How do you work out a charge rate for a temp?
Start from the pay rate, which must be at least the National Minimum Wage (£12.71 an hour at 21 and over from 1 April 2026). Add holiday pay at 12.07%, employer NI at 15% above £96 a week and pension at 3% of qualifying earnings. Divide by hours to get the cost per hour, then add the margin you need.
Last checked 26 October 2026. General information, not legal or tax advice.
Step 1: set the pay rate
The pay rate is what the worker earns per hour before holiday pay. It must be at least the minimum wage for their age. From 1 April 2026 that is £12.71 an hour at 21 and over, £10.85 at 18 to 20, and £8.00 under 18 and for apprentices under 19 or in their first year (GOV.UK). If the client wants a specific rate, or the worker will pass the 12-week AWR point, check what the hirer pays its own staff in the same role (AWR reg 5).
Step 2: add the costs that follow every hour
- Holiday pay at 12.07% for irregular-hours and part-year workers, which most temps are (reg 15B). For a worker on fixed regular hours you still owe 5.6 weeks of paid holiday a year, so the cost is similar, but it cannot be rolled into the hourly rate (GOV.UK).
- Employer NI at 15% of weekly earnings above £96, including holiday pay (GOV.UK rates). For under 21s and apprentices under 25 it is 0% up to £967 a week.
- Pension at 3% or more of earnings between £120 and £967 a week, for enrolled workers (TPR).
- Apprenticeship Levy only if your annual pay bill is over £3 million.
NI and pension start above weekly thresholds, so work them out on a typical week's hours, not per hour. A 20-hour week and a 50-hour week give a different cost per hour at the same pay rate.
Step 3: add your margin
Decide what you need per hour to cover your own costs and profit, and add it to the cost per hour. That gives the charge rate. Some agencies set it the other way round, as a markup percentage on pay; whichever you use, check the result against the true cost so a low markup on a long week does not lose money.
A worked example (made-up rates)
These numbers are an example we made up, not a recommended rate. A worker aged 21 or over works 40 hours at £13.00 an hour.
| Step | Working | Result |
|---|---|---|
| Basic pay | 40 x £13.00 | £520.00 |
| Holiday pay | 12.07% | £62.76 |
| Employer NI | 15% of (£582.76 minus £96) | £73.01 |
| Pension | 3% of (£582.76 minus £120) | £13.88 |
| Cost per hour | £669.65 / 40 | £16.74 |
| Target margin (example) | Your choice | £1.75 |
| Charge rate | Cost per hour plus margin | £18.49 |
Round up to a figure you can quote, and set separate rates for overtime, nights or weekends if the worker is paid more for them.
VAT and what goes on the invoice
If you are VAT registered and supply staff, VAT is due on the full amount you charge, including the part that covers the worker's pay, NI and pension, not just your margin (VAT Notice 700/34, para 2.3). An agency that only introduces a worker, who is then employed by the client, charges VAT on its fee (para 5.1.2). Quote charge rates to clients as plus VAT so there is no confusion.
Questions people ask
What is the difference between a pay rate and a charge rate?
The pay rate is what the agency pays the worker per hour. The charge rate is what the agency bills the client per hour, and it has to cover the pay rate plus holiday pay, employer National Insurance, pension, any levy and the agency's own margin. Quote the charge rate to clients plus VAT.
Can I just add a fixed percentage to the pay rate?
You can, and many agencies do, but check it against the true cost. Employer NI and pension are worked out on weekly earnings above thresholds, so the cost per hour changes with the number of hours. A markup that works on a 40-hour week may not on a short week or for a younger worker.
Should the charge rate change after 12 weeks?
It may need to. After 12 weeks in the same role with the same hirer, the worker is entitled to the basic pay and conditions the hirer gives its own recruits. If that is more than you pay now, your costs rise. Put a clause in your terms of business that lets the charge rate move with it.
Is VAT charged on the whole charge rate?
Yes, for a VAT-registered agency supplying staff. HMRC says VAT is due on the full consideration, which includes the worker's pay and employment costs you recover from the client. If you only introduce a worker who is then employed directly by the client, VAT is charged on your fee.
Sources
- GOV.UK: Rates and thresholds for employers 2026 to 2027 (NI 15%, secondary threshold £96 a week, Employment Allowance £10,500, levy 0.5% with £15,000 allowance, minimum wage rates)
- GOV.UK: National Insurance rates and category letters (2026 to 2027 rates by category)
- The Pensions Regulator: earnings thresholds 2026 to 2027 (£10,000 trigger, £6,240 to £50,270)
- GOV.UK: Workplace pensions, how to enrol staff (at least 3% employer contribution)
- Working Time Regulations 1998, regulation 15B (12.07% accrual)
- GOV.UK: Holiday entitlement, holiday pay (52 week average, rolled-up pay limits)
- Agency Workers Regulations 2010, regulation 5 (equal treatment)
- GOV.UK: Supply of staff and staff bureaux (VAT Notice 700/34), paragraphs 2.3 and 5.1.2
- GOV.UK: Pay Apprenticeship Levy (pay bill, allowance, connected companies, agencies)
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