CSP Contract Staffing & Billing Practices 1 — Questions and Answers
Question 1: Which document formally establishes the terms of a staffing engagement between a staffing firm and a client company?
- Job order form
- Client service agreement (Correct answer)
- Employee handbook
- Background check authorization
Correct answer: Client service agreement
A client service agreement formally establishes the terms, rates, responsibilities, and conditions governing a staffing engagement.
Question 2: The 'bill rate' in staffing is best defined as:
- The hourly wage paid directly to the temporary worker
- The total cost charged to the client for each hour of temporary labor (Correct answer)
- The staffing firm's net profit per placement
- The overtime premium paid to workers after 40 hours
Correct answer: The total cost charged to the client for each hour of temporary labor
The bill rate is the total hourly amount charged to the client and includes the worker's pay rate, employer taxes, benefits, overhead, and the staffing firm's markup.
Question 3: A staffing firm's 'markup' percentage is calculated as:
- (Bill Rate / Pay Rate) - 1 (Correct answer)
- (Pay Rate / Bill Rate) x 100
- (Bill Rate - Pay Rate) / Bill Rate
- Pay Rate + Employer Burden
Correct answer: (Bill Rate / Pay Rate) - 1
Markup = (Bill Rate / Pay Rate) - 1, expressing how much above the pay rate the bill rate is as a percentage of the pay rate.
Question 4: Which of the following costs is typically included in the 'employer burden' component of a staffing firm's bill rate calculation?
- Client's facility overhead
- FICA taxes and workers' compensation insurance (Correct answer)
- Worker's personal income tax withholding
- Client's internal HR department costs
Correct answer: FICA taxes and workers' compensation insurance
Employer burden includes payroll taxes (FICA, FUTA, SUTA) and insurance costs (workers' compensation, general liability) that the staffing firm pays on behalf of the temporary employee.
Question 5: A 'temp-to-perm' conversion fee clause in a staffing contract is designed to:
- Penalize clients who terminate temporary assignments early
- Compensate the staffing firm when a client hires a temporary worker directly (Correct answer)
- Allow workers to convert from part-time to full-time status
- Cover overtime costs when temporary workers exceed 40 hours
Correct answer: Compensate the staffing firm when a client hires a temporary worker directly
A conversion fee compensates the staffing firm for its recruiting investment when a client company directly hires a temporary worker the agency placed.
Question 6: What does a 'not-to-exceed' (NTE) clause in a staffing contract specify?
- The minimum number of hours a temporary worker must work per week
- The maximum total cost or hours the client authorizes for a staffing engagement (Correct answer)
- The overtime cap for individual workers on assignment
- The maximum number of workers a staffing firm can supply
Correct answer: The maximum total cost or hours the client authorizes for a staffing engagement
A not-to-exceed clause sets a cap on the total authorized hours or dollar amount for an assignment, protecting the client from unexpected cost overruns.
Question 7: Which billing practice involves the staffing agency invoicing the client on a set regular schedule based on approved time records?
- Milestone billing
- Retainer billing
- Periodic invoicing (Correct answer)
- Flat-fee billing
Correct answer: Periodic invoicing
Periodic invoicing involves billing the client at regular intervals (weekly, bi-weekly) based on verified timesheets, which is the standard billing cycle for temporary staffing.
CSP Contract Staffing & Billing Practices 1
Which document formally establishes the terms of a staffing engagement between a staffing firm and a client company?