What margin should a temp agency make?

Why there is no "right" margin

We looked for an authoritative published figure for temp agency margins in the UK and did not find one from government, HMRC or a regulator. Margins depend on the sector, the volume, the client's bargaining power, how long the booking runs and whether you pay the worker yourself or through an umbrella company. A figure that suits a large-volume warehouse contract would not suit a one-off care shift.

So the useful question is not "what should I make?" but "what am I actually making on each job, after the costs the law puts on me?" Once you know that, you can decide what you need to cover your own wages, rent, software and risk.

Gross margin and true margin

Most agencies quote gross margin: charge rate minus pay rate. It is quick, but it hides the costs that come with every hour you pay. The true margin takes those off as well:

• Holiday pay. Irregular-hours and part-year workers build up holiday at 12.07% of hours worked, and many agencies pay it as 12.07% rolled-up pay (WTR 1998 reg 15B, reg 16A).
• Employer National Insurance. 15% on earnings above the secondary threshold of £96 a week, £417 a month or £5,000 a year in 2026 to 2027 (GOV.UK rates). It is charged on holiday pay too, because holiday pay is earnings.
• Pension. If the worker is enrolled, at least 3% of qualifying earnings, which in 2026 to 2027 are earnings between £120 and £967 a week (The Pensions Regulator).
• Apprenticeship Levy. Only if your pay bill is over £3 million a year (GOV.UK). Most small agencies pay nothing.

A worked example (made-up rates)

The rates below are an example we made up to show the method. They are not a typical or recommended rate. A worker aged 21 or over works 40 hours in a week at £13.00 an hour, and the client is charged £18.50 an hour.

The gross margin looks like £5.50 an hour (29.7% of the charge). After holiday pay, NI and pension it is £1.76 an hour (9.5%). That gap is why agencies that price on gross margin can be busy and still short of cash.

What changes the result

• Hours per week. NI and pension both start above a weekly threshold, so a short week costs proportionally less in NI than a long one. Work them per pay period, per worker, not per hour.
• Age. For workers under 21, and apprentices under 25, employer NI is 0% up to £967 a week (category letters M and H).
• Pension status. A worker who is not eligible, has opted out or is in a postponement period costs no pension contribution for that time.
• Employment Allowance. An eligible employer can take up to £10,500 off its employer NI bill for the year (GOV.UK). Treat it as a business-level saving, not part of a per-hour price.
• The 12-week point. After 12 weeks in the same role with the same hirer, the worker is entitled to the hirer's basic pay and conditions (AWR 2010 reg 7). If that raises pay, your margin shrinks unless the charge rate rises too.

Costs the calculation leaves out

The example covers the costs the law sets on each hour. Your own costs come on top: your desk staff, insurance, any umbrella or payroll bureau fees, bad debts, and the gap between paying the worker weekly and being paid by the client on 30 days or more. An agency must pay the worker for work done even if the hirer has not paid (Conduct Regulations reg 12), so slow-paying clients cost you money to carry.