Use a staffing company? You’re probably overpaying.
That’s right. A staffing firm is telling you that the industry-standard pricing model costs clients more.
Do you employ your contingent talent through staffing agencies? If so, you’re likely being charged for costs that don’t actually apply to your talent.
You’re paying based on maximum, not actual costs.
The majority of staffing companies charge clients a markup on pay rates that assumes maximum costs on the benefits they provide talent, like health insurance and paid sick leave. This is the case even though enrollment and usage are almost always less and can vary significantly from client to client. That’s like paying health insurance premiums for 100% of your own employees when some employees actually decline coverage because they’re already insured another way — it just wouldn’t be workable.
Here’s an analogy. Every month, you pay your electric bill. On that bill, you see just how much electricity you used and how much you owe based on that usage. But imagine that your electric bill instead reflected the most electricity that all the homes in your neighborhood might use in a month, not how much your household actually used. Would you pay that bill? Probably not.
Another example where you’re probably paying more than you should is when it comes to your staffing companies’ employer taxes. In the spring of this year, Congress passed a bill related to the pandemic called the CARES Act. This legislation allows employers to defer their FICA taxes from March 27, 2020, through the end of the year. Your staffing agencies have probably been deferring these taxes on your talent, which equals 6.2% of their pay up to the taxable maximum of $137,700, and they will not owe these taxes until the end of 2021 and 2022.
But chances are that you’ve been paying for FICA taxes in your bill rates throughout the pandemic, at a time of great economic uncertainty no less.
That’s why we believe the industry pricing model needs to evolve.
Pay for what you use, nothing more, nothing less.
As a client, you should only pay for the actual costs to employ your talent as they are incurred. We call it metered benefits, but it’s essentially the pay-as-you-go model.
Here’s how this works. For each client, we would track their specific talent population’s enrollment and usage of benefits like health and dental insurance, sick days and paid time off, and 401(k) matching contributions. Many benefits, like sick days, already have established maximums for usage and costs. For health insurance, we also cap client costs with stop-loss insurance, so clients have the opportunity to save through our self-insurance model without the risk. Your actual costs would then be billed as they are incurred. The same concept goes for employer taxes like FICA — you should only have to pay these costs when we do.
One of our core values is transparency and fairness. That applies to our employees and our clients. That transparency also applies to how we price our services. We are the only company to offer pay-as-you-go pricing and to pass along our FICA deferral savings to our clients.
Right now, the priority for many organizations is to manage costs wherever they can. However, you need to know what you’re paying before you can pare back. For most staffing companies, they rely on you not having that insight. They charge you for talent costs that aren’t yours. To us, that’s just not right.
Pay-as-you-go is more and more the norm, from wireless bills to cloud computing services, and we think that it is time the staffing industry caught up.
