Insights
What Staffing Agencies Actually Charge
Staffing agencies charge two ways. Contract placements are billed as an hourly bill rate — the worker’s pay rate plus a markup, commonly 35–60% in the US market. Direct-hire placements are a one-time fee, usually 18–25% of the candidate’s first-year base salary. Both should be agreed in writing before any work starts.
The two pricing models
Almost every staffing engagement is priced one of two ways, and the difference matters because they behave completely differently on your budget.
Contract staffing is an ongoing hourly cost with no lump sum. Direct hire is a single fee that lands when the person starts. A role you expect to keep for three years is far cheaper as a direct hire; a role you need for four months is far cheaper as a contract.
How a contract bill rate is built
This is the part agencies are usually vague about, so here is the whole structure. Say a contractor is paid $50 per hour and the agency quotes a 45% markup. Your bill rate is $72.50 per hour. That extra $22.50 is not profit — most of it is employer cost.
| Component | Approx. per hour | What it covers |
|---|---|---|
| Worker pay rate | $50.00 | What the contractor actually receives |
| Employer payroll taxes | $4.00–$5.00 | FICA, FUTA, SUTA — roughly 8–10% of wages |
| Workers compensation | $0.50–$3.00 | Varies enormously by role; warehouse costs far more than desk work |
| General & professional liability | $0.30–$0.80 | Insurance the client normally requires |
| Benefits & admin | $1.50–$4.00 | Health coverage, payroll processing, onboarding, I-9 |
| Agency margin | $8.00–$12.00 | Recruiting, screening, management, and profit |
The practical takeaway: a markup below roughly 30% is a warning sign, not a bargain. Employer costs are fixed by law and by the insurance market. If an agency quotes well under them, the money is coming out of worker pay, insurance coverage, or screening quality — and all three eventually become your problem.
Typical markup ranges
| Role type | Typical markup | Why |
|---|---|---|
| Light industrial / warehouse | 35–50% | High workers-comp rates offset lower wages |
| Administrative & clerical | 35–50% | High volume, low complexity |
| Finance & accounting | 40–55% | Credential verification adds screening cost |
| IT & engineering | 40–60% | Scarce candidates, long search cycles |
| Niche or clearance-dependent | 55–75%+ | Very small candidate pools |
Direct-hire fees
Direct-hire recruiting is normally a percentage of the candidate’s first-year base salary. Across the US market, 18–25% is the common range, with harder or more senior searches at the top of it.
On a $120,000 salary at 20%, the fee is $24,000, invoiced when the candidate starts.
Two structures exist. Contingent means no fee unless you hire — the agency carries all the risk, which is why contingent recruiters work many roles at once. Retained means you pay in staged instalments through the search, which buys genuine prioritisation and makes sense for senior or genuinely difficult roles.
What should never appear on your invoice
- A fee to open a search or receive a shortlist.
- A charge to replace a contract worker who did not work out.
- A conversion fee after the agreed contract-to-hire period has elapsed.
- Background check or onboarding surcharges you did not approve in advance.
- A markup that changes after the engagement has started.
Questions worth asking before you sign
Any agency that will not answer these in writing is telling you something useful about how the engagement will go.
- What is the exact markup percentage, and is it fixed for the engagement?
- What is the replacement guarantee period, and what voids it?
- Is the contractor W2 or corp-to-corp, and who carries workers compensation?
- What are the conversion terms, and when does the conversion fee reach zero?
- Can I see a certificate of insurance before anyone starts?