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Temp Agency vs Direct Hire Cost Calculator

The agency invoice is easy to see and the direct hire cost is spread across payroll, benefits and recruiting. Putting both on an annual, per-position basis makes the comparison fair.

Your numbers

Positions to fill

positions

Paid hours per position per year

Direct hire hourly wage

$/h

Burden on direct wages

Benefits, payroll taxes, paid leave, workers comp.

Recruiting and onboarding per direct hire

Agency bill rate

$/h

The all-in hourly rate the agency invoices.

Temp productivity vs direct employee

90 %

Admin cost per temp per year

Time cards, onboarding forms, agency management.

Your results

Direct hire annual cost

$579,400

Agency cost adjusted for productivity

$647,778

Cost of getting the same output as direct employees would produce.

Direct loaded cost per hour

$28

Agency annual invoice plus admin

$583,000

Direct hire saving (negative means temps cheaper)

$68,378

Break-even bill rate

$26

The agency rate at which the two options cost the same after productivity.

Excludes conversion fees, joint-employer risk, unemployment claims and the value of flexibility to cut headcount quickly.

Save results:

Annual cost vs agency bill rate

Sweeps Agency bill rate from 20 to 40, holding your other inputs fixed.

Labor mix review

Optional: we can compare direct, temp and overtime labor performance from your ERP data.

Optional. The tool and every export work without this. No spam.

How to use it

Enter the number of positions, the paid hours per year and the direct wage with its burden percentage. Add the one-time hiring and onboarding cost for direct hires. Then enter the agency's hourly bill rate, an estimate of temp productivity relative to a trained employee, and your own admin time per temp. The result shows each option's cost, the saving and the bill rate at which they break even.

Use the all-in bill rate on the invoice, not the pay rate
Set productivity from real output or labor efficiency data
Run a second scenario at a shorter duration for seasonal work

Method

Direct cost per position is hours times wage times one plus burden, plus the hiring cost. Agency cost is hours times bill rate plus admin. Dividing the agency total by the productivity ratio converts it to cost per equivalent unit of output. Break-even bill rate sets the two equal and solves for the rate the agency would need to charge.

Reading the result

Short-term or uncertain demand favors agency labor because you pay only for the hours needed and avoid severance and hiring risk. Stable, year-round need favors direct hire, particularly when the work requires training that you lose when a temp leaves. Where the agency adjusted cost is close to direct cost, the flexibility and screening may justify the premium. A temp-to-hire program can capture both.

Common mistakes

Comparing the agency bill rate to the direct wage ignores burden and is the most common error. Assuming equal productivity ignores ramp-up and temp turnover. Ignoring conversion fees can also distort a temp-to-hire plan. Finally, check local joint-employment and labor-law rules on temporary labor limits, since those can make long-term agency use risky.

Frequently Asked Questions

What is a typical agency markup?

Agency markups on pay rate vary by country, skill and volume, and commonly span a wide range. Compare the bill rate with the pay rate you know the temp receives. Larger volume contracts often negotiate lower markups.

How do I estimate temp productivity?

Compare labor efficiency or output per hour for temps and direct employees on the same operation over the same weeks. If you do not have the data, assume a lower value in the first weeks and test sensitivity with the slider.

Does the burden percentage include paid time off?

It should if you pay for hours not worked. Paid leave, holidays, health coverage, retirement contributions, payroll taxes and workers compensation insurance all belong in the burden. Get the figure from finance.

When does a temp-to-hire conversion fee matter?

Fees apply when you hire a temp directly, often waived after a number of hours worked. Add the fee to the direct hire cost for a conversion scenario, since it replaces your own recruiting cost.

If you want to compare these options using your actual labor efficiency, scrap and overtime data by worker type, we can build that view from your ERP and timekeeping records.

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