Understanding pricing staffing services can be challenging if you don’t have the facts. At Barton Staffing Solutions we feel being transparent is critical to clearing up the confusion for our clients.
Last year, our blog titled “Differentiating 5 Factors When Choosing a Staffing Firm” identified the fifth of its five points as “Value-based Pricing.”
If you want to be a partner with your staffing firm that ensures the successful outcomes of your own production and operational goals, this is for you.
If you want to learn the basis for calculating markup and final bill rates, read-on.
As a manager, you simply must know the true value of having the right workforce in your facility. Investing in value provides returns. Investing less than that introduces risk on many fronts.
The statement we made back in November of 2013 is just as critical today, if not more. Here’s what we wrote.
Value-based pricing. Any staffing agency can lower their price (margins or mark-up) and gain your business. Seems like a good idea, until the short-term gain is exceeded by the longer-term costs of turnover and the subsequent issues that develop from low retention. Turnover reduces the experience and skill level of your temporary workforce, which in turn drives down quality, production, and results. A staffing firm that defends the value of their pricing may well have a better workforce to meet your needs.
It’s easy to get hyped, or taken in by the blah blah blah of some sales pitches that fail to provide facts on how pricing is set. The typical hollow message is usually one that says something like: “Let’s talk about what it takes to make sure we set the right price to meet your staffing needs.” They might mention “market pay for the work” or “true requirements to do the job” or maybe even suggest a site visit to look at your work environment.
In economics terms, all factors being equal, the cost of an equilibrium wage for the work you have to perform does not go down as size (quantity) of the necessary workforce for production goes up. You can’t have twice the workers for half the minimum pay rate for the job.
The discussion needs to be less ambiguous, and financially-focused on specific costs. The main costs contributing to effective sustainable pricing, that real staffing companies like Barton Staffing Solutions are open to discussing include:
- Unemployment taxes and federal, state and local payroll taxes. Every staffing company pays these, and cannot avoid these costs of doing business.
- Unemployment risk. Expect to discuss historical data about turnover. Not just numbers, but root causes, and how it will be managed and minimized.
- Workman’s Compensation. NCCI codes are specific to your industry and business. NCCI is the National Council on Compensation Insurance. Your company’s specific NCCI code drives pricing based on a staffing agency’s workers compensation insurance costs.
- Cost of Recruiting. Your staffing agency should know what it costs to source, recruit and hire a temporary worker – that’s part of the cost structure. They should be transparent with that cost in discussing pricing.
- Overhead. Your staffing company is just like your company. They have overhead to keep the doors open, the heat and AC on, computers running, and today, subscription fees for cloud IT services and other recruiter services.
- Job pay rate. Your staffing agency should be able to produce up-to-date statistical data on regionally-specific pay rates for similar work performed in your industry. Don’t assume you can achieve results without a pay rate discussion that ensures you keep the staff you train.
- Benefits. It’s the law. Your staffing agency must provide some level of benefits to attract and retain quality workers. As the Affordable Care Act is rolled out over the next few months, this will be a cost factor that your staffing agency should share with you.
- Safety. Yes, safety is critical in setting pricing. Not only in historical terms for workers compensation, but in terms of the kind of worker that is willing to take a position at the kind of environment that exists.
- Profit. Just like your business, staffing firms must generate a reasonable profit.
The rigor in this list of nine cost factors differentiates the staffing firm that knows how to successfully match staffing to your business, from those that don’t. It is ultimately the difference between achieving sustainable results over regular failure events.
If your staffing firm can’t show you a spreadsheet of numbers that give you specifics, or if they just wave their arms while they bluff some blither about standard markups for their staffing company..., then they are guessing at pricing. Guessing at pricing increases your risk both in terms of liability and in terms of success.
At the same time, be sure you respect that it does take investment to keep a staffing business going, and suggesting that it’s only worth a single digit percentage markup to use a temporary firm is not respecting one of the most important partners you have in achieving results and delivering on corporate goals.
Build a win-win relationship. Don’t just sign a contract.
If you are analyzing price quotes from your staffing firm, think about these nine factors of pricing staffing services. Consider what dependency a strong partnership has on your company’s results and goals. Ask critical questions around the 9 factors above. Have your finance person in the room for the discussion, along with the head of human resources and the plant supervisors.
Barton Staffing Solutions is available to have a real conversation about these nine staffing pricing factors. Our team proposing pricing to ensure your business success consists of an account manager, finance manager, safety manager, and human resources specialist. Call us today to set a date for a discovery meeting that focuses on facts, not hype.