staffing employees sitting

How to Price Staffing Services

Last Updated on May 11, 2021 by Grey Idol

When you start a staffing company, you need to know the proper amount to charge for your services. You don’t want to charge too little and lose money for your time and effort, and you also don’t want to aim too high and scare off potential customers. So, how do you achieve the right balance?

To be successful, it’s critical to remain competitive in your industry and turn a profit without breaking your clients’ banks. Are you at a loss for how to effectively price your staffing services? You’ve come to the right place. Continue reading to learn some helpful tips for establishing your pricing model.

5 Tips for Your Staffing Service Pricing Model

Before you start developing your pricing model, you need to understand a few standard pricing terms in the staffing industry.

First is the pay rate. This is the amount your agency will pay the employee. Then, you have the markup, which is a percentage added to the pay rate that covers taxes, worker’s compensation, insurance, and your income. Finally, you have the bill rate. This refers to the total you get when you add the pay rate to the markup and is the amount you will receive from your client for your services.

Now that you have a better idea of these different pricing terms, here are a few tips to keep in mind when you’re starting to price your staffing services.

Understand Your Competitors

If you have little to no competition in your area for your particular staffing services, you can typically raise your markup a little higher. However, if you have a few competitors in your region, you’ll benefit more from having an average price.

A general rule of thumb to follow is that the more competitors you have, the lower your price needs to be. Why? Because your customers have more options, and if your price is too high, chances are, they will choose someone else.

But remember not to go for the bottom of the barrel. Shoot for the average between your competitors to find the right price for you and your clients.

Know Your Company’s Expenses

One of the most important things you can do is examine your company’s expenses. The estimated monthly number will give you a better idea of how much you should be charging to earn a profit. Without knowing your expenses, you won’t know the lowest amount you need to stay afloat.

Startups have additional expenses to consider. Some of these common costs include equipment, office space or building, marketing, website, utilities, payroll, insurance, taxes, office supplies and furniture, and other miscellaneous fees involved in starting a business.

Make sure you’ve drafted a business plan to estimate revenue and expenses, as this will help you stay on track. Although managing your finances is one of the most stressful and overwhelming parts of owning a business, it’s also the most crucial. Stay informed about your company and charge properly by keeping abreast of your recurring expenses!

Identify Valuable Long-Term Client Relationships

Do you have a client or two that have stuck with you from the very beginning? Have they given you tons of good business? These valuable client relationships are sometimes the only thing that keeps companies running.

When you have a client like this, it’s a good idea to offer them a discounted price. This shows you appreciate their business and support while also giving them an incentive to keep using your services.

Determine which client is deserving of a price reduction and stick to that rate when serving them. It may be tempting to charge full price, and there may be times when you have to, but use your best judgment in this case.

Typically, staffing agencies customize their pricing after considering their client’s location, turnover rates, job requirements, and anticipated volume.

Note The Industry

Ask yourself if you’re working in a niche market or you’re a traditional staffing agency. The industry will play a significant role in your pricing.

A niche staffing agency selects job candidates from a limited pool. These usually include people from the Information Technology, Engineering, Computer Science, Mechanical, or Civil industries. Traditional staffing agencies accept resumes from a wider variety of jobseekers and forward them to relevant jobs that open up.

Niche markets can often charge higher, as they are searching to place highly qualified individuals with specific skill sets. So, if you’re in a niche market, consider increasing your markup after considering the other factors in this list, of course.

Distinguish Between Placements

You should also base your pricing on the types of placements you do. Three different types commonly occur in the staffing industry, and each can impact how you price your services. These placements include:

Temporary Placements
These types of placements are when you’re only looking to find a worker to be an employee for a client temporarily. If you’re a company that offers temporary placements, you should determine the pay rate, add a reasonable markup, and total this up to get your billing rate.

Temporary-to-Permanent Placements
The price for temp-to-perm placements depends on how much time and effort you’ve invested into the employees you’re finding a job for. The more difficult it is, the more you should charge for your services.

Permanent Placements
If you focus on permanent placements, your fee will automatically be a lot higher than if you only placed temporary employees. The amount you charge is usually based on the anticipated gross salary of the worker (usually between 10 to 20%).

Final Thoughts

Following the tips mentioned above can help your business start on the right foot and remain profitable over time. Remember that the most successful companies begin with a solid foundation. You and your clients will benefit when you establish a fair pricing structure.

In sum, ask yourself who your competition is and what they are charging, understand your business expenses, so you know the bottom dollar, and don’t forget to give that long-term client a considerable discount if possible. Finally, keep the industry you’re serving in mind and take note of the types of placements you’re looking to acquire.

For more other tips for staffing companies, check out these resources: