Bill Rate vs Pay Rate: Markup Math for Staffing Agencies

Every staffing quote comes down to three numbers: what the worker gets, what the client pays, and whether the space between them actually covers your costs. Get the middle number wrong and you can run a busy, growing, unprofitable agency.

Here's the math, with worked examples you can rebuild in a spreadsheet, or check your current rate cards against.

Definitions

• Pay rate: the hourly wage the worker receives. Say $20/hour.
• Bill rate: the hourly price the client pays for that worker. Say $30/hour.
• Markup: the bill rate's premium over the pay rate, as a percentage of pay:

Markup % = (Bill rate − Pay rate) / Pay rate × 100
$30 vs $20 → 50% markup

• Gross margin (before burden): your cut as a percentage of the bill, which is not the markup:

Gross margin % = (Bill rate − Pay rate) / Bill rate × 100
$30 vs $20 → 33.3% margin

A 50% markup is a 33% margin. Mixing the two up is an easy quoting error to make: a "50% margin" promised to a client as "50% markup" cuts your spread in half ($10 an hour instead of $20 on a $20 pay rate).

What the markup has to cover

The markup is not profit. It pays, roughly in order:

Statutory burden (required in nearly every state, much of it only up to annual wage bases):

• Employer FICA: 7.65%
• Federal + state unemployment (FUTA/SUTA): commonly 2–5% combined at staffing volumes, state-dependent
• Workers' compensation: wildly variable by class code, under 1% for clerical and double digits for some industrial and trades classes

Statutory burden alone typically runs 10–18% of pay depending on state and class.

Non-statutory costs: ACA-compliant benefits where applicable, PTO accrual if offered (paid sick leave is required in California and other states), payroll funding costs (if you factor receivables, the factoring fee lives here), and the back office itself, the software and people that turn hours into invoices.

Then overhead (recruiters, office, insurance) and, finally, profit.

Worked example

$20/hour pay, light-industrial placement in a mid-burden state:

Pay rate                        $20.00
Statutory burden (~14%)          $2.80
Benefits/PTO accrual (~4%)       $0.80
Loaded labor cost               $23.60

Bill at 50% markup              $30.00
Gross profit per hour            $6.40   (21.3% of bill)

That $6.40 still has to fund recruiting, ops, and margin. This is why typical staffing markups run 40–75%, with clerical at the low end and specialized or high-workers-comp roles at the high end. That's not because agencies are greedy; it's because loaded cost eats the first ~18% of markup before anything else happens.

The overtime trap

An hour of overtime pays the worker 1.5×, but your burden rides on top of it, and your quoted bill rate may not. Two rules save you:

1. Quote an overtime bill rate explicitly. Commonly it's the regular bill rate × 1.5, so your margin percentage survives the premium.
2. Know when overtime triggers. Hours aggregate per worker per week across all assignments, so a worker split across two of your clients can go into overtime that neither client's hours alone would predict. We covered the mechanics in the FLSA aggregation rule. Decide contractually, in advance, how that premium is billed.

An agency that eats unbilled overtime premiums at 50% markup loses money on every OT hour.

Quoting checklist

• Markup and margin not confused in the quote
• Workers' comp class code checked for this role, not your average
• State SUTA rate current (they change; check yearly)
• Overtime bill rate stated in the agreement
• Shift differentials (nights/weekends/holidays) priced if applicable
• Rate card recorded somewhere better than a recruiter's inbox

Where software fits

The math above is simple exactly once. At volume, with dozens of clients, per-project rates, differentials, and overtime splits, the failure mode isn't understanding the formula. It's applying the right rate card to the right hour ten thousand times a month.

That application step is what Hire2Hero automates: unlimited per-placement pay and bill rates for every client and project, shift differentials, cross-assignment overtime on payroll, and invoices generated from approved timecards with the correct markup applied, then pushed to your books via the QuickBooks Online integration. Per-timecard pricing is published on the pricing page, so you can put the software's own cost into your burden math too.