing agency for a long period of time, you might inquire as to how much they could lower your bill rate if you worked with them on a “just send” basis (meaning you place and order and they hand select the candidate to fill it)
How Many Resources Have You Asked to Help You Fill Your Role?
While many employers believe that the more agencies they involve to help them with their recruit, the more likely they are to find the candidate they need. In truth, the more agencies or resources you use 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. PACE, for example, offers significant discounts for “exclusive listings” as we know that exclusivity reduces our costs of service – a savings we are more than willing to share with PACE customers.
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!”
How Long Will the Employee You Select Be Working on Assignment?
The longer the temporary or contract assignment the longer the staffing company has to recoup its up front recruiting costs. 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 3, 6, or 12 months.
Are there any Unique Work Environment or 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.
What Benefits is Your Staffing Agency Providing to Their Employees While on Assignment?
We are all affected by the high costs of benefits—healthcare insurance, paid time off, etc. While all temporary staffing companies are required to offer and pay for mandated benefits, if you, as a customer, require them to offer benefits over and above mandated levels, that will add directly to their direct costs, increasing your bill rate. The benefits you want your staffing agency to provide to their employees need to deliveer value to you and your business or you are wasting money paying for those costs in your bill rate.
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.
How Many Employees Will You be Hiring?
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.
Here’s the BOTTOM-LINE…..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.
For a complimentary discussion regarding the elements of how most agencies price their services and ways for you to either lower your current bill rates or improve the services you get from monies being spent….
Contact our Partner Services and Solutions team at firstname.lastname@example.org or call us at 425-637-3312.
PACE Staffing Network is one of the Puget Sound’s premier staffing /recruiting agencies and has been helping Northwest employers find and hire employees based on the “right fit” for over 40 years.
A 4 time winner of the coveted “Best in Staffing” designation , PACE is ranked in the top 2% of staffing agencies nationwide based on annual surveys of customer satisfaction.
PACE services include temporary and contract staffing, temp to hire auditions, direct hire professional recruiting services, Employer of Record (payroll) services, and a large menu of candidate assessment services our clients can purchase a la carte.
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