What is Service charge?
In a manpower tender, the service charge is the agency’s fee over the wage and statutory costs, often the main figure that decides the L1 bidder.
What is a service charge?
The service charge is the manpower agency’s margin. It is usually quoted as a percentage of the cost of the workers, that is, the minimum wage plus EPF, ESIC, bonus and any other statutory or bid-specified costs.
It has to cover the agency’s overheads and profit: supervision, uniforms, insurance, recruitment, administration and the cost of waiting for payments.
How it fits into the price
- Start with the minimum wage, basic plus VDA, for each post
- Add the employer’s statutory costs and any items the bid asks for
- Add the service charge on that total
- Add GST at the applicable rate on the total including the service charge
Why it decides many bids
When the buyer fixes the wage and statutory components, the service charge is often the only figure bidders compete on. Many bids set a minimum service charge in their terms, and many bidders quote that same lowest permissible figure.
When several qualified bidders tie at the lowest price, GeM manpower bids are often decided by random selection among them.
Tips for bidders
Read the bid’s additional terms for any minimum service charge. Work out your real overheads before quoting, as a very low service charge can win the bid but lose money over the contract.
Common questions
Common questions about Service charge in government tenders.
It is set by you, within any limits in the bid. Check the bid for a minimum service charge and make sure the figure covers your real costs.
Many bids set a minimum, and a quote that does not cover statutory costs is usually treated as unviable. Check the bid’s terms.
GST on manpower supply is usually charged on the total bill, including wages, statutory costs and the service charge. Follow the bid’s price format.
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