Contract recruitment fees are charged as a markup on the contractor’s hourly pay rate. On a typical Ontario IT contract rate of $80 an hour, statutory employer costs alone come to roughly $8.47 an hour, or about 10.6 per cent of pay, before an agency has covered a single hour of its own work. That is the floor. Everything a client pays above it covers recruiting, payroll administration, insurance, the risk of carrying someone else’s worker on your books, and margin.
Most published guidance on this question is American, and most of it describes permanent placement rather than contract. This page works through the Canadian numbers, and every statutory figure below links to the government page it comes from.
Figures verified September 2026 against 2026 rates. Ontario employer, contractor engaged through the agency as legal employer.
What a contract recruitment fee covers
Two different things get called “recruitment fees” and they work nothing alike.
Permanent placement is a one-time fee, calculated as a percentage of the hire’s first-year salary, paid once when the person starts. You pay it, the person is your employee, and the relationship ends.
Contract is a markup applied to the contractor’s pay rate, charged on every hour worked, for as long as the engagement runs. The agency is the legal employer. It runs payroll, remits statutory deductions, carries workplace insurance, and absorbs the employment risk.
That second structure is why contract pricing is harder to compare between agencies. A permanent fee is one number. A contract markup sits on top of a cost base that changes with the pay rate, the province, and the classification of the work.
What the statutory floor is in Ontario
An agency acting as legal employer carries five mandatory costs on top of the contractor’s pay. For 2026 in Ontario:
- Canada Pension Plan: 5.95 per cent employer contribution on pensionable earnings between the $3,500 basic exemption and the $74,600 ceiling, to a maximum of $4,230.45. A second tier, CPP2, adds 4.00 per cent on earnings between $74,600 and $85,000, to a maximum of $416.00. Canada Revenue Agency, CPP contribution rates, maximums and exemptions.
- Employment Insurance: employers pay 1.4 times the employee premium, on insurable earnings to a $68,900 ceiling, to a maximum of $1,572.30 per worker.
- Workplace Safety and Insurance Board: the 2026 average premium rate for Ontario businesses is $1.23 per $100 of insurable payroll, against a maximum insurable earnings ceiling of $121,700. WSIB, 2026 premium rates. Read that figure carefully. It is the average across every classification in the province, including construction and manufacturing. An office-based knowledge-work classification sits materially below it, so the table below overstates this line for IT contract work.
- Vacation pay: 4 per cent of gross wages for employees with less than five years of employment, rising to 6 per cent at five years or more. Ontario, Your guide to the Employment Standards Act: Vacation.
- Employer Health Tax: eligible employers claim an exemption on the first $1,000,000 of Ontario remuneration, and lose it entirely once total payroll reaches $5,000,000. The rate is set by total remuneration before the exemption is deducted, and any employer above $400,000 of total payroll pays the top rate of 1.95 per cent. In practice, an employer large enough to owe EHT at all is almost always paying 1.95 per cent. Ontario, Employer Health Tax.
Why the statutory share falls as the pay rate rises
This is the part most pricing guidance misses, and it is the reason markup ranges quoted for warehouse or clerical staffing describe a different market from IT contract.
Three of those five costs stop growing. CPP stops at $85,000 of earnings. EI stops at $68,900. WSIB stops at $121,700. Only vacation pay and Employer Health Tax scale with the rate all the way up.
So a contractor billing $150 an hour carries almost exactly the same CPP, EI and WSIB dollars as one billing $60. Spread across a much larger base, the statutory burden as a percentage falls sharply.
| Contractor pay rate | Annual at 2,080 hours | Statutory employer cost | As share of pay |
|---|---|---|---|
| $17.60 (Ontario general minimum wage) | $36,608 | $5,434 | 14.8% |
| $40 | $83,200 | $12,121 | 14.6% |
| $55 | $114,400 | $14,433 | 12.6% |
| $80 (typical IT contract) | $166,400 | $17,616 | 10.6% |
| $125 (senior IT contract) | $260,000 | $23,186 | 8.9% |
The spread between minimum wage and a typical IT contract rate is about four percentage points. Any markup range built on light-industrial staffing volumes is describing a cost base that does not apply here.
What sits above the floor
Statutory cost is roughly a tenth of pay on an IT contract rate. The rest of the markup covers work that either happens or does not, and it is worth asking which:
- Sourcing and screening. The hours spent finding, vetting and presenting candidates, including the ones you did not hire.
- Payroll and remittance. Running the pay cycle, remitting CPP, EI and income tax to CRA on schedule, issuing T4s, and carrying the penalty exposure if any of that is late.
- Employment risk. The agency is the employer of record. Termination obligations, Employment Standards Act complaints and workplace insurance claims land on the agency rather than the client.
- Replacement. What happens when a contractor leaves in week three, and who carries the cost of the gap.
- Margin. The agency’s profit, which is a legitimate line and should be discussed as one.
One Ontario rule worth knowing
The Workplace Safety and Insurance Board classifies staffing agencies by the work the contractor performs rather than by the agency’s own office activity. Since 1 January 2025, agencies supplying administrative, clerical and knowledge-based labour are classified under code 001281, separately from the agencies’ internal operations under NAICS 561320. WSIB operational policy, Temporary Employment Agencies.
There is a trap in that policy. An agency that does not keep segregated payroll and wage records by classification is assigned a single rate, and the WSIB assigns the highest class rate among every classification the agency has ever placed into. An agency that once staffed a warehouse can carry that rate on its IT desk. It is a fair question to ask a prospective supplier.
What to ask before you sign
Rate cards are easier to compare when everyone is quoting the same thing. Four questions get you there:
- Is the quoted number a markup on pay, or a margin on bill? They are different arithmetic and the gap is wide. A 50 per cent markup is a 33 per cent margin on the same placement.
- What is included in the markup, and what is invoiced separately? Background checks, equipment and overtime premiums are the usual extras.
- What happens on conversion? If the contractor becomes a permanent employee, what is the fee, and does it decline over the length of the engagement.
- What is the replacement term? Length, conditions, and whether it is a credit or a re-fill.
How STACK IT handles it
We are the legal employer on every contract placement. We run payroll, remit statutory deductions, carry workplace insurance and hold the employment obligations. Clients receive one rate per role with what is included stated in writing before anyone starts, and a conversion schedule that reduces the fee for every month the contractor is active.
If you want the arithmetic on a specific role rather than a table, tell us the role and the rate you have budgeted and we will show you the build-up.