Resources/Glossary/Staffing and agencies
A bill rate is the hourly rate a staffing agency charges its client for a contract worker. It covers the worker's pay rate plus the agency's employer costs, such as payroll taxes, insurance and benefits, and the agency's margin. The client sees one rate per hour worked.
The pay rate is what the worker earns per hour. The burden is the agency's cost of employing that worker, which commonly includes employer payroll taxes, workers' compensation insurance, unemployment insurance, any benefits and administration. What remains after pay and burden is the agency's gross margin. Agencies often express the gap between bill and pay as a markup percentage, and the dollar gap as the spread.
Bill rates depend on the skill, market, length of assignment, overtime rules and the client's volume. Many larger clients use a managed service provider or vendor management system that sets maximum bill rates by job category. Overtime is usually billed at a higher rate, and agencies need to price it so the extra pay and burden are covered. Getting the bill rate right at the start avoids margin problems later.
Formula: Bill rate = pay rate + employer burden per hour + agency margin per hour
The bill rate decides whether a contract placement makes money. Price too low and burden costs eat the margin; price too high and you lose the order to another agency. Recruiters who understand bill rates can negotiate with clients, set realistic pay rates for candidates and explain pricing clearly. It is also the basis for forecasting contract revenue.
An agency places a contract accountant at a 40 dollar pay rate. The agency estimates burden at 8 dollars per hour for taxes, insurance and admin, and wants a 12 dollar margin. In this example the bill rate is 60 dollars per hour. If the client pushes back to 55 dollars, the recruiter knows the margin drops to 7 dollars and can decide whether to accept.
The pay rate is what the contract worker earns per hour. The bill rate is what the agency charges the client per hour. The difference covers the agency's employer costs, such as payroll taxes and insurance, plus its margin. The bill rate is always higher than the pay rate.
Agencies start with the pay rate the market requires for the skill and location, add the hourly cost of employing the worker, then add a margin. They then check the result against client rate cards, competitor pricing and the length and volume of the assignment before quoting.
Usually, yes. Clients negotiate on volume, length of assignment and payment terms, and large clients often set rate caps. Agencies can negotiate by adjusting margin, pay rate or terms. Know your burden cost before negotiating, so you can see exactly how each change affects your margin.
Written by recruiters at Work Insiders. Part of the recruiting and HR tech glossary. Updated October 2026.