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It can be confusing to try and understand all of the fees you are charged for employing temporary staff. Each year sees changes to the minimum wage and award rates, which can translate to increased costs for you. So, how are these rates calculated, and what can be considered reasonable? This is basically how it all breaks down; candidate pay rate PLUS on costs EQUALS total candidate cost PLUS agency margin EQUALS the rate invoiced to the hiring manager/organisation.
On Costs
The on costs include charges such as payroll tax, superannuation, workers compensation, and general insurance. Some agencies may include administration fees as part of general insurances. Generally, the on costs component of the calculation only changes, when there is an increase in the compulsory superannuation rate, when state-based payroll tax rates alternate between states, and when rebates can be applied in the non-profit sector.
Temporary Worker Pay Rate
How much a temp worker should be paid is dictated by the relevant award, the market, what they are prepared to accept, and what the hiring manager has budgeted for pay. Legally, we aren’t able to pay temporary employees below the award rates. However, many casual employees will likely get paid above the minimum wage levels, because there is enough market demand for the skills they have, allowing to command higher rates.
While not all temporary employees are covered by an award (professional staff, for example, are generally not covered), there is always going to be a minimum wage that must be adhered to. A recruitment consultant must always be clear about this if a hiring manager is considering budgeting restrictions.
Margin
The relationship we have with hiring organisation is a commercial one. The margin percentage that is charged depends on the industry, signed preferred supplier agreements (PSA)/fee amendment agreements, and market demand.
Awards and Annual Increases
The New Zealand minimum wage is reviewed each year, and this may lead to increases in the cost of temporary workers. The increase in the minimum wage will then affect modern awards. If you have temporary staff covered by an industry/occupational award, and they are being paid the minimum wage, then they will have to be paid a higher rate in the event the minimum wage is increased. However, this only applies to those who are paid at the award rate. Let’s use a receptionist as an example. Say there is a minimum casual rate of $22 per hour for a receptionist, but you pay them $30 an hour. You wouldn’t be affected if the minimum casual rate increases to $23 per hour because you are already paying them more than the award rate. If the agency you are working with advises you need to increase the rate because of changes to the modern award, be sure that they are transparent about the increase.
Recently, there have been increases in standard rates due to changes in superannuation, such as superannuation changing from 9% to 9.25% and then to 9.50%. These increases apply to all sectors and all casual staff, whether or not there have been any changes to modern award rates. Again, consultants should clearly explain all of this to you, so that you understand how it might affect the rates you have to pay.
Overtime and Penalty Entitlements
We’ll just write about this one quickly because it creates a lot of angst with hiring managers. Here are the general rules on overtime and penalty entitlements; IF the temporary worker is covered by a modern award, then this must be disclosed by the agency when you wish to engage them. If an award applies, then they may also be entitled to overtime and penalty entitlements. However, overtime and penalty entitlements don’t automatically apply to everyone. That is why a consultant must be clear about the details of this so that you don’t have to deal with any unexpected surprises. At people2people, we are dedicated to being transparent about our temporary rates. Our consultants will explain to you just how they calculate their rates.
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