Mark-up and the impact on worker pay

The payment supply workers receive will significantly inform how they feel about working with you and the children they teach, which is why mark up rates for agency staff are so important. Jenny Nugent from Crown Commercial Service explains further

Recruitment agencies providing supply teachers and other temporary workers remain one of the essential routes available to schools which find themselves with staff shortages, absence or long term sickness. But if your school’s strategy is to have a favourite agency on speed dial, perhaps it’s time to ask whether business can be done better?
If you’re sourcing supply teachers or other temporary staff, you’ll likely have your eye on the challenges of staying within budget while ensuring those in post are capable, remain satisfied and are committed to your school.

But the payment these workers receive will significantly inform how they feel about working with you and the children they teach. It may even influence whether they stay long-term.
That’s why mark up rates for agency staff, an often overlooked aspect of employing temporary workers, are so important.
The mark-up is the fee the agency charges the employer to find a worker. Agencies most commonly use the term ‘margin’ to calculate their charges – this appears lower as it’s a percentage of the total cost rate. This can cause confusion for schools, so a clear understanding of what is being quoted is key.
The CCS framework uses mark-up because it provides greater transparency and clearer representation of all the charges. Mark-up is a percentage added on to worker pay and legislative costs, which makes up the total charge rate.

The legislative costs include pension and National Insurance payments, apprenticeship levy and holiday pay, all of which are calculated as a percentage of the worker’s pay. But the mark-up will be separate and additional to these, and can vary.

Know the mark-up rate

It’s good practice for schools to know that the mark-up rate an agency is charging is competitive, because a high mark-up affects the take home pay of temporary workers. It could be the difference between someone staying with a school, or leaving to work for another agency with lower mark-up.
Yes, workers typically register with several agencies – exclusivity is rare. That’s because they want to maximise their opportunities for work.

Attracting the best talent

So how might you maximise your chances of attracting and keeping the best of them?

You may not be able to do much about the legislative costs within your total charge rate, but you can negotiate the mark-up.

By demanding a lower rate from an agency, you can take control of the savings you make –  perhaps passing some on to the worker via a rate increase, and using the remainder to reduce the amount you are charged. That’s great news for you and them.

Before CCS launched its Supply Teachers and Temporary Staff agreement, there was no structured approach to supply recruitment that addressed safeguarding, compliance and cost.

In fact, the average agency mark-up schools were being charged was 38 per cent. On a daily charge rate of £200, just over half of that would end up in the worker’s pocket.

However, agency mark-ups of 15 per cent and below are now achievable on the framework. So even a worker on a lower charge rate to the school of £190 takes home a further £15 extra per day.

Supply teachers deal

The recruitment environment is challenging and highly competitive, and change is slow, though the introduction of framework solutions such as the DfE sponsored Supply Teachers Deal is helping.
By negotiating the mark-up of your agency down, rather than just accepting their first offer, you can add value to workers’ pay packets and increasing the attractiveness of your offer with less outlay.
At Crown Commercial Service (CCS) we advise customers who use our Supply Teachers framework and digital agency selection tool to negotiate, after all, the mark-ups are not to exceed maximum rate, so suppliers may expect them to be challenged. Shop around. Robust discussion and negotiation are part and parcel of a healthy business to business relationship.
For example, the 62 academies of the Academies Enterprise Trust (AET) spent £4.6 million on supply staff in 2017/18. Its academies were sourcing temporary staff separately from 95 agencies, and the terms of those contracts often favoured the agencies, rather than the academies. AET reviewed its approach prioritising quality candidates, safeguarding of pupils and making savings. It then negotiated with existing and potential suppliers before drafting a preferred list of 40 accredited framework suppliers who offer the trust the best value for money whilst not compromising on quality and service delivery.
AET says the methods it used while sourcing its deal through CCS identified cashable savings of £119,000 in the first year – a 7.7 per cent saving.
So to recap, by negotiating on the mark-up rate you will benefit from savings for your school; enhanced worker pay, which can increase chances of securing and retaining workers; and more satisfied and committed workers which in turn sees benefits in the classroom.
Find out more here or log on to CCS’s agency selection tool to see what mark-up rates agencies in your area are offering – and don’t forget to negotiate to reduce these rates even further.