Agency mark-up and the impact on temporary worker pay

It’s important to pay attention to the agency mark-up rate when sourcing temporary and fixed term staff as it doesn’t just affect what you pay. It can also make a big difference to your worker’s pay.

What is mark-up?

Put simply, mark-up is the fee the agency charges you for finding a temporary or fixed term worker. It is an amount added on to worker pay and legislative costs to make up the total charge rate.

Legislative costs include pension and National Insurance payments, apprenticeship levy (if applicable) and holiday pay, all of which are a percentage of the worker’s pay.

Why does mark-up matter?

It’s important to know what mark-up rate your recruitment agency is charging so that you can be confident you are getting a competitive rate – not just for your organisation, but also for your workers because it impacts what they get paid too.

Workers typically register with several agencies and exclusivity is rare. Workers are likely to be attracted by the best pay rate, so by negotiating your agency mark-up, you are putting your organisation in a good place to attract the best workers.

Understanding the importance of mark-up will put you in a great position to negotiate with agencies. This is something you can – and definitely should – do. By negotiating on the mark-up rate you will benefit from:

• lower charge rates = savings for your organisation
• enhanced worker pay = increased opportunity to secure and retain workers
• improved worker benefits = satisfied and committed workers

You might also find it helpful to read our article on how to negotiate agency rates with confidence. 

It’s also worth remembering that the mark-up rates under the CCS frameworks are maximum rates, so suppliers will expect you to negotiate.

Impact on worker pay

These examples show the impact the agency mark-up rate you pay can make on worker pay.

If you pay a daily charge rate of £200 and the agency mark-up is 38% this would breakdown as: 

• agency fee £56 
• legislative costs £42.19
• worker pay £101.81

Through negotiation, agency mark-ups of 15% and below are achievable. With a daily charge rate of £190 this would breakdown as:

• agency fee £24.70
• legislative costs £48.41
• worker pay £116.89

By negotiating the agency mark-up and daily rates you could pay £10 less per day and your worker would still receive £15.08 more per day.

We’re here to help 

Our workforce team can help you get a great deal on all your temporary recruitment needs:

• visit our workforce web page
• email info@crowncommercial.gov.uk
• call 0345 410 2222