You see a bill rate in the req. You see a pay rate on your offer. The gap between them is not a mystery — it is a chain of entities, each taking a cut before the money reaches you. Some of those cuts buy you something real. Others just add a phone call and a delay.
If you have ever wondered why a role pays $65/hr W-2 when the client is clearly paying north of $110/hr for the seat, this is why. You are not being underpaid by one company. You are being paid what is left after several companies take their share.
Let us walk the money down, step by step, with made-up but realistic numbers so you can do this math on your own contracts.
The Anatomy of a $100 Bill Rate
Below is an illustrative example only — not a real contract, not a real client, not a real vendor. The structure is common; the exact percentages vary widely by industry, MSP, and negotiating leverage.
| Layer | Role | Illustrative Cut | Remaining Rate |
|---|---|---|---|
| Client bill rate | What the end client pays for the seat | — | $100.00 |
| MSP / VMS administrative fee | Runs the vendor management system, consolidates invoicing, enforces compliance | 3% | $97.00 |
| Prime vendor markup | Holds the master agreement with the client, often does payrolling or insurance | $15.00 | $82.00 |
| Sub-vendor markup | Sources and manages the actual consultant | $12.00 | $70.00 |
| Your pay rate | What lands in your pocket (W-2 or C2C, before taxes) | — | $70.00 |
In this illustrative example, roughly 30 cents of every client dollar never reaches the person doing the work. That is not automatically a scandal. It depends entirely on what each layer is actually doing for that cut.
Which Layers Earn Their Keep
Not every markup is dead weight. Some of it buys real infrastructure you would otherwise have to build yourself.
- Payrolling and tax compliance. Someone has to run W-2 payroll, withhold taxes correctly, handle state-by-state registration, and issue a W-2 at year-end. That is real administrative cost.
- Workers' comp and liability insurance. A legitimate vendor layer carries coverage that protects you and the client if something goes wrong on-site. This is not optional, and it is not free.
- MSA ownership and client relationship risk. A prime vendor that holds the actual contract with the client is accepting liability if the engagement goes sideways. That risk has a price.
- Background checks, onboarding logistics, badge coordination. Tedious, but genuinely necessary work that someone has to do.
Here is what does not add value: a layer that exists purely because it has a relationship with the layer above it, performs no payrolling, carries no distinct insurance, and adds nothing except a Slack handle and a forwarded email. That layer is pure latency. It slows down your rate increase requests, your time-off approvals, and your contract renewals — and it takes a cut for the privilege.
The Two Questions That Reveal Where You Sit
You cannot always see the full chain. MSAs are confidential, and most staffing firms will not disclose their markup. But you can ask two questions that tell you almost everything you need to know.
- Who signs my paycheck or my C2C invoice, and is that the same entity that has the Master Service Agreement with the end client? If yes, you are close to the top of the chain — fewer layers, less latency. If the answer involves a vendor you have never heard of, you are further down, and your effective markup stack is longer.
- If I had a problem on-site tomorrow — a scope dispute, a safety issue, a client escalation — whose name is on the contract that protects me? This question surfaces who is actually accountable, versus who is just collecting a referral fee.
Ask these before you sign, not after you are three weeks into the engagement and trying to figure out why your rate increase request has been sitting in someone's inbox for a month.
What This Means When You Negotiate
Staffing markup explained plainly: every additional sub-layer between the client and you adds a fixed or percentage cut, and every one of those cuts has to clear the MSP's rate card before the req even gets posted. That is why some roles look underpaid relative to the skill required — the rate was never low, it just traveled through a long prime vendor subcontractor chain before it got to you.
Practical takeaways:
- Ask directly whether you are working with a prime vendor or a sub of a sub. A vendor that answers vaguely is telling you something.
- Corp-to-corp rates should reflect that you are carrying your own insurance and tax burden — compare the full load, not just the headline number.
- A shorter chain usually means faster rate conversations and fewer dropped communications during renewal season.
- A longer chain is not automatically bad if the extra layer is doing real payrolling or compliance work you would otherwise have to handle yourself.
The memorable part: the chain is not evil, it is structural. Your job is not to eliminate it — you cannot, especially in large enterprise MSP programs. Your job is to know exactly how many links are between you and the client, and to make sure each one is pulling its weight.
Call to Action
If you want a straight answer about where you would sit in a specific engagement's vendor chain, the Josh Pros LLC team is happy to walk through it with you. Reach out at contact@joshpros.com or visit https://joshpros.com.
#VendorLayersBillRate #StaffingMarkupExplained #PrimeVendorSubcontractorChain #ContractConsulting #ITContracting #W2VsC2C #StaffingIndustry #BillRateBreakdown #ConsultantPay #TechStaffing #ContractITJobs #MSPVendorManagement
Talk to a real recruiter, not a bot.
We'll tell you the rate, the client, and the terms before you interview. And if we're not the right fit, we'll say so.