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Is Your Recruiter Ripping You Off?

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by Lisa Johnson

about 3 years ago

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The fees you are charged for the employment of temporary staff can be confusing.  Every year, if the minimum wage increases, award rates change, and there can be associated fee increases to you. So how are rates calculated, and what is reasonable? Basically this is how it goes: candidate pay rate + on costs = total candidate cost + agency margin = rate to the client.

On Costs

On costs include superannuation, payroll tax, workers compensation and general insurances.  Some agencies might include administration fees with the general insurances.  Generally, the on cost portion of the calculation only changes when the compulsory superannuation rate increases, when the state based payroll tax rates alter between the states, or when rebates are applicable in the not for profit sector.

Candidate Pay Rate

The rate that the candidates are paid is dictated by the market, the relevant award, what the candidate is prepared to accept and what the client is budgeted to pay.  Legally, we cannot pay a temporary employee below award rates.  However, most casual employees are likely to be paid above award/minimum wage levels simply because the market demand for their skills ensures that the rates they can command are higher. 

Is Your Recruiter Ripping You Off?

Whilst not every temporary employee is covered by an award (e.g. professional staff are traditionally not covered), there will always be a minimum wage rate that needs to be applied. Your recruitment consultant should always be clear with you on this subject while taking into consideration your budget constraints.

Margin

Our relationship is commercial.  We provide casual staff, and we aim to earn a profit from the supply of these people.  The margin percentage is dependent upon the industry, market demands and signed preferred supplier agreements (PSA) or fee amendment agreements.  For the market in which we provide casual staff, the standard margin percentage is between 22% and 25%.

Awards & Annual Increases

Every year, the minimum wage in Australia is reviewed and, as a result, may be increased.  The increase in the minimum wage affects modern awards.  If you employ casual staff covered by either an industry or occupational award, and if they are being paid at minimum award rate, then there will be an associated rate increase to apply as a result. However, this should only apply to people being paid at the award rate.  For example, let's say the minimum casual rate for a receptionist is $22 per hour,  but you are paying your casual receptionist $30 per hour. A change in the minimum casual rate from $22 to $23 per hour should not affect you at all, because you are paying your receptionist more than the award rate. If an agency advises you that they need to apply a rate increase as a result to changes in the related modern award, ensure that they are completely transparent with this increase. 

Is Your Recruiter Ripping You Off?

In recent years, the other standard rate increase has been as a result of superannuation changes, e.g. the rate of superannuation moving from 9% to 9.25% to 9.5%.  This increase applies across all sectors for all casual staff, regardless of whether there has been a change to modern award rates. Again, your consultant should be very clear with you about this so that you understand how this affects the rate that you pay.

Overtime and Penalty Entitlements

Just a quick note on this one, because it causes angst with clients on a regular basis.  Here is the general rule for you to be guided by: IF the casual employee is covered by a modern award, the agency must disclose this to you when you engage the casual, and, if an award applies, then overtime and penalty entitlements may also apply. Overtime and penalties do NOT apply to everyone, however, so your consultant needs to be very clear with you regarding this detail so that there are no nasty surprises. At people2people, we are happy to be completely transparent with our temporary rates, and our consultants are more than willing to share exactly how your rate has been calculated with you.

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