Mandatory Local, State and Federal Benefits – The cost of benefits vary greatly by organization and by location. Workers compensation premiums are charged by $100 of payroll so for example, an employee working for a law firm may cost the law firm $0.62 per $100 of payroll in workers compensation premium, whereas an inventory specialist in a warehouse for a large retail distributer may be much higher at $3.32 per $100 of payroll. Companies with a culture of safety and low level of injuries will have lower premiums than companies that ignore safety best practices and a high level of injuries. Another factor which should not be discounted is the company’s safety record and claims experience. Workers compensation insurance varies based on the industry of the company, the position of the worker, and the state in which the employee is working. Workers Compensation Insurance – Workers compensation is a mandatory insurance for companies with employees that covers the cost of medical treatment in the event of a workplace injury or illness, covers employees lost wages in the event they are not able to return to work, and covers the cost of litigation should an injured worker sue the company for negligence. The 5.4% credit will be reduced for states that borrow funds from the federal government to pay unemployment benefits.
Employers can take a credit of up to 5.4% of taxable income if they pay state unemployment taxes. The FUTA tax rate in 2016 applies to the first $7,000 an employer pays in wages and is 6.0%. Each state also has its own tax rate range and maximum contribution levels.įederal Unemployment Tax Act (FUTA) – FUTA is a US federal tax paid by most employers to help fund state workforce agencies. Employers that have higher employee claims pay a higher tax and employers that have fewer claims experience pay less. State Unemployment Tax Act (SUTA) or State Unemployment Insurance (SUI) – SUTA/SUI is an employer tax that funds the state unemployment programs and provides unemployment benefits to former employees. The employer’s tax for Medicare funding is 1.45% of wages with no limit. The employers’ 2016 tax rate for social security, is 6.2% of compensation taxed up to $118,500 of wages. Following is a list of the most common costs that will be included in the hourly bill rate:įederal Insurance Contributions Act (FICA) – FICA is a US federal payroll tax imposed on both employees and employers to fund Social Security and Medicare. In addition to the hourly wage, an employer is obligated to pay taxes and benefits.
However in addition, the staffing firm will likely have more costs associated with recruiting a highly skilled individual and can demand a higher fee for their recruiting services. The high wage is the first and most obvious. The higher skilled positions will cost more than a lower skilled worker and this will impact your bill rate in two ways. The majority of the hourly bill rate you pay goes to the employee in the form of wages. The purpose of this article is to give you a better understanding of what is included in that bill rate and help you make a more informed decision when choosing a staffing or payrolling firm. However if you’re just now considering these services you might be a bit surprised when the staffing firm quotes the rate to you. If you’ve used temporary staffing or payrolling services before, you may have a general understanding of all the costs that are included in a bill rate.
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