What Is Service Charge in a Manpower Tender?

Service charge is the contractor's commercial charge for managing and executing the manpower contract.

It is separate from employee wages and statutory contributions.

What Does Service Charge Cover?

Depending on the contract, it may cover:

• Recruitment
• Employee replacement
• Payroll processing
• PF / ESIC compliance
• Attendance management
• HR support
• Supervision
• Billing
• Office expenses
• Bank charges
• Working capital cost
• Contractor profit

Is Service Charge the Same as Profit?

No.

Service Charge

Operating & Administrative Costs

Actual Profit

Example:

Service Charge received: ₹50,000

Administration and contract expenses: ₹35,000

Actual profit:

₹50,000 - ₹35,000 = ₹15,000

So a 5% service charge does not automatically mean 5% net profit.

How Should Service Charge Be Calculated?

Before quoting, calculate:

Employee Cost + Statutory Cost + Operational Cost + Administration + Finance Cost + Risk + Required Profit

Then decide the sustainable service charge.

Important

Always check the tender conditions before quoting.

The buyer or GeM service category may prescribe:

• Minimum service charge
• Maximum service charge
• Fixed service charge
• Percentage-based service charge

Do not copy the service charge from another tender.

Conclusion

Service charge should cover the real cost of managing the contract and leave a reasonable profit.

A very low service charge can make a manpower contract loss-making even when employee wages are calculated correctly.

DhirekOne helps contractors compare service charge, actual contract cost and profitability in one workflow.