Staffing agency fees in India, explained line by line.
Most quotes for manpower are impossible to compare, because two agencies bundle different things into one number. Staffing agency fees in India follow just two models: a markup on the worker's cost to company for contract and temporary staffing, usually 8–14%, and a one-time placement fee for permanent hiring, usually around 8.33% of annual CTC. This guide shows what each covers, what must stay a pass-through, and how to read an invoice before you sign.
Why the cheapest manpower quote usually costs the most
A low markup is easy to print. It is funded by something — and that something is almost always the worker's statutory dues or your own compliance exposure.
One agency quotes 6% markup, another 12%, a third a flat per-head rate. Only one of the three has PF, ESI, bonus, leave and uniform inside the number, and the quote does not say which.
Under-deposited PF and unpaid statutory dues on workers at your premises come back to the principal employer. The saving on paper turns into a recovery order, arrears and interest.
Wages, statutory contributions, reimbursements and service fee as four separate lines. If an agency will not show them separately, the rate is not the risk — the bundling is.
See a clean invoice format →
Markup or placement fee — which is cheaper for your requirement?
Set the headcount, the cost to company per head and how long you expect to keep the role. Set the contract markup and the placement fee you have been quoted (12% and 8.33% of annual CTC to start), and see where the crossover sits for your own numbers. Fees only — GST at 18% applies to both and is usually recovered as input tax credit.
Contract staffing also carries no severance exposure and no notice-period risk — worth real money on seasonal headcount. Read the model in full on contract staffing services.
What belongs on a manpower invoice
Four line groups, always separate. If your current vendor shows one consolidated figure per head, ask for this breakup before the next cycle.
Basic, DA, HRA and allowances as per the state minimum wage notification for the scheduled employment, plus overtime at statutory rates.
Employer PF 12% on wages up to ₹25,000 plus about 1% EDLI and PF admin, ESI 3.25% where gross is ₹21,000 or less, bonus provision, leave, gratuity provision and LWF where applicable.
Uniform, shoes, PPE, ID cards, consumables and transport where the contract says the client bears them. Actuals, with support.
The agency's own charge — the markup. GST at 18% then applies to the whole invoice, wages included. The fee is the only line that is actually negotiable.
A manpower bill rate, built line by line
Two workers, per month, as a staffing agency should price them after the ₹25,000 PF ceiling took effect on 17 September 2026. Basic + DA is taken as 50% of gross (the Labour Code minimum), bonus at 8.33%, gratuity at 4.81%, service fee 12% on the workforce cost. Uniforms, leave provision and LWF are left out to keep it readable.
| Line | Gross ₹18,000 (ESI-covered) | Gross ₹30,000 (above the ESI limit) |
|---|---|---|
| Gross wages (basic + DA ₹9,000 / ₹15,000, plus allowances) | ₹18,000 | ₹30,000 |
| Employer PF 12% of basic + DA | ₹1,080 | ₹1,800 |
| EDLI 0.5% + PF admin 0.5% | ₹90 | ₹150 |
| Employer ESI 3.25% of gross | ₹585 | — (gross above ₹21,000) |
| Statutory bonus 8.33% of basic + DA | ₹750 | ₹1,250 |
| Gratuity provision 4.81% of basic + DA | ₹433 | ₹722 |
| Workforce cost (pass-through) | ₹20,938 | ₹33,922 |
| Service fee 12% | ₹2,513 | ₹4,071 |
| Bill rate before GST | ₹23,451 | ₹37,993 |
| GST 18% on the whole invoice | ₹4,221 | ₹6,839 |
| Invoice per worker | ₹27,672 | ₹44,832 |
Statutory costs add about 16% on an ₹18,000 gross and 13% on ₹30,000 — not the flat 13% or 16.25% loading often used in quick quotes. Model your own headcount with the contract vs permanent cost calculator or the CTC breakup calculator.
Markup on what? The base changes the bill
Two quotes can both say "12%" and differ by hundreds of rupees per worker. Ask which base the percentage is applied to.
On an ₹18,000 gross: ₹2,160 a month. Lowest-looking number; statutory costs are billed at cost on top.
On the same worker's ₹20,938 workforce cost: ₹2,513 a month — ₹353 more per worker, ₹35,300 a month across 100 workers.
Common for large volume contracts. Easiest to compare and does not rise automatically when wages or the PF ceiling go up.
Six checks before you sign a manpower contract
Each of these shows up in audits and recovery notices. None of them is visible in a single per-head rate.
Basic + DA must meet the State's minimum wage for the job, zone and skill, revised every April and October in most States. Check with our minimum wage calculator.
PF on basic + DA of at least half of gross, and on wages up to ₹25,000 from 17 September 2026 — not on a token basic or the old ₹15,000 cap.
ESI for every worker with gross up to ₹21,000, and statutory bonus for wages up to ₹21,000. A quote missing either is under-priced, not cheap.
Manpower supply is taxed on the whole invoice. An agency charging 18% only on its fee is under-paying GST — a demand that can later disrupt your input tax credit.
The contractor's licence under the OSH Code (formerly the Contract Labour Act) and your own registration as principal employer, where the thresholds apply.
ECR and PF challan, ESI challan, wage register and bank transfer proof every month. As principal employer you can be made to pay what the contractor does not.
Want this priced against your actual requirement?
Send the role, headcount and city. You get an itemised rate card in the format above — wages, statutory dues, reimbursements and service fee shown separately, so you can compare it against any other quote on the table.
- ✓Indicative bill rate inside 24 hours
- ✓No obligation, and no charge to see numbers
- ✓Written replacement and compliance terms up front
Staffing agency fee FAQs
Markup ranges, GST, what the fee covers, and the one rule that never changes: the employer pays, never the worker.
Ask for a rate card →Is GST on manpower supply charged only on the service charge?+
No. Showing wages and the service charge on separate lines does not make the agency a “pure agent”: it employs the workers and is liable to pay them, so GST at 18% applies to the full invoice. Several advance rulings have held this.
Is the markup charged on gross wages or on the total cost?+
Either, depending on the contract — and the difference is material. 12% on an ₹18,000 gross is ₹2,160; 12% on the same worker's ₹20,938 workforce cost is ₹2,513. Always ask which base the percentage uses.
How does the ₹25,000 PF ceiling change manpower bills?+
From 17 September 2026, employer PF is due on wages up to ₹25,000 instead of ₹15,000. For a worker on ₹25,000 basic + DA, employer PF, EDLI and admin rise from ₹1,950 to ₹3,250 a month, and a percentage markup on cost rises with it.
What should a staffing agency's fee include?+
Recruitment and replacement, onboarding documents, payroll, PF, ESI, professional tax and LWF filings, registers, the contractor's licence and insurance, and a monthly compliance pack. Uniforms, PPE and site transport are usually reimbursed at actuals.
What are typical staffing agency fees in India?+
Two models dominate. Contract and temporary staffing is billed as a markup on the worker's cost to company, typically 8–14% depending on volume, city and role scarcity. Permanent placement is a one-time fee, usually around 8.33% of annual CTC for staff roles and 12–20% for leadership search.
What does the staffing markup actually cover?+
Sourcing and screening, trade tests and background verification, appointment letters and onboarding, payroll processing, PF, ESI and professional tax filings, statutory registers, site supervision, replacement of exits and the monthly compliance pack. It does not cover wages or statutory contributions — those are pass-through costs shown separately.
Is GST charged on staffing agency fees?+
Yes. Manpower supply and recruitment services attract GST at 18%. For manpower supply it is charged on the whole invoice value — wages, statutory costs and fee — because the agency is the employer paying the wages. Registered employers claim input tax credit in the normal course, so it is usually a cash-flow item rather than a cost.
Which is cheaper: contract staffing or permanent placement?+
On fees alone, a 12% monthly markup overtakes a one-time placement fee of 8.33% of annual CTC after about eight months (0.0833 × 12 ÷ 0.12). Contract staffing still wins for seasonal, project or uncertain headcount because the agency carries replacement, payroll and compliance work and there is no long-term commitment; for a role you will keep for years, a one-time placement fee is cheaper. The comparison above shows the break-even for your own rates.
Do candidates ever pay a fee?+
No. In India the employer pays the staffing agency. A consultancy that charges a worker for a job is operating outside the law and outside our policy — Godstone Consultech never collects a rupee from a candidate at any stage. Report a fee demand here.