Understanding the Real Cost Behind Private Contract Security Pay Rates

In the first post of this series, we talked about how private contract security wages are tied to what clients are willing to pay. Now I want to take you a little deeper. One of the biggest misunderstandings in this field is when someone says, “The client is paying $25 an hour, so why am I not making $25 an hour?” That question makes sense if you have never seen what goes on behind the scenes. The truth is, a company cannot simply hand the entire bill rate over to the guard.

There are many costs that have to be covered first.

Disclaimer: The figures, examples, and percentages in this series are for illustration purposes only. They do not represent the actual billing or pay rates of Enterprise Security Consulting and Training Inc. (ESCT) or any other security company. They are included only to help explain how private contract security pay and costs are structured.

A Sample Breakdown of Costs

Let us use a $25 per hour bill rate as an example. Remember, this is not an actual contract rate. It is just a way to show you how the money is divided.

Expense	Approximate Percentage	Cost per Hour (based on $25)
Guard’s Wage	60%	$15.00
Payroll Taxes (FICA, Medicare, FUTA, SUTA)	10%	$2.50
Workers’ Compensation Insurance	6%	$1.50
General Liability Insurance	4%	$1.00
Supervision and Management	8%	$2.00
Uniforms, Equipment, Training	5%	$1.25
Company Overhead (office, scheduling, licensing, legal)	5%	$1.25
Total	98%	$24.50

That leaves the company with only about 2 percent in profit, or fifty cents an hour in this example.

Why Companies Cannot Just “Pay More”

Looking at this breakdown, you can see that most of the money already goes straight to wages and mandatory costs like insurance and taxes. These are not optional. The government requires payroll taxes. The state requires workers’ compensation. Clients require general liability coverage. If a company cut corners here, it would put everyone at risk, including the guards themselves.

So when someone says, “They should just pay me more,” it is not as simple as it sounds. If the client only pays $25 an hour, the company cannot magically stretch that into $20 for wages without shortchanging insurance, supervision, or training. And if a company did try to do that, it would not be in business for long.

Training, Uniforms, and Compliance

Beyond insurance and taxes, there are other necessary expenses. Guards need uniforms. Equipment must be purchased and maintained. Training has to be delivered so that the company stays compliant with state laws. Scheduling software, payroll systems, and supervision also cost money. Every one of these items is essential to running a professional security operation.

Why Some Companies Pay More Than Others

You might wonder why a guard you know makes $20 an hour at one company while another guard makes $15 at a different firm. A few things explain the difference:

• Some companies have higher-value contracts, such as government or unionized sites.

• Larger companies can spread overhead across more hours, which gives them more room to raise wages.

• Some firms specialize in niche security services that justify higher bill rates, like healthcare or high-risk industries.

Smaller or newer firms may not have that kind of leverage yet. They might be locked into contracts where clients are simply not willing to pay more, and that limits what the guards can earn.

The Takeaway

When you hear that a security company bills $25 an hour but pays the guard $15 to $17, it is not about greed. It is about math. The rest of the money is going to taxes, insurance, supervision, and overhead. Security companies operate on thin margins compared to many other businesses.

Understanding this reality is important for both guards and clients. For guards, it sets realistic expectations about what you can earn starting out. For clients, it explains why the lowest bidder may not always deliver the best service.

In the next post, we will look at how pay balances with market realities such as cost of living, inflation, and client budgets. Think of it like balancing your own household budget. You cannot spend more than what comes in, and security companies have to follow the same principle if they want to survive.