Staffing guide
Markup vs. Margin in Staffing: What's the Difference? (With a Practical Example)
Markup and margin both describe the gap between what you pay a consultant and what you bill the client, but they measure it against different numbers. Mixing them up leads to underpriced deals.
Definitions and formulas
Gross spread = Bill rate − Pay rate
Markup is the spread as a percentage of the pay rate: (Bill − Pay) ÷ Pay × 100.
Margin is the spread as a percentage of the bill rate: (Bill − Pay) ÷ Bill × 100.
A practical example
A consultant is paid $40/hour and the client is billed $60/hour.
- Gross spread: $60 − $40 = $20/hour
- Markup: $20 ÷ $40 = 50.00%
- Margin: $20 ÷ $60 = 33.33%
Same dollars, two very different percentages. A "50%" deal is a 33.33% margin.
Run your own numbers
Enter a pay rate and markup, or a bill rate, and see spread, markup and margin instantly. Free, nothing is saved.
Try the Wage CalculatorComparison table
| Pay rate | Bill rate | Gross spread | Markup | Margin |
|---|---|---|---|---|
| $40.00 | $50.00 | $10.00 | 25.00% | 20.00% |
| $40.00 | $54.00 | $14.00 | 35.00% | 25.93% |
| $40.00 | $60.00 | $20.00 | 50.00% | 33.33% |
| $40.00 | $64.00 | $24.00 | 60.00% | 37.50% |
Gross spread is not net profit
The spread has to cover the cost of employing the consultant before any profit is left. Depending on the arrangement, that can include employer payroll taxes (Social Security, Medicare, federal and state unemployment), workers' compensation, benefits, vendor management system (VMS) fees, payment terms and your own overhead. A healthy looking markup can shrink quickly once these are included.
Conclusion
Quote markup to your team if you like, but price deals on margin and on true burdened cost. Always state which number you mean.
Run your own numbers
Enter a pay rate and markup, or a bill rate, and see spread, markup and margin instantly. Free, nothing is saved.
Try the Wage CalculatorDisclaimer: This guide is general educational information, not tax, legal or accounting advice. Rates, taxes and insurance costs vary by state, classification and contract. Confirm figures with your accountant, insurer or payroll provider.