When a staffing agency sends a quote, most employers look straight at one number: the gap between what the worker earns and what the agency bills. If a forklift operator makes $20 an hour and the invoice says $28, it’s fair to ask where the other $8 goes.
Some of it is profit, though less than you might think. This article breaks down how staffing agencies price their services, what a markup pays for, and how to compare quotes from different firms. The examples use 2026 payroll costs for Maryland employers.
Pay rate, bill rate and markup
Almost every staffing quote is built from three numbers. The pay rate is what the worker earns per hour. The bill rate is what you pay the agency per hour. The markup is the difference between the two, usually written as a percentage of the pay rate.
A $20 pay rate with a 40% markup gives you a $28 bill rate. Across the U.S., markups on temporary and contract workers generally fall somewhere between 25% and 75%. High-volume light industrial orders tend to sit toward the low end of that range. Short assignments, specialized skills and hard-to-fill roles push it higher.
Markup is not the same as margin. The agency’s $8 has to pay for taxes, insurance, recruiting and administration before any of it turns into profit.
What a 40% markup actually covers
When you bring in temporary workers through a temp agency, the agency is their legal employer. It runs payroll, pays the employer’s share of payroll taxes and carries the insurance. Here is roughly how the numbers break down for a $20-an-hour warehouse worker on a 1,000-hour assignment in Maryland:
| Cost item | Per hour |
|---|---|
| Worker’s pay rate | $20.00 |
| Employer Social Security and Medicare (7.65%) | $1.53 |
| Federal and Maryland unemployment taxes (approx.) | $0.26 |
| Workers’ comp, liability insurance, recruiting, screening, payroll and agency margin | $6.21 |
| Bill rate at a 40% markup | $28.00 |
The tax lines are set by law. Employers pay 6.2% for Social Security (up to the annual wage limit) and 1.45% for Medicare on each worker’s wages, as the IRS explains. Federal unemployment tax works out to 0.6% on the first $7,000 a worker earns once the state credit is applied, which is $42 per worker per year. In Maryland, new employers pay 2.6% on the first $8,500 of each worker’s wages, and experienced employers pay between 0.3% and 7.5% depending on their claims history, according to the Maryland Division of Unemployment Insurance.
The last line in the table is where agencies differ. Workers’ compensation is the biggest variable, because coverage for a forklift operator or a production worker costs many times more than coverage for an office assistant. The rest pays for job ads, recruiter time, interviews, background checks and drug tests, timekeeping, invoicing and replacing workers who don’t show up. Whatever remains after all of that is the agency’s profit.
Comparing the bill rate to hiring directly
A fair comparison isn’t the bill rate against the worker’s hourly wage. It’s the bill rate against what the same person would cost you as your own employee.
According to the Bureau of Labor Statistics, private employers spent an average of $46.89 per hour worked on employee compensation in June 2026. Wages made up 70% of that cost and benefits the remaining 30%. For full-time workers, benefits accounted for 31.5%. Those benefits include paid leave, health insurance and retirement contributions, along with the same payroll taxes listed above.
Then there are the costs that never appear on a paycheck. Someone on your team has to write and post the job ad, screen applicants, interview, order background checks and onboard the new hire. If that person quits in week two or simply stops coming in, most of that work starts over.
For a permanent role you plan to keep filled for years, hiring directly usually costs less over time. For seasonal peaks, short projects and positions with high turnover, an agency’s bill rate often turns out to be the lower total cost once everything above is counted.
How direct hire and temp-to-perm fees work
Hourly markups apply to temporary staffing. Other arrangements are priced differently.
With direct hire placement, the candidate joins your payroll on day one and the agency charges a one-time fee, usually a percentage of the new hire’s first-year base salary. Many firms charge somewhere around 15% to 25%, and more for senior or hard-to-fill positions. Most agreements include a guarantee period: if the new hire leaves within that window, the agency finds a replacement without charging a second fee. We look at why that fee often costs less than an empty seat in our breakdown of direct hire costs.
Temp-to-perm hiring combines the two models. You pay the hourly bill rate during a trial period, then move the worker onto your own payroll. Some agencies charge a conversion fee if you hire before the worker reaches a set number of hours, and many drop it to zero after that point. Get the conversion terms in writing before the assignment starts. Of everything in a staffing contract, this clause catches employers off guard more often than any other.
Companies that hire all year sometimes switch to recruitment process outsourcing (RPO), which is usually billed as a monthly management fee, a per-hire fee or a combination of the two.
What makes your rate higher or lower
Two employers can ask for “five warehouse workers” and get very different quotes. These factors usually explain the difference:
- Injury risk of the job, since it sets the workers’ comp class.
- How scarce the skill is. Certified forklift operators, maintenance techs and CNC machinists take more effort to find than general laborers.
- Order size and length. Twenty workers for six months will get a better markup than one worker for three days.
- Shift and location. Overnight and weekend shifts, and sites far from public transit, usually need a higher pay rate to attract people.
- Extra screening, such as expanded background checks, specific drug panels or certification checks.
Questions to ask before you sign
A clear quote should answer these without you having to dig:
- Is the bill rate all-inclusive, or are background checks, drug tests and safety gear billed separately?
- How is overtime billed? Many agencies bill overtime at 1.5 times the full bill rate, not 1.5 times the worker’s pay.
- What is the conversion fee if we hire the worker permanently, and when does it go away?
- If a worker doesn’t show up, how fast is a replacement sent, and are we billed for the gap? Our no-call, no-show guide covers how to handle this on your end.
- Is there a minimum number of hours per assignment or per week?
Get a quote you can actually read
A good staffing quote shows the pay rate, the bill rate, what’s included and what isn’t. If you’re hiring for warehouse, manufacturing or light industrial roles in Maryland, TBest Services can price out temporary staffing, temp-to-perm or direct hire for your specific positions before you commit to anything. Contact our team with the job title, shift and number of workers you need, and we’ll put together a quote with every cost spelled out.