Gross Margin

The difference between the bill rate for the temporary services and the direct costs of employment (pay rate plus burden and/or mandatory benefits. In the United States, burden will include workers’ compensation, unemployment insurance, employer’s share of FICA and state or local taxes for each temporary employee on assignment. In Europe, mandatory benefits vary per market but will generally include employment tax and social insurances. Staffing company gross margins vary per country and per staffing category depending on the perceived value-add of the service provided, which can be affected by issues as varied as unit labor cost, social acceptance, competition and idle-time management. Expressed as a percentage, this term is often incorrectly confused with markup, whereas gross margin is a percentage of the hourly bill rate before Value Added Tax, and markup is a percentage of the temporary worker’s hourly gross wage. (See also: Markup.)

Source: Staffing Industry Analysts

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