Pay Rate

Pay rate vs bill rate

The pay rate is what the worker earns. The bill rate is what the client is charged. The gap between them, the spread, covers employer payroll taxes, workers' compensation, benefits required by law or offered by the agency, recruiting and account management costs, credit risk and profit. The relationship is usually expressed as a markup on the pay rate.

Workers usually see only the pay rate and clients usually focus on the bill rate. Both views matter. If a client pushes bill rates down, the pay rate is what gives first, and the agency starts losing candidates to employers paying more.

How agencies set the pay rate

Good recruiters start from the candidate market, not the client's budget. For each role and location they look at what direct employers are paying, what competing agencies are posting and how fast similar jobs fill. Then they work backward to the bill rate.

For high-volume roles, small differences matter. A warehouse picker job at $17.50 will often draw noticeably fewer applicants than the same job at $18.25 across the street. When a client's bill rate does not support a competitive pay rate, the honest move is to show the client the math before accepting the order: here is the market rate, here is the bill rate it needs, here is the expected fill rate if we go lower.

Agencies also have to meet legal floors: federal, state and local minimum wage, prevailing wage on public contracts, and any applicable living wage ordinance. When a minimum wage goes up, the pay rate must rise on the effective date, and the MSA should allow the bill rate to rise with it.

Overtime and other pay rates

A single assignment may have several pay rates: a base rate, an overtime rate (1.5 times the regular rate for hours over 40 in a workweek under federal law, plus daily overtime in some states), shift differentials, holiday premiums and training rates. The overtime rate must be based on the regular rate, including differentials and nondiscretionary bonuses, not just the base pay rate. Clients are normally billed at a matching overtime bill rate, often the regular bill rate times 1.5, or the overtime pay rate times the markup.

Pay rate in a staffing job order

Every job order should state the pay rate or pay range, any differentials, overtime expectations and the bill rate. With pay transparency laws in several states and cities requiring a pay range in job postings, agencies need the pay rate fixed before advertising. Do not post a range wider than you will actually pay; candidates who are offered the bottom of a wide range often drop out before starting.

Common mistakes

• Accepting orders with bill rates that only support a below-market pay rate, then missing the fill rate.
• Not adjusting pay rates when local minimum wages change on January 1 or July 1.
• Paying temps less than direct employees doing the same job, where local equal treatment rules or the client's own policy prohibit it.
• Calculating overtime on the base pay rate only.
• Advertising the bill rate or a misleading 'up to' figure that includes overtime.