Last updated: October 18, 2026
Staff augmentation is priced three ways: an all-in hourly bill rate, cost-plus (pay plus burden plus a disclosed markup), or a flat monthly rate per seat. The trap is a quoted markup that leaves out the 24% employer burden. A mid-level software engineer bills $96 to $122 an hour nationally (KORE1 Contract Rate Index, Oct 2026).
Three pricing models. Same engineer. Quotes that can sit $30 an hour apart and still both be honest, or both be slippery, depending on what each one leaves off the page.
On a recent internal call about how we talk to buyers, my partner Devin Hornick described the problem more bluntly than I usually would. “There’s sort of the bait and switch in the staffing industry,” he said. “And you really need to ask the right questions.” He wasn’t talking about any single firm. He was talking about a habit, the habit of quoting a markup percentage that sounds low because the employer’s payroll costs got quietly parked somewhere else.
Where I sit, for the record. KORE1 bills hourly, all-in, and our staff augmentation services are built on that model, so I have a preference and I’ll defend it below. If you need the budget number itself, what one augmented engineer costs per month by role, our IT staff augmentation cost guide covers that. This page answers a narrower question. When three vendors price the same seat three different ways, how do you get them onto one line?
The Three Staff Augmentation Pricing Models
A staff augmentation pricing model is the formula a vendor uses to turn one contractor’s time into your invoice. Nearly every quote you’ll see is an all-in hourly bill rate, a cost-plus build (pay, plus employer burden, plus a stated markup), or a fixed monthly price per seat. The underlying costs are identical. Only the packaging changes.
All-in hourly. One number per hour worked. Wages, payroll taxes, insurance, recruiting, and the firm’s margin all sit inside it. You approve a timesheet and pay hours times rate. This is the standard for W2 contractors in U.S. IT staffing, and it’s what KORE1 quotes. What that hourly number runs in 22 metros is in our metro bill rate index. The Los Angeles row is broken out in the Los Angeles contractor rate breakdown.
Cost-plus shows its work, or claims to. The vendor tells you the contractor’s pay rate, then adds a percentage on top. Sometimes the burden is broken out as its own line. Often it isn’t, and that is where most of the confusion in this market starts.
Then the monthly seat. You pay something like $18,700 a month for “one senior-ish developer,” regardless of how many hours land in that month. Offshore and nearshore vendors favor it because it smooths their own payroll. Buyers like the predictability, right up until a month with two holidays and a sick week costs exactly the same as a month without them.
What Is a Cost-Plus Staffing Model?
Cost-plus staffing means the bill rate is built from three disclosed parts: the contractor’s pay rate, the employer burden on that pay, and the firm’s markup. You see the arithmetic. In theory that makes it the most transparent model. In practice it depends entirely on which of those three parts the markup is calculated against.
The burden part is the one people underestimate. It isn’t profit. It’s what any W2 employer owes for having a person on payroll, and at KORE1 we model it at 24% of pay. On a $100-an-hour contractor, that’s $24 an hour before the staffing firm has earned a cent. Roughly, here’s where the $24 goes. See how we source and model that figure.
- Social Security at 6.2% of wages up to $184,500 for 2026, and Medicare at 1.45% with no cap. Both employer-side, both per IRS Publication 15 (2026).
- Federal unemployment. Small, actually. FUTA is 6.0% on the first $7,000 of wages, which drops to 0.6% net once the state credit applies, per IRS Topic 759. Call it $42 a year per person in a normal state.
- State unemployment, which varies by state and by the employer’s own claims history.
- Workers’ compensation and the general and professional liability coverage a client’s legal team will ask about in the MSA.
- Mandated paid sick leave. California requires at least 40 hours or five days a year, per the California Labor Commissioner, and the W2 employer of record is the one paying it.
- Benefits the firm chooses to carry. We pay 100% of dental and vision for our contractors. Not required. Still a cost.
Remote engineers complicate it a little. Burden generally follows where the person actually works, so a cost-plus quote for an engineer in Austin and the same quote for one in San Jose shouldn’t carry identical burden lines. If they do, somebody averaged. Ask which state the burden was calculated for.
Do Agencies Include Markup in Hourly Contractor Rates?
Yes, every agency does. In an all-in hourly rate, the markup, the burden, and the contractor’s wages are one blended number, and that’s fine as long as you compare blended numbers to blended numbers. The trouble begins when a cost-plus quote advertises its markup as a percentage and nobody asks what it’s a percentage of.
Say a firm quotes you a 35% markup. Sounds clear. It isn’t.
If that 35% sits on the $100 pay rate, the bill rate is $135, and the firm still has to pay the $24 of burden out of its $35. If it sits on the $124 loaded cost, the bill rate is $167.40. Same contractor, same “35%,” and a $32.40 hourly gap that becomes $16,848 over a three-month, 520-hour engagement. Over six months it’s $33,696, which in most departments I’ve worked with is somebody’s entire tooling budget.
Devin’s line on the call was the cleanest version of this I’ve heard. “First off, it’s not a markup. Secondly, there’s a margin in there. And thirdly, there’s a bunch of other costs that you’re not thinking of.” Markup and margin aren’t the same number either, and the gap between them confuses procurement teams constantly; our explainer on how contract staffing works walks through that conversion with a full rate build.
If you only ask one question, ask this one. Is your quoted percentage applied to pay, or to pay plus burden? Get the answer in writing.
Where the Money Goes Between Pay and Bill Rate
Devin used a $100-an-hour pay rate on the call, which keeps the arithmetic easy. Add the 24% burden and the employer’s loaded cost is $124 an hour. In his words, “we make our profit after the $124.” For a contractor at that pay rate, he put the bill rate at around $150 to $160 an hour. The line items behind that 24% are in the burden rate worked example.
The difference between $124 and the bill rate isn’t all profit, and this is the part that gets lost when buyers fixate on a single percentage. It pays for the recruiter who found the person and the one who backfills them if they leave. Account management. Weekly payroll that runs whether or not your AP team paid on time, because we pay contractors on Fridays and they don’t wait for net-45. The insurance tower. Background checks. Then, yes, a margin.
I won’t publish our markup, and I’d be wary of anyone who leads with theirs. A percentage on its own tells you almost nothing about what you’ll actually pay. The bill rate does.
How Does a Monthly Per-Seat Price Convert to an Hourly Rate?
Divide the monthly seat price by the billable hours you’d actually get. At 40 hours a week, a full year is 2,080 hours, which is 173.3 a month and 520 per quarter. That’s the conversion to use, and it’s the one most per-seat quotes quietly avoid.
A worked example from the index. A mid-level software engineer, national, runs about $56,100 for a three-month contract at the median bill rate. That’s $18,700 a month. Divide by 173.3 and you’re at $108 an hour, which matches the median. Good. The per-seat number and the hourly number agree.
Now suppose the seat vendor’s math assumed 160 billable hours a month instead, a figure that shows up a lot because it sounds like “four weeks.” The same $18,700 is suddenly $116.88 an hour. Nobody lied. The hours assumption just did the work.
Three things to pin down on any per-seat quote. What hours does the price assume? What happens to the invoice when the person is out for a week, or the office closes for Thanksgiving and the day after? And can you scale a seat down mid-month, or only at renewal? Most of the cost difference between a seat and an hourly rate hides in those three answers rather than in the headline figure.
Comparing the Models Side by Side
The worked example in every row is the same contractor, a mid-level software engineer, U.S. national, at the index median of $108 an hour.
| Model | What you see | What can hide | How to normalize |
|---|---|---|---|
| All-in hourly | $108 per hour worked | Extra charges for background checks, overtime or conversion | Confirm the rate is all-in, in writing, then compare as is |
| Cost-plus | Pay rate plus a stated markup % | The 24% burden, if the markup sits on pay and burden is billed separately | Rebuild it as pay × 1.24 × (1 + markup), or ask for the final hourly figure |
| Monthly per seat | About $18,700 per month | A 160-hour assumption, holidays and absences billed anyway | Divide by 173.3 hours, then compare to hourly quotes |
For reference, here’s where software and QA contract rates sit nationally right now. These are bill rates, what an employer pays per hour through a staffing firm on a W2 contract, not what the contractor takes home. Metro rates move off these national figures, so if your team is in Southern California, compare against the same rates priced for Orange County.
| Role and level (U.S. national) | Bill rate range | Median | 3-month cost at median |
|---|---|---|---|
| Software engineer, junior | $77 to $96 | $83 | $43,400 |
| Software engineer, mid-level | $96 to $122 | $108 | $56,100 |
| Software engineer, senior | $118 to $142 | $131 | $68,300 |
| QA tester, mid-level | $73 to $94 | $83 | $43,000 |
Source: KORE1 Contract Rate Index 2026-Q4, effective October 16, 2026. National cells are modeled from BLS Occupational Employment and Wage Statistics (May 2025) hourly wages, a 24% employer burden, and the bill bands KORE1 observes on its own W2 contract placements with 2023 to 2026 starts. Three-month cost assumes 520 hours. Next refresh: January 2027.
Holding three quotes that don’t line up? Get an all-in rate from KORE1 for the same role, level, metro, start date, and length, and use it as the yardstick for the other two.
Which Model Makes Vendor Comparisons Easiest?
All-in hourly, and it isn’t close. One number per hour, nothing to rebuild, and an invoice that rises and falls with the hours your team actually used. “Hourly, which we prefer,” is how Devin put it. “It’s really more of a staffing model to do the hourly billing and you manage the person.”
That last clause matters more than the pricing. In staff augmentation the contractor works inside your team, on your sprint board, under your engineering manager. You direct the work, so you should be paying for the time, and the time is exactly what an hourly rate measures. A monthly seat makes more sense when a vendor is managing the people and owns delivery, which is a different purchase, closer to managed services; our breakdown of staff augmentation vs managed services covers where that line falls.
Cost-plus has a real place too. Some procurement teams require pay transparency for audit reasons, government-adjacent work especially. Fine. Just insist the burden is inside the build and the markup basis is stated, and then convert the result to an hourly figure anyway so it can sit next to the other quotes.
What Should Never Be in a Staff Augmentation Price
A fixed fee for the work itself. If a vendor offers to deliver “the project” for a flat price, they’re selling consulting, not augmentation. That can be the right purchase. It isn’t this one, and the pricing logic, the risk, and the contract terms all change once the vendor owns the outcome instead of you. If you’re unsure which of the two you’re actually buying, our comparison of contract staffing vs staff augmentation lays out the models.
Promotional pricing is the other one. A free first week. A discount that kicks in at month seven. A rate cut “if you sign this quarter.” I’m skeptical of all of it, because the cost of a contractor doesn’t change in month seven. Payroll taxes don’t take a holiday. When a discount appears, it’s usually being recovered in the bill rate, the conversion terms, or both.
What Buyers Ask Before Signing a Rate Sheet
So what is a cost-plus staffing model for remote engineers?
A cost-plus model bills the remote engineer’s pay rate, plus employer burden, plus a disclosed markup. For remote hires the burden should reflect the state where the engineer actually works, since unemployment tax and sick-leave rules differ. Ask which state the vendor used.
Do agencies bake their markup into the hourly rate?
They do, always. An all-in hourly bill rate already contains the contractor’s wages, the roughly 24% employer burden, and the firm’s margin. The risk sits with quoted percentages instead, where a markup applied to pay alone can leave the burden to be billed on top.
How do I turn a monthly per-seat quote into an hourly rate?
Divide the monthly price by 173.3, the average billable hours in a month at 40 hours a week. An $18,700 seat works out to about $108 an hour. If the vendor assumed 160 hours, the real hourly figure is higher than it looks.
Which pricing model fits a six-month augmentation?
All-in hourly fits most six-month augmentations, because your team directs the work and you pay only for hours used. At the national median for a mid-level software engineer, six months runs about $112,200. Cost-plus works too, if burden is clearly inside the build.
Does the 24% burden change by state?
Somewhat. Federal payroll taxes are the same everywhere, but state unemployment rates, workers’ comp classes, and paid sick leave mandates are not. California’s sick-leave floor alone adds cost a Texas employer doesn’t carry. We use 24% as a consistent planning figure across our published examples.
Before You Sign the Rate Sheet
Put every quote on one line, in dollars per hour, all-in. Rebuild cost-plus quotes with the burden inside. Divide seat prices by 173.3. Ignore any percentage that arrives without the dollar figure attached to it.
Then look at what’s left, which is usually less about rate and more about who will actually show up. Across our placements, 12-month retention runs about 92%, and the contracts that go sideways rarely do it over a few dollars an hour. If you’d rather keep it flexible, start with contract staffing on an hourly rate and decide later. And if you want a number to measure the others against, send us the role and the dates. We’ll quote it all-in, and tell you if your other quotes look fair.
