Tips for Negotiating Contract Bill Rates

What should you do when a client doesn’t set any limit on the hourly bill rate for a contract placement? While it might sound like a great problem to have, this can be frustrating because you have no clue what rate they consider acceptable—you have to guess. If you keep your hourly fee (a.k.a. “recruiter share”) low and ask a lower bill rate than they expect, they’ll be pleased, but you might be shorting yourself. On the other hand, select a rate too steep and you could wind up losing the contract placement and injuring your reputation.

So what’s a recruiter to do? The ideal approach is to have them suggest at least a range of hourly bill rates. As long as your rate falls within their range, they can’t argue that it is unreasonable.

If that tactic fails, here are some strategies that have worked for other contract recruiters:

• Use a standard multiplier – Multipliers usually range between 1.5 and 1.8, but they can go much higher for healthcare professionals and hard-to-find positions. Simply select one and multiply by the contractor’s pay rate to determine the bill rate.
• Base the rate on your target income – Determine how much you want to make per hour and then negotiate the contractor’s pay rate to determine the bill rate. If you are using Top Echelon Contracting as your back-office, you can call us to run a Quote based on those numbers.
• Charge based on a direct placement fee –Calculate what you would normally earn on a direct hire and divide it by the length of the contract. For example, if the contract is 12 months and you would earn $20,000 by placing the candidate direct, divide that by 2,080 hours (the approximate number of hours a full-time contractor would work in a year). You would need to make $9.62 per hour to earn the entire fee in twelve months. You can call Top Echelon Contracting for a Quote that will give you the bill rate that corresponds to this amount.

There is no one correct way to set the bill rate. The important thing is to be creative with each client and come up with a rate structure that will keep both of you happy.