Revisiting Foundational Rate Concepts

Rate categories are used as a method for grouping rates and the time submitted against those rates. When creating a rate, you must either select an existing rate category or create a new one. There are three Rate Categories provided automatically by SAP Fieldglass:

• ST (Standard Time)
• OT (Overtime)
• DT (Double Time)

Rate Components are optional and allow the inclusion of pre-defined fees, markups, operating costs such as Value Added Tax (VAT) and/or National Insurance (NI), and fees for service. These additional costs apply to the standard rate of a worker to derive the final bill rate or pay rate. Rate Components are used within Rate Component Groups in the SAP Fieldglass application.

When Rate Components are included within a Buyer rate structure, Rate Component Groups must also be configured. Essentially, Rate Component Groups collate all the Rate Components that should apply to a worker. When used, the pay or bill rate is derived from the standard rate value plus the Rate Components specified within the Rate Component Group.

Rate Component Groups facilitate the stacking of Rate Components into levels to control the order in which the additional costs are applied. The only exception to this flexible stacking is for companies using MSP Fee Rate Component Types and Coefficients (used with Rate Schedules), which are always applied last.

This is the most straightforward rate used when a Buyer doesn’t need visibility into the make-up of the Supplier fees or Worker’s wage that ultimately results in the final Bill rate.

For instance, in a job posting created by WorkingNet Networking Inc, a company that designs and manufactures data networking equipment, the company may simply choose to set a maximum rate that they will pay the supplier for a Data Network Engineer, in this case, Joe. The supplier, reCrewIt then presents that rate as the final Bill Rate.

WorkingNet does not wish to capture the Pay Rate or any applicable Rate Components in SAP Fieldglass so using the basic rate, the Pay Rate of the worker essentially equals the Bill Rate.

A Factor takes a base rate and multiplies it by a pre-determined ‘factor’ to derive the bill rate. A common factor rate is overtime (OT). Instead of creating an overtime rate for each position, the factor can apply the same calculation across multiple standard (ST) rates.

For example, WorkingNet might be willing to pay 1.35 times the standard rate for both a Network Engineer and Developer role within WorkingNet. This could also apply to double time (DT), which might be set as 2 times the standard rate. Instead of needing to create separate OT and DT rates applicable for each position, WorkingNet could create Factors of 1.35 and 2 respectively, applying them to as many positions as needed.

If an organization is using Rate Components, there are two methods of calculating the final rate. This depends on whether the calculation should be Pay Rate-Based or Bill Rate-Based and is often driven by regional regulations.

With Bill Rate-Based, the Bill Rate is determined first, and the Pay Rate and Rate Components are derived from it. The Buyer is provided insight into how the Supplier arrives at a Worker Pay Rate.

For example, reCrewIT has negotiated that WorkingNet will be billed a rate of 100, with 75 promised to Joe and the remaining 25 comprising reCrewIT’s fee. This allows WorkingNet visibility into reCrewIT’s costs and allows them to determine whether the final bill rate has been arrived at fairly.

With Pay Rate-Based, the Worker Pay Rate is defined first, and the resulting Bill Rate is derived once the Rate Components have been applied.

So in this case, WorkingNet and reCrewIT have negotiated that Joe will be paid 75. The remaining amount will be reCrewIT’s fee. Based on this approach, the final bill rate can change based upon reCrewIT’s fee.

This ensures that the worker pay is static which is a mandatory requirement in several countries.

The Buyer is responsible for paying the MSP (and/or VMS) fee. These fees are typically calculated as a percentage of the total spend on contingent labor managed through the tool.

The Buyer typically skims a % off the supplier total to be able to pay the MSP fee at the end of each billing cycle. These fees are typically a percentage of the total spend that goes to the Suppliers for providing their workers or services to the organization.

If an MSP is involved in the transaction, remember that the fee is only seen by the party responsible for paying it, so the final bill rate that the Supplier sees is likely to be different from the final bill rate that the Buyer sees in SAP Fieldglass.