Temp Agency Markup Calculator

What is a temp agency markup and how is it calculated?

A temp agency markup is the percentage added to a candidate's hourly pay rate to determine the client billing rate. It is calculated by dividing the agency's gross cut by the candidate's pay rate.

For example, if an agency pays a contractor $80/hr and bills the client $100/hr, the agency's gross cut (spread) is $20/hr. The markup percentage is calculated as: $$\text{Markup} = \frac{\$20.00}{\$80.00} = 25\%$$ This means the client rate is marked up by 25% over the pay rate.

What is the difference between staffing markup and gross margin?

Staffing markup is calculated relative to the candidate's pay rate, whereas gross margin is calculated relative to the client's total bill rate.

Using the same example (bill rate $100/hr, pay rate $80/hr, cut $20/hr):

• Markup: $\frac{\$20.00}{\$80.00} = 25.0\%$
• Gross Margin: $\frac{\$20.00}{\$100.00} = 20.0\%$

Agencies frequently present rates in terms of margin to corporate clients, but internal recruiting models and external candidate offers are often computed as a markup.

How does a vendor chain split apply to temp agency markups?

In many complex Corp 2 Corp (Corp-to-Corp) agreements, multiple layers of vendors are placed between the end-client and the candidate's payroll employer. Each sub-vendor or prime vendor adds their own markup (or takes a margin cut). Understanding how these cuts stack up helps recruiters and candidates calculate fair rates without excessive leakage.