Bill Rate = Pay Rate × (1 + Markup Percentage)
Or written another way:
Bill Rate = (Fully Burdened Labor Cost / Billable Hours) × Markup
Bill rate errors cost firms up to 15% in lost profit. This free bill rate calculator helps you set rates that cover costs and hit profit goals. You’ll learn how to calculate bill rates, check them against industry norms, and track them over time.
We’ve also built a free Excel and Google Sheets template you can download and use right away.
Stop guessing on pricing and start using data.
Bill Rate Formula Explained
Bill Rate = Pay Rate × (1 + Markup Percentage)
Or written another way:
Bill Rate = (Fully Burdened Labor Cost / Billable Hours) × Markup
Let’s break down each part:
Pay Rate: The hourly wage you pay the worker or contractor. This is base pay only, not total cost.
Markup Percentage: The extra amount you add to cover burden costs and profit. For staffing firms, this runs from 20% to 75% based on the role and market. For consulting firms, markup often hits 1.5x to 3x the pay rate.
Fully Burdened Labor Cost: This includes pay rate plus all the extras like payroll taxes (around 12%), workers comp, health benefits, and unemployment insurance. These costs add 25% to 40% on top of base pay.
Billable Hours: The hours you can actually bill to clients. In consulting, this is often just 50% to 70% of total work hours. The rest goes to admin, sales, and other non-bill tasks.
We use markup instead of margin because it’s simpler to calculate and apply. But some firms track gross margin instead, which is (Bill Rate – Pay Rate) / Bill Rate.
What Is a Bill Rate?
A bill rate is the hourly amount you charge a client for a worker’s time. It must cover the worker’s pay, all burden costs, overhead, and your profit margin.
Bill rates differ from pay rates in one key way: the bill rate is what the client pays you, while the pay rate is what you pay the worker. The gap between them covers your business costs and profit.
Who uses this metric?
Staffing Agency Owners set bill rates to price temporary and contract roles while keeping margins healthy across all placements.
Fractional CFOs review bill rates for consulting clients to check that pricing covers full costs and hits profit targets.
Professional Services Firms track bill rates by practice area, seniority level, and project type to keep utilization and margins on track.
HR and Finance Teams use bill rates to budget for contingent labor and compare vendor pricing when hiring contractors.
Construction Project Managers calculate bill rates for trades and subs to price bids and track job profitability.
How to Calculate Bill Rate: Step-by-Step
Let’s walk through a real example with a technical staffing placement.
- Determine the pay rate
Start with what you’ll pay the contractor per hour. For this example: $50 per hour base pay.
- Calculate burden costs
Add payroll taxes (about 12%), workers comp (varies by state and job type, often 2% to 8%), and any benefits. For our example, total burden is 20% of pay rate.
Burden cost = $50 × 0.20 = $10 per hour
- Find fully burdened cost
Add pay rate and burden together:
$50 + $10 = $60 per hour fully burdened cost
- Choose your markup percentage
Based on industry norms for technical staffing, we’ll use a 50% markup. This covers overhead and profit.
- Calculate bill rate using markup
Multiply fully burdened cost by (1 + markup percentage):
$60 × 1.50 = $90 per hour bill rate
Or using the simpler formula: $50 pay rate × 1.80 total multiplier = $90 per hour
- Verify gross margin
Check your gross margin to confirm it hits your target:
Gross margin = ($90 – $60) / $90 = 33.3%
- Interpret the result
A $90 bill rate with $50 pay rate gives you $40 per hour to cover burden ($10), overhead, and profit ($30). With a 33% gross margin, you have room for operating costs and should hit about 8% to 12% net profit if overhead is managed well.
How to Interpret Your Bill Rate Number
Bill rates don’t mean much on their own. What matters is the markup percentage and gross margin you achieve. Here’s how to read your numbers:
| Markup Range | Gross Margin | Interpretation | Recommended Actions |
| Below 25% | Below 20% | Critical risk – You likely can’t cover overhead and profit. This only works in high-volume, low-touch scenarios. | • Review all burden costs<br>• Check if pay rates are too high for market<br>• Renegotiate client rates immediately<br>• Consider if placement is viable |
| 25% – 40% | 20% – 29% | Tight margins – Acceptable for high-volume staffing with low overhead, but risky for most firms. | • Monitor overhead costs closely<br>• Look for ways to reduce burden<br>• Target 35%+ on next deals<br>• Review pricing strategy |
| 40% – 65% | 29% – 39% | Healthy range – This is the sweet spot for most staffing and temp agencies. Covers costs with decent profit. | • Maintain current pricing discipline<br>• Track margins by client and role type<br>• Use as baseline for future deals<br>• Focus on volume growth |
| 65% – 100% | 39% – 50% | Strong margins – Typical for specialized consulting or hard-to-fill technical roles. | • Document what makes these roles profitable<br>• Replicate for similar placements<br>• Don’t drop rates without reason<br>• Invest in finding more similar roles |
| Above 100% | Above 50% | Premium positioning – Common in high-end consulting, expert advisory, or crisis staffing situations. | • Ensure quality matches premium pricing<br>• Build case studies to justify rates<br>• Risk of client pushback if market softens<br>• Consider if rate is sustainable |
Bill Rate Benchmarks by Industry
Bill rate norms vary a lot by industry, role type, and market conditions. Here’s what the data shows for 2024-2025:
| Industry | Typical Markup | Typical Bill Rate Range | Notes |
| IT Staffing (General) | 40% – 60% | $50 – $150/hour | Help desk and junior roles at low end, senior engineers and architects at high end |
| Healthcare Staffing | 30% – 45% | $45 – $135/hour | Travel nurse bill rates dropped from $133 in 2022 to $107 in 2023 due to market correction |
| Management Consulting | 150% – 250% | $100 – $350/hour | Big Four and global firms often charge $200+ for experienced consultants |
| Construction Trades | 25% – 40% | $40 – $120/hour | Labor often marked up 25%+, materials 7.5% to 10% |
| Professional Services (Legal) | 200% – 400% | $200 – $2,100/hour | Senior partners at top 50 firms now average $2,100/hour, a 10% jump in 2024 |
| Accounting & Finance | 60% – 100% | $75 – $450/hour | CPAs and controllers at low end, fractional CFOs and specialist advisors at high end |
| Cybersecurity Consulting | 150% – 200% | $225 – $300/hour | High demand for specialized skills drives premium rates |
| Manufacturing / Industrial | 35% – 55% | $35 – $90/hour | Production and assembly roles at low end, process engineers and quality specialists at high end |
Why benchmarks vary: Bill rates change based on supply and demand for skills. When talent is scarce, rates go up. During economic slowdowns, rates drop as competition grows.
Overhead costs differ by business model. Consulting firms with offices, full-time staff, and high touch service need higher markups than lean staffing agencies running on 1099 contractors.
Client relationships matter too. Long-term contracts with high volume often accept lower markups in exchange for steady work and fast payment terms.
Benchmark Citations
Mosaic Tech: How to Set Your Bill Rate
altLINE: How to Calculate Staffing Agency Markup and Bill Rates
Consulting Success: Consulting Fees Guide
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How to Improve Your Bill Rate
Low bill rates or thin margins don’t fix themselves. Here are five ways to boost profitability:
Increase your markup on new placements
Don’t just match competitor rates. Justify higher pricing by offering faster fill times, better candidate quality, or value-add services like onboarding support. Even a 5% markup increase adds up fast.
Reduce burden costs where possible
Shop workers comp insurance annually. Review benefit plans and consider whether you’re offering more than needed for contingent workers. Some firms cut burden costs by 3% to 5% through better vendor deals.
Improve billable utilization
For consulting firms, every hour spent on internal tasks hurts profit. Target 70% to 75% billable utilization by streamlining admin work, using templates, and reducing non-bill activities.
Focus on higher-margin specialties
Not all roles deliver the same profit. Track gross margin by job type and industry, then shift your sales focus to high-margin placements. A cybersecurity consultant at 60% margin beats three general IT placements at 30% margin.
Renegotiate rates with long-term clients
If you haven’t raised rates in 18 months, you’re losing money to wage and cost inflation. Most clients accept 3% to 5% annual increases if you present the case clearly and give advance notice.
Bill Rate vs. Pay Rate vs. Markup vs. Margin
These terms get mixed up often. Here’s how they differ and when to use each:
Bill Rate
What you charge the client per hour. This is revenue to your business. Example: $90 per hour.
Pay Rate
What the worker earns per hour. This is your direct labor cost. Example: $50 per hour.
Markup
The percentage you add to fully burdened cost to set the bill rate. It’s calculated as (Bill Rate – Fully Burdened Cost) / Fully Burdened Cost. Markup focuses on cost as the base. Example: 50% markup.
Gross Margin
The percentage of bill rate left after paying labor costs. It’s calculated as (Bill Rate – Fully Burdened Cost) / Bill Rate. Margin focuses on revenue as the base. Example: 33% gross margin.
Multiplier
The factor you apply to pay rate to reach bill rate. Example: A 1.8x multiplier means $50 pay rate becomes $90 bill rate.
When to use each
When pricing new roles, start with pay rate and desired markup. When analyzing profitability, track gross margin by client, role type, and recruiter. Both metrics matter, but they measure different things.
Pro tip for fractional CFOs: Always show clients both markup and gross margin. Many owners think a 50% markup means 50% profit, when the real gross margin is only 33%. This gap often explains why “we’re so busy but not making money.”
Price for profit
Track bill rates by client and role type. Compare to industry benchmarks. Adjust pricing to hit target margins while staying competitive.Get started with Coefficient to automate your bill rate tracking and improve profitability.
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