Billing Rate Calculator – How Much Does a Recruitment Agency Earn?

BrightMove has developed a tool that helps sales reps at recruitment agencies estimate how much money they could make from contract placement. We call it the ultimate endowment calculator. It will also tell you your financing needs and profit margin over time based on the terms of the placement. The BLS (US. Bureau of Labor Statistics) produces wage data by region and by occupation for workers in the United States. This is an excellent free resource for determining market rates across the country. Using this billing rate and pay rate calculator and some free data from the BLS, you can determine the hourly wage you should charge for a specific occupation.

First, determine the hourly pay rate

You can use BLS data and recruitment agency BrightMove’s billing rate calculator to find out what your hourly rate would be for any job. Simply search by education level and years of experience, then enter that information into the Ultimate Staffing Calculator’s Pay Rate field.

Second, determine your markup rate

This is where your sales skills will come in. The markup is the percentage you or your organization sets based on the value you bring by finding the best candidate for the job. This markup may vary from recruiting agency to recruiting agency and region to region. If you know what your market will tolerate from a markup perspective, enter it in the Markup Percentage field. Otherwise, you can start with a recommended amount of 110%.

Then display the calculated billing rate and the calculated spread

The billing rate is the amount you will charge your client for each hour your candidate works, based on the contractual agreement you have in place with the client. The calculated spread is the gross profit based on the contractual billing rate with the client.

Finally, Mind The Gap – Don’t forget the other fees

There are several other typical areas that can erode the profitability of a contract investment. These other domains produce fees that add up and can put less money in your pocket. Or worse, an investment that goes from profitable to unprofitable if you don’t “watch the spread”. In fact, it is precisely for this reason that the BrightMove software was originally created. These fees are:

  • Charge % – These are fees such as employment taxes, recruiting fees, benefits and other administrative costs
  • Interest rate % – If your financing is not guaranteed by money, you will have to take into account the costs to find money. Factoring companies can make a fortune with high interest rate loans by factoring invoices from recruitment companies.
  • Weeks before payment – How long until you get paid according to the terms of your contract. Generally, customers want to pay more than 30, 45 or 60 days. Sometimes these terms are longer and will require you to pay money.
  • Slot length – How long will the applicant be committed to the contract. The Billing Rate and Pay Rate Calculator will tell you how long it will take before you break even.
  • Commission Cap % – Is your commission capped at a maximum percentage? If so, this is the field to set this amount in the Billing Rate and Pay Rate Calculator.

Payroll Funding for Staffing Firms is Critical to Success

Once the contract is in place and the candidate gets to work, payroll financing for placement firms is the next major factor that will impact profitability. Yes, you made the sale. Congratulations! Now, the recruiting firm must cover the cost of the candidate’s payroll until payment is received from the client. Sometimes it’s 30 days, sometimes more. As part of your contract and probably as part of the master services agreement you have with your client, payment terms should be defined. You should make sure to factor the cost of payroll funding for recruitment companies into your business plan. If your organization has enough capital to self-fund the payroll, that’s usually better. In many cases, recruitment company payroll funding is done through an internal or external line of credit or by factoring accounts receivable and invoices. Whether you fund payroll with internal capital or other capital, you need to factor the cost of borrowing that money into your plan. The Ultimate Staffing Calculator provides a quick and free way to understand your payroll funding needed for your staffing business. Simply enter the interest rate you expect to pay to lock in the principal and the number of weeks until you expect to be paid by your client, Viola! Payroll financing needs are estimated for you!

Find out how much you should charge using the Billing Rate and Pay Rate Calculator.

Do you know how much you should charge for a job? Our billing rate calculator will show you how much you should charge per hour.

About BrightMove

BrightMove is the perfect ATS for recruitment agencies of all types and sizes. Whether you are an executive search and recruitment firm, a permanent placement agency, or a staffing manager, BrightMove will meet your needs and exceed your expectations. BrightMove was created for recruiters, by recruiters. BrightMove for Staffing is a software for hiring employees and contractors. It’s cost-effective employment agency software that’s streamlined for your business. It can be customized to fit your recruitment process, so you can find the right candidate the first time. No workaround required.

For more information on BrightMove for Staffing, please schedule a demo with one of our Customer Success Specialists.

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