In practice
It is calculated as (bill rate − cost) ÷ bill rate. Because it is based on the bill rate, it is always lower than the markup for the same deal.
Firms track gross margin per placement and across the book of business.
How it shows up
A $85 bill rate, a $60 pay rate and 15% employer cost give a cost of $69 and a margin of about 18.8%.
How a staffing team uses it
Use the W2 burden calculator to find your loaded cost and the markup and margin calculator to test target margins.
Common mistakes
- Ignoring employer costs on W2 consultants.
- Comparing a margin target with a markup number.
- Using last year’s burden rate.
Frequently asked questions
What is a good gross margin?
It depends on your clients, your volume and your cost structure. Calculate your own cost and the rate cap each client allows.