How Much Do Temp Agencies Charge? Hourly Rates and Markups

Temp agencies charge employers a markup on the worker's hourly pay rate, commonly 25-50%, reaching 75% or more for specialised roles. A worker paid $20 an hour at a 40% markup bills at $28. The markup covers payroll taxes, workers' compensation, insurance, benefits administration and agency margin.

This page is written for employers. If you are a worker wondering what an agency takes from your pay, the mechanics below still explain it, but the framing is about what a business is invoiced.

The single most useful thing to understand is that markup is not margin. A 40% markup does not mean the agency keeps 40%. As the legal employer of that worker, the agency carries real costs that come out of it, and in some sectors those costs consume most of the percentage.

Bill rate = pay rate x (1 + markup)

Worker pay rate	At 30%	At 40%	At 50%	At 60%
$15.00	$19.50	$21.00	$22.50	$24.00
$20.00	$26.00	$28.00	$30.00	$32.00
$25.00	$32.50	$35.00	$37.50	$40.00
$35.00	$45.50	$49.00	$52.50	$56.00
$50.00	$65.00	$70.00	$75.00	$80.00

On a full-time assignment, a worker paid $20 an hour at a 40% markup costs you $28 an hour, which is $1,120 a week and roughly $14,560 over a thirteen-week engagement.

The trap: never compare markups between agencies. Markup is a percentage of the pay rate, so two firms quoting different markups on different pay rates are not comparable at all.

• Agency A quotes 35% markup, pays the worker $24. Your bill rate: $32.40.
• Agency B quotes 50% markup, pays the worker $20. Your bill rate: $30.00.

Agency B has the higher markup and the cheaper bill rate. Agency A is paying the worker more, which usually means better candidates and lower turnover, and may well be the better buy anyway. You cannot tell any of this from the markup alone.

Always ask for the pay rate and the bill rate together. An agency that will not disclose the pay rate is asking you to compare a number that cannot be compared.

This is rarely itemised for buyers, and it is why a markup below the sector norm should worry you rather than please you.

As the legal employer, the agency carries:

• Employer payroll taxes. Social Security and Medicare, plus federal and state unemployment tax. Commonly around 8-12% of pay, depending on state and wage level.
• Workers' compensation insurance. Set by job classification and the single biggest source of variation between sectors. Low single digits for office work, dramatically higher for warehouse, construction and skilled trades.
• Unemployment insurance. Experience-rated, so agencies in high-turnover sectors carry higher rates.
• General liability and professional insurance.
• Benefits, where offered, including any applicable healthcare obligations.
• Recruiting, screening and onboarding. Background checks, drug screening, skills testing, credential verification.
• Payroll administration, invoicing, timekeeping and compliance.
• Agency margin.

Once those are paid, actual gross margin on a 40% markup is typically a modest slice of the total. An agency quoting well below its sector range is either absorbing a loss, excluding something you assumed was included, or misclassifying the work. The third one becomes your liability, not theirs.

Role type	Typical markup	Main driver
Administrative and clerical	25-50%	Large candidate pool, low insurance risk
Customer support and call centre	25-45%	High availability, turnover priced in
Warehouse and light industrial	35-60%	Higher workers' comp classification
Skilled trades	40-75%	Certification, finite local supply
Manufacturing technicians	40-70%	Scarce skills, safety classification
Accounting and finance	40-70%	Professional scarcity, higher pay rates
IT and technology	40-80%	Scarce skills, competitive market
Healthcare and clinical	60-100%+	Licensure, credentialing, acute shortages

The pattern is consistent: workers' compensation classification and candidate scarcity explain nearly all the variation. The sector-by-sector detail, including why healthcare runs so much higher, is in markup rates by industry.

• Volume and guaranteed hours. Several workers, or a committed minimum of hours, prices better than one-off requests.
• Engagement length. Longer assignments spread the agency's recruiting cost over more billed hours, and that can be negotiated into the rate.
• Payment terms. Agencies fund payroll before your invoice clears, so this is a genuine cost to them and real leverage for you.
• Screening scope. If you run your own background checks or skills testing, that cost should come out of the markup.
• Overtime treatment. Confirm whether markup applies to the overtime premium or only to base pay. On an assignment with regular overtime this is a material number and it is often left vague.
• Conversion terms, agreed at the start. If a temp might become permanent, settle the conversion fee and the tenure schedule that reduces it before the engagement begins. Conversion fees commonly run 11-21% of salary and typically decline the longer the worker has been on assignment. Negotiating this once you are attached to a specific person is a weak position.

What does not help is pressing below the sector cost base. That does not reduce what it costs to employ the worker, it reduces the pay rate offered to candidates or the quality of screening, and both land back on you as turnover.

Markup buys flexibility, and flexibility is worth real money while the need is genuinely uncertain. It stops being worth paying for the moment the uncertainty resolves, and that moment usually passes unnoticed.

A worker billing at a 40% markup for two years costs substantially more than hiring the same person would have, plus a conversion fee. If you have known for a year that the role is permanent, you have been buying optionality you had no use for.

The honest test is one question: if this person resigned tomorrow, would you backfill the role? If yes, the need is permanent and you are paying a premium for an option you are not using. Price the conversion, or run a direct hire search.

For the decision between temporary, contract-to-hire and permanent hiring, see contract-to-hire vs direct hire and what direct hire fees cost. For which kind of firm to call in the first place, see staffing agency vs recruiting agency vs headhunter.

The Chum Effect is a staffing agency in Austin, Texas. We publish our pricing logic in the open because the costly mistakes in staffing come from buyers not understanding what they are being charged for, not from paying a percentage point too much.

We run contract staffing, contract-to-hire and direct placement, and Recruitment Squads for companies whose hiring volume has outgrown per-placement pricing.

If you want to know whether what you are paying now is reasonable, book a free hiring strategy call and bring your current rates. We will tell you where they sit against the ranges above, including when the honest answer is that your existing agency is charging you fairly.

Related reading: what staffing agencies charge, by model, markup rates by industry and the questions to ask before you sign.