How should I charge for contract placements? How do I calculate my margins?

Making sure that your agency is making informed commercial decisions on your margins, is one of the critical success and longevity factors for your business. Here's our quick guide on charging for contract placements.

As a recruitment agency, your genuine on-costs for the processing of wages to workers would include superannuation, payroll tax, workers compensation and general insurances. When you are building your margin; most organisations will have some expectations around what your estimated on-costs would be. Information on payroll tax, superannuation guarantee contribution and industry workers compensation rates is both publicly and readily available; as are minimum rates of payment for workers. 

The rate that your candidates are paid is dictated by the market, the relevant award (if applicable), what the candidate is prepared to accept and what the client is budgeted to pay. Legally, temporary workers cannot be paid below their applicable award rate; however, generally most casual workers are likely to be paid above award/minimum wage levels simply because the market demand for their skills ensures that the rates they can command are higher. It is important to note that not every worker is covered by an award; for example, professional staff are traditionally not covered. Despite this, there will always be a minimum wage rate that needs to be applied. It’s important to be clear on market and salary expectations; as this will assist you during the negotiation process with your client. For example, is their budget actually appropriate for the role’s skill and/or demand level? If you can clearly demonstrate what they need to spend on a candidate and why - this will only assist when discussing your margin.

You can always leverage Oncore’s salary insights to help!

Never forget that you’re doing business with a business; and good businesses understand the mechanics of commercial relationships. Your clients are requesting a service from you, and it’s important that you’re compensated fairly for these services. Your overall margin percentage might be dependent on industry, market demand and specialisation. Typically a gross margin of 15% - 30% of the worker’s hourly or daily rate will apply. Where margins fall within this band might depend on whether the worker’s field is highly specialised eg. IT or engineering (higher margin); or whether it’s a generalist role (lower end of the scale). Your agency may wish to get more creative with margins and leverage discounts based on volume, attraction, placement duration etc..

In order to assist you in maximising your margins, Oncore has created an online margin calculator tool. You can use this to work out your margin while factoring in invoice rate, payroll tax, worker rate and Oncore on-costs (your fee). This online tool is simple to use, but just make sure you reset the calculator between sessions.