"A 10% Markup Sounds Great" - Until You Work Out What a Bill Rate Actually Has to Cover

Published July 22, 2026 · 8 min read · By Alliance Employment Services

Why a low markup deserves a second look

More and more often, we're encountering bill rates in the GTA light industrial market built on a markup as low as 10%, or a flat $2.00 per hour over the worker's pay rate. On Ontario's current $17.60 general minimum wage, that produces total bill rates of roughly $19.36 and $19.60 per hour.

To an operations director or CFO, a 10% markup reads as a win. And I understand why - in most vendor categories, a 10% margin is normal. But staffing isn't a normal vendor category, because the agency isn't just marking up a product. It is the legal employer, and it carries mandatory government costs on every single hour worked before it has funded one minute of its own operation.

This isn't a complaint about losing deals on price. It's that once you work through the arithmetic, rates in that range raise a question that's worth asking out loud.

Tier one: what does the law require before anyone makes a dollar?

Start with the statutory floor - the costs an agency cannot legally avoid.

Two mechanics worth noting, because they're where most back-of-envelope calculations go wrong. First, CPP, EI, WSIB and EHT apply to the wage plus vacation and public holiday pay - not the base wage alone - so the burden compounds. Second, on EHT: a staffing agency serving many clients across the GTA carries a combined payroll well beyond the $1 million exemption threshold, so 1.95% is the realistic rate for the entity actually writing that cheque. A single client's payroll position is irrelevant here; what matters is the agency's.

Tier two: what does an agency still have to pay for?

Here's the part that gets missed. The statutory floor is not the cost of running a staffing agency. It's the cost of employing someone legally. Above that line sits everything that makes the agency function at all:

• Recruiting and advertising - job boards, campaigns, referral programs, and the constant pipeline work that lets anyone fill a shift on short notice.
• Screening and onboarding - interviews, reference and eligibility checks, orientation, documentation.
• Payroll funding - workers are paid weekly; client invoices settle on 30, 45 or 60-day terms. Someone has to finance that gap, every week, and financing costs money.
• Banking, factoring and financing costs - the direct price of carrying that working capital.
• Branch and administrative overhead - office space, coordinators, dispatch, scheduling systems, software.
• Insurance and licensing - general liability, other coverage, and the Ontario temporary help agency licence and its security requirement.
• WSIB claims administration - incident management, return-to-work programs, the internal time an active claim consumes.
• Safety training and PPE - and the equipment and instruction that keeps injury rates, and therefore WSIB rates, down.
• Bad debt - clients who pay late, pay short, or don't pay at all. The agency still paid those workers.

We're not going to publish our own overhead percentages - that's proprietary, and any number we invented would be worth exactly nothing to you. But the list above isn't controversial. Ask any agency operator and they'll recognise every line. All of it has to come out of whatever sits between the statutory floor and the bill rate.

So where is the margin coming from?

This is the question the arithmetic actually raises, and it's a better question than "is this vendor cheating?"

Set the illustrative statutory floor near $21.44. A $19.36 bill rate sits about $2.08 below it; $19.60 sits about $1.84 below. But let's be genuinely fair about the assumptions: a different WSIB rate group, a different hours mix, or a different EHT position all move that floor. A lean operator may well have a lower true cost than we do. Reasonable people can put the line in a different place.

That's exactly why the "below cost" framing isn't the strongest version of this argument. Suppose a more favourable set of assumptions brings a vendor to break-even, or to a slim positive margin on statutory burden alone. That still leaves the real question untouched: what is funding tier two?

An agency operating at or near the statutory floor has not yet paid for recruiting, screening, payroll financing, insurance, licensing, claims administration or bad debt. Those costs don't become optional because a rate is competitive. So either the agency is absorbing them from reserves - which is a business-continuity question for you - or the money is coming from somewhere in the model that hasn't been explained to you.

And when a low rate is described as an introductory promotion, that's a perfectly legitimate strategy for a defined window. It gets harder to explain when the same promotional pricing has been running for years, across an entire client base.

Why does the agency's financial health become your problem?

Many facility managers reasonably assume that if a vendor mismanages its obligations, that's the vendor's problem. Ontario employment legislation doesn't fully support that assumption.

Employment-law commentary is blunt about the practical consequence. Filion Wakely Thorup Angeletti notes that where an agency fails to pay these amounts, the client employer will be jointly liable even if it has already remitted payment for those wages to the agency - and that the exposure grows where many assigned workers are involved, or where the agency ceases operations through bankruptcy or other disruption.

That's the connection between tier two and your risk. Joint liability matters most precisely when the agency can no longer pay. An agency with no margin to fund its own operations is closer to that scenario than one with a sustainable one. You are not just buying labour - you are taking on a counterparty.

Is a provincial licence enough assurance?

Since July 1, 2024, temporary help agencies must hold a licence to operate in Ontario, and clients are prohibited from knowingly engaging an unlicensed agency. Checking your vendor's licence is now table stakes, and the regime was a real step forward.

But a licence reflects that an agency met the application requirements and posted the required security. It isn't a certificate that the government has reviewed that agency's billing model, WSIB classifications or remittance history and found them sound. Treating it as an audit clearance is where comfort outruns the evidence.

Is Ontario actually enforcing in this sector?

Yes, visibly. In a recent case, a temporary help agency and its director were fined a combined $150,000 after failing to comply with wage repayment orders. A Ministry investigation opened in early 2023 led to an audit of the company's 2022 records, which found hundreds of employees owed regular wages, public holiday pay and vacation pay totalling $234,212.47. An Employment Standards Officer issued an Order to Pay in June 2023; when it went unpaid and unreviewed, the Ministry escalated with a Director's Order to Pay making the director personally liable. Following conviction in Windsor Provincial Offences Act Court in April 2026, the court imposed $100,000 on the company and $50,000 on the director, plus the 25% victim fine surcharge.

The sector-wide picture is substantial too: CBC reporting cited by industry press put Ontario THA inspection findings at more than $4 million owed to over 10,000 employees, across roughly 2,300 agencies and 114,000 workers. A Hamilton agency was separately fined $100,000 for false records and obstructing an inspection.

One honest caveat about what this shows. These are enforcement actions against agencies and their directors. We're not aware of a publicly reported Ontario decision ordering a host client to pay under the joint liability provision - and such orders, if issued, generally wouldn't be publicised unless prosecuted. The client-side exposure rests on the statute and on legal commentary about it, not on a reported case. We think it's worth managing; you should weigh it accurately.

What should a facility manager actually do?

None of this means every competitive rate signals a problem. It means a rate near or below the statutory floor is a question worth asking, and a good partner will answer it without friction.

Managing cost is a legitimate and necessary part of running a facility. But a saving that depends on a vendor not funding its own obligations isn't really a saving - it's exposure moved off their books and onto yours.

At Alliance Employment Services, we're happy to show a client exactly how a bill rate is constructed, tier by tier. If you'd like a second read on your current staffing rates, our GTA team is glad to help.