The largest operating expense for staffing companies is the remuneration paid to their staff, as is this case for most professional services firms. Total personnel expense for US staffing firms ranges from 52% to 56% of gross profit dollars, according to recent rounds of Staffing Industry Analysts’ SIBC benchmarking study. Avoiding systemic overpayment is thus key to managing company profitability. At the same time, underpaying staff weakens a staffing firm’s ability to acquire and retain the internal talent needed to execute its business plan, a factor especially true in the current economy where talent is scarce and wages are rising. In SIA’s 2018 survey of staffing firms’ internal staff, 42% of respondents indicated a pay increase was the most appreciated management tactic, a number far exceeding those that selected a promotion, recognition or greater autonomy.

How then can staffing firm executives walk this tightrope of getting compensation levels right? Let’s turn to SIA’s 2018 US Internal Employee Compensation Estimator. This benchmarking tool is based on a data set of more than 8,000 staffing professionals located across the country and represents a wide variety of job titles and staffing skill segments.

Evaluating compensation ranges. The tool has dashboards that display summary statistics — including the median, 25th percentile and 75th percentile values — which provide details on base salary, bonus and total cash compensation across a variety of skill segments and for more than 20 job titles. For an example of what one might see, the graph below displays the range of total cash compensation for temporary staffing recruiters in the industrial and IT segments.

On a nationwide level, compensation is higher for recruiters in IT staffing than for those in industrial staffing — median $65,000 versus $46,000 — likely due to the greater subject-matter expertise required and bigger challenge of finding specific IT talent.

Adjusting pay to location. Anyone who has travelled around the country quickly notices that prices are higher or lower based on location — whether it is a cup of coffee or employee salaries — reflecting various demand and supply factors as well as the cost of living in that market. With this in mind, the benchmarking tool enables users to select any state or choose from 430 metro areas, which then localizes all of the dashboards according to an adjustment factor tailored to that region.

Adjustment factors reflect the degree to which staffing firm compensation levels are likely to be above or below the national average, based on our analysis of business professional wage data from the US Bureau of Labor Statistics.

Bonus size structure. A major challenge for staffing executives is determining the right bonus structure to incentivize the best performance from their team. The benchmarking tool provides some insight on how bonus size varies based on job title and skill segment of staffing.

In the example data shown in the accompanying table, not suprisingly, the bonus paid to sales staff is a much larger percentage of their base salary than for recruiters, and this is true for both industrial and IT staffing. Compensation structure for both industrial and IT sales staff is quite similar, while in contrast, bonus payouts are a larger percentage for recruiters in IT than for those in industrial, perhaps due to the greater complexity of making IT placements.

While optimizing a staffing firm’s compensation program is a never-ending task, executives can leverage benchmarking tools to pinpoint where their firm is positioned relative to the industry. Using the latest data can help staffing leaders deliver both profitability and employee retention.