Gross Margin
Gross margin is what a staffing agency keeps from the bill rate after pay and burden. How to calculate it, how it differs from markup, and what erodes it.September 24, 2026
5 min read
Running an Agency
Written by the NextCrew team
Definition
In staffing, gross margin is what is left of the bill rate after paying the Crew Member and the burden on their wages. It is shown in dollars per hour, often called gross profit, or as a percentage of the bill rate. It pays for recruiters, offices and software before any profit is left.
Where a $29.00 bill rate goes
Gross margin $5.00 = 17.2% of the bill rate
How do you calculate gross margin in staffing?
Gross margin per hour = bill rate − pay rate − burden. Gross margin % = that amount ÷ bill rate. On a $29.00 bill rate, a $20.00 pay rate and $4.00 of burden leave $5.00 an hour, or 17.2%. Over a 40-hour week that is $200 per Crew Member, before any overhead.
Burden is where the same markup produces different margins. At a 45% markup on a $20.00 pay rate, four roles with different burdens leave very different money behind:
| Role (illustrative burden) | Bill rate | Burden per hour | Gross margin per hour | Gross margin % |
|---|---|---|---|---|
| Office (10%) | $29.00 | $2.00 | $7.00 | 24.1% |
| Events (15%) | $29.00 | $3.00 | $6.00 | 20.7% |
| Warehouse (20%) | $29.00 | $4.00 | $5.00 | 17.2% |
| Light construction (25%) | $29.00 | $5.00 | $4.00 | 13.8% |
Example only. Most of the difference comes from workers' comp class codes.
To run your own numbers, use the markup calculator: enter pay, markup, burden and any program fee, and it shows the gross margin per hour.
What is the difference between gross margin, markup and net margin?
They measure the same hour from different starting points, and mixing them up is the most common pricing mistake in staffing.
| Measure | Formula | On $20.00 pay, $29.00 bill, $4.00 burden |
|---|---|---|
| Markup | (bill rate − pay rate) ÷ pay rate | 45% |
| Spread | bill rate − pay rate | $9.00, or 31.0% of the bill rate |
| Gross profit | bill rate − pay rate − burden | $5.00 per hour |
| Gross margin | gross profit ÷ bill rate | 17.2% |
| Net margin | profit after all overhead ÷ revenue | Depends on your overhead |
The practical rule: set prices with markup, but judge them with gross margin. See how a bill rate is built from pay, burden and markup.
What eats into gross margin?
Gross margin rarely drops in one step. It leaks, an hour at a time.
- Overtime billed at straight time. The Crew Member earns time and a half, the burden rises with it, and the client pays the regular rate.
- Fees taken off the bill rate. VMS program fees and early-payment discounts come out before you are paid, so the margin is lower than the rate card suggests.
- Burden that moved. A new state unemployment rate, a workers' comp renewal or a new paid sick leave law raises the cost of every hour on existing contracts.
- Raises without bill rate increases. A pay rate that goes up while the bill rate stays put shrinks the margin on every hour that Crew Member works.
- Hours you pay but cannot bill. Orientation, training, disputed hours you write off and rate errors on timesheets all cost margin without appearing as a line anywhere.
How should an agency track gross margin?
By client and by position, every week, in dollars per hour as well as percent. A blended monthly margin hides the one client or role that is losing money. And percent alone misleads: a $50.00 nurse at a 30% markup and 15% burden earns $7.50 an hour at 11.5%, more dollars than the $5.00 warehouse hour at 17.2%.
Bottom line: price with markup, judge with gross margin, and look at it per client and per position before the month closes.
How NextCrew handles gross margin
NextCrew keeps pay rate, markup and bill rate together from the order to the invoice, so the margin you priced is the margin you bill.
- Rates set per position in each client's rate configuration: pay rate, markup and bill rate, applied automatically to that client's future job orders.
- Every manual rate change on a timesheet is recorded, with who changed it, to what and when, so a pay rate that moved without its bill rate can be found.
- Invoices built from approved timesheets, applying each client's billing rules, with a snapshot of the timesheets kept at the moment of invoicing.
- Financial AI in the CrewPilot AI Command Center covers rates, invoicing and margin. It is rolling out gradually, one account at a time.
See how it fits together in invoicing software for staffing agencies.
Frequently asked questions
Related terms
- Markup: the percentage added to pay to set the bill rate, with a calculator.
- Burden rate: the employer costs on top of wages that come out before margin.
- Bill rate: what the client pays per hour.
- Workers' comp class codes: the biggest reason burden, and so margin, differs by role.
- Payroll funding: where funding fees come out of the margin.