3 Tips When Managing and Negotiating with Your HR Staffing Partner

Typically, an HR Staffing Partner’s bill rate consists of four components:

HR Staffing Partner’s bill rate consists of four components

While ‘Pay Rate,’ ‘Statutory Expenses,’ and ‘SG&A’ costs are rarely negotiable, we all know ‘Gross Margins’ are. These margins, or Agency Markups, generally consist operational costs, while also serving as a catch-all for the administrative time and expense for managing the relationship. When we work with clients to assess the composition of these markups, it’s not uncommon for us to identify unwarranted fees and expenses.

The Negotiation Tip Sheet below summarizes the key levers we recommend employing when negotiating with your HR Staffing Partner. While price negotiation may not be possible for each of these Cost Components, there are strategies that should be considered to mitigate potential impact.

Cost Component Sourcing Levers
Minimum Wage
Legally required direct compensation paid by agency to the contractor.
  • Compliance with regional minimum wage laws
Worker Pay Premium
Direct compensation paid by agency to the contractor above what is legally required, but market appropriate
  • Rate standardization by skill set and experience level
  • Rate selection driven by position need rather than resource experience.
Taxes & Benefits
National/local taxes, healthcare, bonuses, holidays, vacation, sick time, and maternity
  • Ability to select the benefits, if any that are offered to resources
Agency Mark-up
Recurring costs, overhead, and profit
  • Not to exceed markups by skill level
  • Volume driven discounts
  • Payment term driven discounts
  • Reduced mark-ups if you self-identify a candidate for placement
  • Reduced mark-ups for resources that meet a certain salary threshold
Pass Through Expenses
Travel, meals, dues, screening, and hiring fees
  • No mark-ups on SG&A Fees for resource placement
  • No mark-ups on resource travel expenses
  • Reasonable and necessary expenses as a result of approved travel
  • Monitor compliance with existing travel and expense policies

Below are three (3) expert tips for managing and negotiating with your HR Staffing Partner:

1. Staffing agency competition is a beautiful thing, but it’s important that you not over-solicit the opportunity. Doing so may result in multiple agencies fighting over the same talent pool, without even knowing it. Furthermore, candidates may use this to their leverage when negotiating pay rates.

Expert Tip: Ask your preferred staffing partner to reduce bill rates in exchange for exclusive listings. This cuts out their competition for filling roles and provides incentive for successful placement.

2. Every employer wants to attract and retain talent, but if you’re requiring candidates to have top skills and not paying competitive wages, you’re exhausting recruiting time and costs.

Expert Tip: Outline the requirements for the position along with the wage range. If your standards are too high and not aligned with the actual salary being offered, it’s likely that you’ll lose money on the placement. Has the need been validated? Can this budget be increased for the right candidate? What skills are critical for success in the position?

3. A staffing agency’s service cost for candidate screening may include more services than your company actually requires. Candidate screening can range from typical background checks and drug tests to social media profile screening or pre-interview assessments.

Expert Tip: While staffing agencies might not budge on their screening processes to mitigate their risk of being responsible for a low-quality hire, you may be able to work in a clause that allows them to remove screening requirement in exchange for a lower price and no direct responsibility. Outline the pre-hire assessment or assignment requirements for each position and determine how many of the total positions will actually benefit from them.

In today’s staffing marketplace, transparency of cost composition is a key to building trust and establishing long-term relationships. Requesting an overview of agency costs helps you not only understand the scope of the services, but also identifies new procurement staffing strategies that champion cost mitigation and broader process improvement.

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