Markup versus margin in staffing
Markup is the percentage added to the pay rate to reach the bill rate. Margin is the share of the bill rate that is not pay. A 50% markup is a 33% margin; a 100% markup is a 50% margin. Clients and competitors tend to talk in markup ("we charge 45 over pay"), while your accountant and your bank talk in margin. Mixing them up is expensive: quoting a "35% margin" when you meant a 35% markup leaves about 9 points of profit on the table. The comparison table under the calculator shows the pair for common markups at your pay rate.
Why burden belongs in the calculation
The pay rate is not what a worker costs you. On top of it come the employer share of Social Security and Medicare, federal and state unemployment insurance, workers' compensation premiums (which vary enormously by job class: a few percent for office roles, far more for light industrial), paid sick leave where required, benefits, and payroll processing. Together these are the burden, expressed as a percentage of pay. If your burden is 18%, an 18% markup is break-even: every hour billed exactly covers the loaded cost with nothing left for recruiting, sales, office and profit.
The true margin in the results is the margin after burden, before your overhead. It is the number to compare against your overhead per billed hour to know whether a placement makes money. The calculator also shows the break-even markup, which is simply the burden percentage, so you can see how much of a quoted markup is spoken for before it starts.
Typical ranges and when to deviate
- Light industrial and clerical: markups often 35% to 60%, with high-volume accounts at the low end.
- Skilled trades, healthcare and IT contract: 50% to 80% or more, reflecting harder recruiting and higher burden.
- Direct hire: priced as a percentage of first-year salary rather than a markup, so this calculator does not apply.
- Volume deals: a lower markup can still be a good deal if the burden is low and the hours are reliable; check the weekly net profit rather than the percentage.
Whatever the range, quote in the units the client uses and check the margin in the units your P&L uses. The two-mode design of the calculator exists for exactly that switch.
Using the result in a proposal
Copy the summary into your rate sheet: it lists pay, bill, markup, gross margin, burden, loaded cost, true margin and the weekly figures. For a client comparison, run the same pay rate at the markups they have been quoted elsewhere and compare true margins; a competitor's lower markup may be covering a lower burden class rather than a smaller profit. If you need to convert a target margin to a markup for a whole rate card, the markup calculator and profit margin calculator handle the conversion, and the hourly rate calculator works the other way round for independent contractors setting their own rate.
Limits of the calculation
The calculator treats burden as a flat percentage of pay. In reality some burden items are capped (unemployment taxes stop above a wage base) and some are per-head rather than per-hour (benefits, onboarding), so the true cost of a long-term placement drifts down over the year while a short one carries more fixed cost per hour. Overtime, holiday pay, conversion fees and client rebates are also outside the model. Use the result to set and sanity-check rates; use your payroll reports to confirm the burden percentage every quarter.