# What is gross margin?

Source: https://launch-rec.com/glossary/gross-margin. Category: Commercials. Market: US and UK.

Also called: GM, staffing gross margin.

## Definition

The share of the bill rate left after paying the contractor and their employment burden. It is the money the agency actually runs on.

## In practice

Gross margin is measured against the bill rate, not the pay rate. Bill $45.00, pay $30.00, burden $3.75, and you keep $11.25 — a 25% gross margin. Everything else in the business comes out of that $11.25: consultant salaries, funding cost, software, office, profit.

Contract staffing typically runs 18% to 30%. Below 20% the model rarely funds its own working capital, because the cash tied up in the payroll cycle grows faster than the margin covering it. Above 30% usually means a genuinely scarce skill set rather than a better negotiator.

## Worked example

Bill $45.00 − pay $30.00 − burden $3.75 = $11.25 → 25% gross margin.

## Common mistake

Quoting margin to a client who is thinking in markup. A 25% margin is roughly a 50% markup — the same deal sounds twice as expensive if you pick the wrong word.

## Related terms

- https://launch-rec.com/glossary/markup
- https://launch-rec.com/glossary/bill-rate
- https://launch-rec.com/glossary/employment-burden
- https://launch-rec.com/glossary/spread