Spread is computed on rates, not cost
Pay rate is not cost. Employer taxes, workers compensation, benefits, and unemployment insurance add fifteen to thirty percent, and burden varies by state and by classification.
ERP by industry
Staffing runs on the spread between what you pay and what you bill, on a business model that pays weekly and collects in forty-five days. Both of those are measurable and in most firms neither is measured until the quarter is over.
Send a month of placements, pay rates, and bill rates. We will compute spread after burden and every deduction.
The problems
Staffing has an unusually tight relationship between operational data and financial outcome, and most stacks keep the two apart.
Pay rate is not cost. Employer taxes, workers compensation, benefits, and unemployment insurance add fifteen to thirty percent, and burden varies by state and by classification.
Every placed contractor is a working capital commitment before they are a receivable. Growth consumes cash and most firms model it after the fact.
Spread after burden, after unbilled overtime, after rate concessions, after payment behaviour. Each is recorded separately and the join is a quarterly spreadsheet.
Approved hours arrive in the ATS or VMS and are re-keyed into billing. Every re-key is a dispute waiting to happen, and disputes delay payment.
Tiers, splits, clawbacks on early terminations, and accelerators. Computed monthly in a workbook nobody outside finance can verify, and disputed regularly.
Vendor management system fees, discounts, and payment terms are taken out of what you receive, and are frequently netted rather than tracked per client.
Where the money goes
A representative shape for a staffing firm between $15M and $60M in gross revenue. The burden line is the one most often estimated rather than computed.
Employer taxes, workers compensation, unemployment insurance, and benefits commonly add fifteen to thirty percent to pay rate, and the rate varies materially by state and by job classification. A firm computing spread on pay rate rather than loaded cost is overstating margin by most of its margin — and the overstatement is largest exactly where workers compensation rates are highest.
Your stack
Your ATS and VMS connections keep running. What changes is that the financial consequence of each placement is visible while it is still happening.
Benchmarks
Drawn from our own engagements with staffing firms between $15M and $60M gross revenue. The bar is a typical erp.io customer after two quarters; the marker is the segment median.
A staffing firm pays contractors weekly and collects from clients in forty-five to sixty days. Every new placement therefore consumes cash for six to eight weeks before it produces any, which means growth is a financing event rather than only a commercial one.
Firms that model this properly can say what a new client is worth in cash terms before accepting the terms. Firms that do not discover it when the line of credit gets uncomfortable in a quarter where everything went well.
Burden is not a single percentage. Workers compensation rates differ by classification code and can vary by an order of magnitude between clerical and industrial placements. Unemployment insurance varies by state and by the firm’s own claims experience. Benefits eligibility differs by hours worked.
Applying an average burden rate across a mixed book systematically misstates spread in both directions, and it misstates it most where the margin is thinnest. Per-placement burden is more setup and it is the difference between a spread number you can act on and one that averages away the placements that are losing money.
The ranking of clients by revenue and the ranking by contribution are frequently unrecognisable as the same list. A large client on a VMS with a three percent fee, sixty-day terms, and a rate concession negotiated two years ago can be contributing less than a much smaller direct client.
That calculation needs bill rates, pay rates, burden, VMS deductions, and payment behaviour in one place. It is arithmetic once they are, and it is a quarterly spreadsheet otherwise.
We do not replace your ATS and we are not a front-office staffing platform — Bullhorn, JobDiva, and their peers do candidate sourcing, submission, and placement workflow far better than we would. We also do not run payroll or handle multi-state tax filing; your provider or PEO keeps doing that. If your requirement is front-office rather than financial, we are the wrong purchase.
Questions
A month of placements with pay and bill rates is enough to compute loaded spread and client contribution.