Guide
Temp agency charge rates: what sits between pay rate and invoice
Updated
Employers comparing temporary suppliers usually ask what the margin is. It is the wrong question on its own, and asking it alone is how a cheaper looking supplier ends up costing more per hour worked.
What a charge rate is made of
- The worker's pay rate
- What the temporary worker receives per hour, which must at least meet the applicable minimum wage rate for their age and circumstances.
- Statutory on costs
- Employer National Insurance, pension auto enrolment contributions where the worker is enrolled, holiday pay accrual, and the apprenticeship levy where the supplier is within its scope. These are real costs carried by whoever employs the worker, and they are not agency profit.
- The agency margin
- What the agency retains for sourcing, screening, payrolling, invoicing, compliance and cover. This is the only element that is genuinely negotiable in the way employers assume the whole rate is.
Why margin alone is a misleading comparison
Two suppliers quoting different margins on the same role can produce different total costs in either direction, because the on costs depend on how the assignment is structured, how holiday pay is treated, and what the pay rate has to be to actually attract workers. A low margin quoted on an unrealistic pay rate produces unfilled shifts, and an unfilled shift has a cost that no margin saving covers. Compare charge rates for a defined pay rate, and separately ask what fill rate the supplier is committing to.
The questions that make temp quotes comparable
- Quote the same pay rate to every supplier and ask for the resulting charge rate, not the margin.
- Ask how overtime, night shifts, weekends and bank holidays are charged, since these are where invoices diverge from expectation.
- Ask how holiday pay is handled and whether it is inside the quoted charge rate.
- Ask what happens on cancelled shifts and short notice cover, and whether there is a minimum charge.
- Ask about the Agency Workers Regulations position, since equal treatment on basic working and employment conditions after the qualifying period affects the charge rate as the assignment continues.
- Ask what happens if you want to take the worker on permanently, and check that answer against the transfer fee rules.
Two rules worth knowing as a hirer
- The worker cannot be charged for being found the work. Section 6 of the Employment Agencies Act 1973 restricts charging a work-seeker a fee for work-finding services (legislation.gov.uk). If workers on your site are paying to be placed, that is a matter to raise.
- Work-finding cannot be made conditional on buying other services. Regulation 5 of the Conduct Regulations 2003 prevents an agency or employment business making the provision of work-finding services to a work-seeker conditional on the worker using other chargeable services or hiring or purchasing goods (legislation.gov.uk).
No figures for margins or charge rates appear on this page because they depend entirely on the pay rate, the shift pattern and the on costs of a particular assignment, and a published number would mislead. Get charge rates quoted against a stated pay rate through the form above.