This week we were asked by an agency to help them to calculate some charge rates for their contract placements. One of the main questions was whether the agency worked on a mark-up percentage or on a gross margin percentage.

The agency was unsure of the difference between the two percentages calculations so we explained that a mark-up percentage was based on the profit divided by the candidate rate whereas the gross margin percentage was based on the profit divided by the client rate. We explained that most agencies work on a gross margin percentage as the rate is higher and is a true reflection of what is shown in accounting figures. It also ensures that you are working to correct figures when you have invoices finance as the funding is based on the gross invoice value.

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