Understanding Margin and Markup

This topic discusses:

  • Margin statuses.

  • How margin and markup are calculated.

  • Determining related costs for margin markup calculations.

The following lists the available statuses for margins. These statuses are listed for temporary orders on the Order - Billing page and the Assignment page.

Term

Definition

Acceptable Margin Achieved icon (Green = acceptable)

Acceptable margin achieved. The calculated margin is above the cautionary margin established for the specified job code. If you meet margin requirements, a green circle appears next to the field.

Margin Below Normal Levels icon (Yellow = caution)

Margin below normal levels. The calculated margin is above the critical margin, but falls at or below the cautionary margin established for the specified job code. A yellow triangle appears next to the field to indicate that the ratio is not within margin requirements.

Unacceptable Margin icon (Red = critical)

Unacceptable margin. If the calculated margin falls at or below the critical margin established for the specified job code, a red square appears next to this field.

Note: Margin and markup functionality are applicable to temporary orders only.

When bill and pay rates are entered on the order, the margin and markup calculations are dependent upon your prior margin configuration. This topic discusses calculations for margin and markup.

Calculating Margin

The margin calculation on the Order - Billing page subtracts costs from the bill rate and then divides by the bill rate. The costs include the pay rate, overhead costs (fixed cost margin), and workers compensation premiums.

Margin = ((Bill Rate - Cost) / Bill Rate) * 100

Calculating Markup

The markup calculation on the Order - Billing page subtracts the pay rate from the bill rate and then divides by the pay rate.

Markup = ((Bill Rate - Pay Rate) / Pay Rate) * 100

This topic discusses how to determine margin and markup calculations for:

  • Fixed cost.

  • Workers' compensation cost.

  • Cost.

Determining Fixed Cost

The fixed cost depends on the fixed cost margin and pay rate. Fixed cost is the additional cost (overhead) that is incurred for every hour of employee pay, excluding workers' compensation.

Fixed cost = Pay Rate * (Fixed Cost Margin / 100)

Determining Workers' Compensation Cost

The workers' compensation cost is calculated based on the rate type selected on the Workers' Comp Rates page.

If the workers' compensation rate type = percentage, then

Workers Compensation cost = Pay Rate * (Base Rate / 100) * Modifier

If the workers' compensation rate type = per hour, then

Workers Compensation cost = 1 hour * (Base Rate)

Determining Cost

You must calculate the cost prior to determining the markup or margin. 

Cost = Pay Rate + Fixed Cost + Workers Compensation Cost