An agency quotes you £19.50 an hour for a temporary receptionist and tells you the temp will be paid £13.50. The gap looks like a fat margin. Most of it is not. An agency charge rate carries the temp’s holiday pay, employer National Insurance and pension before the agency earns anything, and on those figures the costs the law puts on the agency come to almost £3.90 an hour.
This guide is for the office manager or finance lead at a small business who has a quote on the desk and wants to know what is in it before agreeing.
Who the employer is when you use a temp
When you book a temp through an employment business, the agency pays them. It runs their payroll, deducts their tax and pays employer National Insurance on their wages. The agency rules in Part 2, Chapter 7 of the Income Tax (Earnings and Pensions) Act 2003 put those duties on the agency, and the same pattern runs through holiday pay and pension duties.
So the charge rate you pay is the agency’s whole cost of employing that person for an hour, plus its margin. You receive one invoice and do no payroll. That is most of what you are buying.
What sits inside an agency charge rate
Take a temp on £13.50 an hour working a 37.5 hour week. Using the 2026/27 rates, this is roughly what the agency carries for each hour they work.
Holiday pay comes first. Workers are entitled to 5.6 weeks of paid leave a year. For temps on irregular hours, agencies are allowed to pay it as rolled up holiday pay at 12.07 percent of pay, a method allowed for leave years starting on or after 1 April 2024. On £13.50 that is £1.63 an hour.
Then employer National Insurance. Since April 2025 the rate has been 15 percent on earnings above the secondary threshold, which is £5,000 a year, or £96.15 a week. HMRC publishes both figures in its rates and thresholds guidance for employers. On a week of £567 including holiday pay, that is about £70.70, or £1.88 an hour.
Then pension. A temp earning over £10,000 a year must be auto enrolled, and the employer pays at least 3 percent of qualifying earnings, the band between £6,240 and £50,270 a year. The Pensions Regulator confirmed those thresholds are frozen for 2026/27. On this example that adds about 36p an hour.
Add those together and £13.50 has become £17.37 before the agency has paid for a recruiter, a compliance check or the risk of a temp who does not turn up. On a £19.50 charge rate the agency is left with about £2.13 an hour to cover its own costs and profit. An agency with a pay bill over £3 million also pays the Apprenticeship Levy at 0.5 percent, which nudges that down a little further.
The minimum wage sets the floor
The National Living Wage for workers aged 21 and over has been £12.71 an hour since 1 April 2026, according to the government’s announcement of the new rates. No agency can pay a temp less, whatever the charge rate. If you are offered a charge rate that seems very low, work backwards. Strip out roughly 29 percent for holiday, National Insurance and pension and see what is left for the temp. If the answer is close to £12.71 for a role that needs experience, expect people to leave as soon as a better shift comes along.
Sick pay changed too. Statutory sick pay is now payable from the first day of absence, and the lower earnings limit has gone. We covered the statutory sick pay changes separately. Agencies carry that cost and some build it into the charge rate.
What changes after 12 weeks
The Agency Workers Regulations 2010 give a temp the right to the same basic pay and conditions as someone you employ directly, once they have done 12 calendar weeks in the same role with you. If your own receptionist is on £14.20, the temp’s pay rises to match from week 13, and every on cost above rises with it.
That is the point where a quote agreed in week one can stop being accurate. Ask the agency at the outset what the charge rate becomes after 12 weeks, and tell them honestly what your own staff in that role earn. Our guide to the 12 weeks rule sets out how the weeks are counted and what breaks the clock.
Questions worth asking before you sign
What is the temp’s hourly pay, and how much of the charge rate is that? A reputable agency will tell you. Is holiday pay included in the rate or billed separately when it is taken? Both are legal, but you need to know which you are budgeting for.
Are evenings, weekends or overtime charged differently? If the temp works 40 hours instead of 37.5, does the extra time bill at the same rate?
What happens if you want to keep the person? Under regulation 10 of the Conduct of Employment Agencies and Employment Businesses Regulations 2003, an agency can charge a transfer fee if you take on a temp directly within 14 weeks of the start of their first assignment, or 8 weeks after it ends, whichever is later. It must also offer you the choice of an extended period of hire instead of the fee. Ask for the fee in writing now, while nobody has an interest in the answer. Admin temps who move to permanent roles are common, and our piece on temp to perm explains how it works from the temp’s side.
Comparing two quotes properly
Lay the quotes side by side and compare the temp’s pay first. An agency that pays its temps £14 and charges £20 can be better value than one paying £12.80 and charging £18.50, because a better paid temp is more likely to arrive on Monday and stay until the job is done.
Then compare the extras. Check for set up or registration fees, minimum booking lengths and cancellation terms. A rate that looks cheaper per hour can cost more over a month once a four hour minimum and a 24 hour cancellation charge are added.
Flamingo Workforce supplies temporary admin, office and reception staff across the UK and will show you the pay rate inside any quote we give. If you need cover, send us the details through our enquiry form and we will come back with numbers.