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RATES CHARGED THE CLIENT BY THE CONTRACT SERVICE
I've heard some pretty unrealistic estimates of how much a security contractor should charge clients. I've heard that anything above 20% or 30% over wages is exorbitant. And I've heard that a dollar an hour over wages paid is reasonable. . . . And, of course, I've also seen what these services provide.
Realistically, a professionally operated security company which furnishes the previously mentioned benefits, and provides good supervision adds on 40% - 50%, or more, over the base rate paid to the officers.
Most well run security agencies have no problem justifying their rates on paper when requested. Clients with experience in the personnel, human resources or accounting professions can often look at the spread between the wages paid and the client rate and calculate or estimate the reasonable bottom line profit the contract service is striving for.
Employment costs in every area of the country vary significantly. For instance in some states, local taxes and unemployment taxes might approximate 2% or payroll, while in others they might be substantially higher. Workers' compensation costs, too, can be three times higher in one state than another and even costs of medical insurance benefits can be quite diverse depending on the region and environment--typically being lower in areas with lower population densities and in rural areas.
Some security contractors may be able to operate with lower overhead, particularly when using creative benefits such as self funded benefit trusts administered by third party administrators, rather than traditional insurance.
One exceptionally high quality security firm with only a hundred full-time officers (but boasting high morale and low turnover), found their employee medical benefit costs remained constant with such a program over a ten year period in which traditional medical insurance premiums more than doubled. The coverage, was superior to even most Fortune 500 companies, with officers having prescription cards, dental and eyeglass benefits as well as fully paid, zero-deductible hospital coverage, which no insurance company would even write. In other words, hospitalized security officers paid absolutely nothing--even the cost of in-hospital television rental was covered.
This program also offered cost-saving incentives benefiting the company and the employees. Officers who were hospitalized were encouraged to closely scrutinize billings. When errors were found, as they frequently were, then corrected, the officer was paid 50% of the reduction. For example in one case a hospital overbilled $2,000. The relevant officer received $1,000 and the security firm saved $1,000. Additionally, officers who went for a year without using any benefits, received a small token bonus and prevention was stressed. This small security company was able to provide this program without unacceptable risk, by self funding the low end costs and carrying inexpensive excess insurance with both single limit and aggregate stop losses caps.
It should also be noted here that some national companies compute all rates using a standard formula that may or may not apply in all areas.
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