Glossary · Commercials
What is Markup
Also called: mark-up, markup percentage.
Definition
The percentage added to a contractor's pay rate to reach the bill rate. Clients negotiate in markup; funders and investors think in margin.
Applies to: US and UK · Reviewed by James Doyle
In practice
Markup is calculated on the pay rate: a $30.00 pay rate billed at $45.00 is a 50% markup. The same deal is a 25% gross margin, because margin is calculated on the bill rate. Neither number is wrong — they answer different questions.
Procurement teams cap markup in master service agreements, often at 35% to 45% for professional contract roles. If your burden is high, a capped markup can quietly push your real margin below the level your funding line assumes.
Worked example
$30.00 pay × 1.50 = $45.00 bill → 50% markup, 25% gross margin.
Related terms
Gross margin
The share of the bill rate left after paying the contractor and their employment burden. It is the money the agency actually runs on.
ReadBill rate
The hourly rate an agency charges its client for a contractor. It has to cover the pay rate, employment burden, funding cost and the agency's margin.
ReadPay rate
The hourly rate paid to the contractor before employer taxes and insurance. It is the input to every bill rate calculation, not the cost of employing them.
Read
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