Client Negotiations
Every recruiter uses different methods for client negotiations in their contract staffing process and some even use different methods for different placements. Here are some methods for setting the bill rate:
1. Bill Rate Decided Solely on Recruiter Target Income
One method for determining a bill rate for a client company is to base it on what the recruiter will earn each hour. These recruiters simply pick the amount they want to earn per hour. An average target for mid-range pay rates is between $7 and $12 per hour for placements in the United States.
2. Using a Multiplier
Another method for determining the client company bill rate is to use a certain multiplier. A multiplier is the result of dividing the bill rate by the pay rate and per diem. Once a recruiter knows what pay rate the candidate must be paid, s/he can multiply that pay rate by a multiplier to calculate the bill rate.
When a company hires an employee, they normally spend between $.35 and $.45 in addition to every $1.00 of salary. This additional money ($.35 – $.45) includes the employer payroll taxes, benefits, and other expenses. This means that a company has a multiplier between 1.35 and 1.45 on their own employees. Given the flexibility and other benefits of utilizing contractors instead of employees, it is easy to justify multipliers of 1.6, 1.7 and higher to client companies.
3. Low Hourly Rate, High Volume, Conversion Fee
Some recruiters use low bill rates which result in hourly incomes of just a few dollars. The goal is to get the candidate placed in hopes the client company will convert the candidate to their employee. When a candidate converts from a contract assignment to an employee of the client, the recruiter can receive the balance of the placement fee from his/her conversion fee agreement.
4. Create a Job Order
This is a variation of the previous strategy. When a client company is unsure as to whether additional help or a new position is necessary, the recruiter offers a candidate for contract assignment at a very low bill rate. The company will bring on the candidate because this low bill rate is an economical way to get to know the candidate and to test out the new position. If the company likes the candidate and finds the position is necessary, they will hire the candidate as an employee and the recruiter can earn a conversion fee.
5. Short Contract, Higher Rate
Often the client will want a worker for a short period of time (3 or 4 months). Recruiters will often charge a higher bill rate since it is more difficult to find candidates willing to take such short assignments. When a client is hesitant to agree to a long-term contract, you can offer them two choices; the shorter length at a higher rate or a longer contract at a lower rate. This way the client is happy because they can choose the plan that best suits their needs.
6. No Budget for Direct Placement Fees
When you are dealing with large client companies, sometimes they have separate budgets for recruiter fees and contract assignments. In some cases, the client will have exhausted their budget for direct placement fees, but still have money in their contracting budget. If you offer contracting, you can still place a candidate on contract assignment and earn a full fee.
There is no right way to pick the client company bill rate. The thing to remember is to be innovative and not to give up until you find a structure that makes both you and the client happy.
