Margin vs Markup: What's the Difference?

Margin and markup both describe the gap between what a recruitment agency charges a client for a temp's hour and what that hour costs the agency. They measure the same pounds-and-pence gap against different numbers, so they give different percentages. The free temp charge-rate calculator works out both from the same inputs.

• Markup is the gap as a percentage of the cost (the pay rate, or the pay rate plus on-costs).
• Margin is the gap as a percentage of the charge rate, the price billed to the client.

A worked example: a temp costs £50 an hour and the agency adds £10, so the charge rate is £60. The markup is £10 ÷ £50 = 20%. The margin is £10 ÷ £60 = 16.7%. Same £10, two different percentages. The two convert directly: margin = markup ÷ (1 + markup), and markup = margin ÷ (1 − margin). A 25% markup is a 20% margin; a 25% margin needs a 33.3% markup.

The confusion costs money. An agency that means to earn a 20% margin but applies a 20% markup to its costs ends up with a 16.7% margin. And the "cost" matters as much as the percentage: a markup applied to the bare pay rate, rather than to pay plus holiday pay, employer's National Insurance, pension contributions and the apprenticeship levy where it applies, can leave little or nothing after on-costs. Agreeing terms with a client should make clear which measure is being quoted and what it is calculated on.

There is no statutory definition of margin or markup. They are standard accounting and business terms, not terms defined in employment or tax law, so no gov.uk or legislation.gov.uk source applies here. The on-costs that sit inside the cost figure do have sources, and the calculator cites gov.uk for each one.