Markup

Written by the NextCrew team

Staffing markup calculator

Enter a pay rate and either a markup or a bill rate; the other one updates. Add your burden and any program fee to see what the agency keeps per hour.

Estimates only. Burden depends on your state, workers' comp class codes and tax rates. Not tax or accounting advice.

How do you calculate markup in staffing?

Markup = (bill rate − pay rate) ÷ pay rate. A Crew Member paid $20.00 an hour and billed at $29.00 carries a $9.00 spread, and $9.00 ÷ $20.00 is a 45% markup. Run it the other way to set a price: bill rate = pay rate × (1 + markup), so $20.00 × 1.45 = $29.00. For the full pricing chain, see how a bill rate is built.

The table shows what common markups produce on a $20.00 pay rate, and what is left once an assumed 20% burden ($4.00 an hour) is paid.

Example only: $20.00 pay rate, burden assumed at 20% of pay. Your burden depends on the state, the workers' comp class code and your unemployment tax rates.

What is the difference between markup and margin?

Markup is the spread as a share of the pay rate; margin is the same spread as a share of the bill rate. Because the bill rate is always larger than the pay rate, the margin percentage is always smaller. A 50% markup is a 33.3% margin, and it takes a 100% markup to reach a 50% margin.

Two formulas convert one into the other:

• Margin = markup ÷ (1 + markup). A 45% markup is 0.45 ÷ 1.45 = 31.0%.
• Markup = margin ÷ (1 − margin). To keep 30% of the bill rate before burden, you need 0.30 ÷ 0.70 = a 42.9% markup.

One more distinction matters. In staffing, "gross margin" usually means what is left after pay and burden, not just after pay. In the example above the spread is 31% of the bill rate, but the gross margin after burden is $5.00, or 17%. Say which one you mean when you quote a number to a partner, a lender or a buyer.

What does the markup have to pay for?

The markup is not profit. It is the only money the agency has to cover every cost of the hour except the wage itself. In rough order, it pays for:

1. 1
   Burden

   The employer's 7.65% share of Social Security and Medicare under FICA (per the IRS), federal and state unemployment taxes, workers' compensation insurance and any benefits. This is the break-even line: a markup equal to your burden earns nothing.

2. 2
   Fees that come off the bill rate

   A VMS program fee is deducted before you are paid. On a $29.00 bill rate, an illustrative 3% fee is $0.87, which turns a 45% markup into an effective 40.7%. See how VMS and MSP fees affect margin.

3. 3
   Overhead

   Recruiters, coordinators, software, office costs and the cost of carrying payroll until the client pays the invoice.

4. 4
   Profit

   Whatever remains after the first three. On a thin markup this line is often zero, and nobody notices until month end.

Where agencies get markup wrong

Most markup mistakes come from treating one percentage as if it were another.

• Setting a margin target as a markup. An owner who wants 30% and types 30% into the markup field gets 23.1% of the bill rate, before burden.
• One markup across every role. A warehouse position and an office position carry very different workers' comp costs, so the same markup leaves very different money behind.
• Billing overtime at straight time. In the example, an overtime hour pays $30.00 plus $6.00 of burden. Billed at $29.00 it loses $7.00; billed at 1.5 times, $43.50, it keeps the 45% markup and earns $7.50.
• Discounting for volume without re-checking burden. Taking five points off the markup to win a large account takes five points off a number that was already paying for burden first.
• Letting pay rates move while bill rates stay put. A raise for a Crew Member with no matching bill rate change quietly shrinks the markup on every hour they work.

How NextCrew handles markup

NextCrew does not choose your markup. It keeps the pay rate and bill rate you set together on the job, so the spread you priced is the spread you invoice.

• Default pay and bill rates by position, with a job-level override for one Crew Member without changing anyone else's rates.
• Overtime, holiday and other pay codes carry their own bill rates and billing rules, so an overtime hour is not billed at the regular rate by accident.
• Every manual rate change is recorded on the timesheet: who changed it, to what, and when, so a pay rate that moved without its bill rate can be found.

NextCrew calculates using the rates and rules your agency configures. See how rates flow to the client in invoicing software for staffing agencies.

Frequently asked questions

Related terms

• Bill rate: what the client pays per hour, built from pay rate and markup.
• Pay rate: what the Crew Member earns per hour, and the base the markup is measured against.
• Burden rate: the employer costs on top of wages, and the floor under any markup.
• Gross margin: what is left of the bill rate after pay and burden.
• Shift differential: premium pay that should carry your markup too.
• Payrolling: a service usually priced at a lower markup.
• Double time pay: why double-time hours need their own bill rate.