Pay Rate & Bill Rate Calculator
Analysis Results
Gross Margin
0%
Markup Percentage
0%
Gross Profit / Hour
$0.00
Bill Rate Multiplier
0.00x
Understanding Pay Rate vs. Bill Rate
In the staffing and consulting industry, the gap between what a worker is paid and what the client is charged is the engine that drives business operations. Understanding these metrics is essential for recruiters, sales managers, and business owners to ensure healthy profit margins.
Key Definitions
- Pay Rate: The hourly wage paid directly to the employee or contractor. This does not include statutory costs like payroll taxes or benefits.
- Bill Rate: The total amount the staffing agency invoices the client for one hour of the employee's work.
- Markup: The percentage added to the Pay Rate to reach the Bill Rate. It is calculated based on the cost (Pay Rate).
- Gross Margin: The percentage of the Bill Rate that remains after paying the worker's hourly wage. It is calculated based on the revenue (Bill Rate).
The Formulas
Markup % = ((Bill Rate – Pay Rate) / Pay Rate) x 100
Margin % = ((Bill Rate – Pay Rate) / Bill Rate) x 100
Gross Profit = Bill Rate – Pay Rate
Margin % = ((Bill Rate – Pay Rate) / Bill Rate) x 100
Gross Profit = Bill Rate – Pay Rate
Example Calculation
Imagine a software developer is paid $50.00 per hour (Pay Rate). The staffing agency charges the client $80.00 per hour (Bill Rate).
| Metric | Value |
|---|---|
| Gross Profit | $30.00/hour |
| Markup Percentage | 60% ($30 / $50) |
| Gross Margin | 37.5% ($30 / $80) |
Markup vs. Margin: Don't Confuse Them
Many people use "markup" and "margin" interchangeably, but they are very different numbers. Markup is always higher than margin. For example, a 50% markup results in a 33.3% margin. If your business goal is a 50% profit margin, you actually need a 100% markup (charging double the pay rate).