Payrolling
Payrolling is when a client picks the worker and a staffing agency employs and pays them. How it works, how it compares with a PEO or EOR, and how to price it.September 24, 2026
5 min read
Payroll
Written by the NextCrew team
Definition
Payrolling is a staffing service where the client finds and chooses the worker and the staffing agency employs them: the agency runs payroll, withholds and pays employment taxes, carries workers' comp and handles the onboarding paperwork. The client pays a markup for that service, usually lower than for a recruited placement because the agency did not recruit.
How a payrolled placement runs
How does payrolling work?
The client does the recruiting; the agency becomes the employer. Clients use it for people they have already chosen: a retiree coming back for a project, an intern, a seasonal hire, or someone they cannot add to their own headcount. The agency onboards the Crew Member, pays them through its payroll, and bills the client for the hours worked.
How is payrolling different from staffing, a PEO or an EOR?
The difference is who recruits and who is the employer.
| Model | Who recruits | Who employs | How it is usually priced |
|---|---|---|---|
| Traditional staffing | The agency | The agency | A bill rate with a full markup |
| Payrolling | The client | The agency | A bill rate with a lower markup, or a fee per hour |
| PEO | The client, for its own staff | The client and the PEO share employer duties (co-employment) | A fee per employee or a share of payroll |
| Employer of record (EOR) | The client | A third party employs on the client's behalf, often in another country | A monthly fee per worker |
Terms vary between providers. What matters is what your agreement says each party is responsible for.
How should an agency price payrolling services?
Price payrolling on the burden and risk you take on, not only on the recruiting you skipped. The agency still carries the full cost of being the employer: payroll taxes, unemployment tax and workers' comp for the work the Crew Member does. Only the recruiting cost falls away, so the markup can be lower, but it still has to clear the burden rate first.
| Per hour (illustrative) | Payrolling at 25% markup | Recruited placement at 45% markup |
|---|---|---|
| Pay rate | $25.00 | $25.00 |
| Bill rate | $31.25 | $36.25 |
| Burden (assumed 18% of pay) | $4.50 | $4.50 |
| Gross margin | $1.75 (5.6%) | $6.75 (18.6%) |
Example only. Your burden depends on the state, the workers' comp class code and your tax rates.
Thin margins are why payrolling works best at volume, with clean approved hours and prompt payment. Check the numbers for your own roles in the markup calculator.
What risks does payrolling carry?
As the employer, the agency takes on employer obligations for someone it did not choose and does not supervise day to day.
- Workers' comp claims. An injury at a site you do not manage still counts against your claims history and your experience modifier. Code the role by the work done at the client; see workers' comp class codes.
- Unemployment claims. When the client ends the assignment, a claim can count against your state unemployment rate, which raises burden on every other Crew Member.
- Wage and hour obligations. You are responsible for paying overtime correctly on the hours the client approves, including hours worked under the client's direction.
- Who is responsible for what. The client directs the work while you are the employer. The agreement should spell out supervision, safety, timekeeping and indemnity, and counsel should review it.
Bottom line: price payrolling to cover burden and risk, get the client's approval on every timesheet, and put each party's responsibilities in the agreement.
How NextCrew handles payrolling
A payrolled Crew Member goes through the same onboarding, time and payroll flow as any other, so the service is cheap to run.
- Onboarding sent as one link, with forms pre-filled from the profile and completed documents written back to it automatically.
- Client approval of hours in their portal, so the hours you pay are the hours the client confirmed.
- Overtime calculated from your jurisdiction and overtime settings, and approved hours exported to your payroll provider.
- A separate rate configuration for payrolling clients, so their lower markup never leaks into your recruited placements.
See how it works in payroll software for staffing agencies.
Frequently asked questions
Related terms
- Burden rate: the employer costs the payrolling markup has to cover.
- Markup: the percentage added to pay, usually lower for payrolling.
- Workers' comp class codes: how the payrolled role is coded for insurance.
- Employer of record: a company that employs workers on another company's behalf.
- Payroll funding: financing that covers payroll while clients pay slowly.
- Co-employment: how employer responsibilities split between agency and client.
- Direct sourcing: a client building its own pool, often payrolled by a partner.
- Employer of record vs PEO vs staffing agency: how payrolling compares with a PEO and a staffing placement.
This page explains common practice. It is not legal or tax advice.