How margin is calculated

Margin is one idea: what you bill, minus what the work truly costs. The billing is easy. The true cost is the hard part, because a salary is only the start of it. This page shows exactly how StaffMargin builds every number behind the figure on your dashboard, including the parts that usually get missed: employer taxes, allocated costs, public holidays, and currency.

Everything below is computed as a monthly run-rate, in your one reporting currency. StaffMargin converts every amount into that currency first, then does the margin arithmetic.

The three margin layers

StaffMargin reports margin in three layers. Each one subtracts a deeper kind of cost.

Direct margin is what you bill minus the loaded cost of the salary.

revenue − salary employer cost = direct margin
Loaded margin takes direct margin and subtracts the costs you allocated to that person (their share of tools, subscriptions, equipment).

direct margin − allocated costs = loaded margin
Operating margin is the company bottom line. It takes the total loaded margin and subtracts overhead, the costs you did not allocate to anyone.

total loaded margin − unallocated overhead = operating margin

Direct and loaded margin exist per employee, project, and client. Operating margin is company-wide, because overhead belongs to no single person. A margin can go negative, and StaffMargin shows it in red when it does.

How cost is built

The cost side has two parts: the loaded cost of the salary, and the costs you allocate on top.

From salary to employer cost

A salary is not its cost. The employer also pays taxes and social contributions on top, and those vary by country. StaffMargin turns a salary into its full employer cost with a payroll rule, a per-country description of the employee contributions, employer contributions, and income tax.

You enter a salary at one of three layers: net, gross, or employer cost. The payroll rule lets StaffMargin move between them.

employer cost = gross + employer contributions

net = gross − employee contributions − income tax

If you enter a net or an employer-cost figure, StaffMargin works back to the gross that produces it, then forward again to the employer cost. That employer cost is the number every margin uses. See employer cost and the salary engine for the engine in detail.

If a salary has no payroll rule attached, it is a flat figure: net, gross, and employer cost are the same number, and nothing is grossed up. A mid-month start or leaving date prorates the salary for that month.

Allocated costs and overhead

Non-salary costs (a software seat, a laptop, a subscription) are recorded once, then split across the people who use them. Each cost becomes a monthly run-rate first: a recurring cost spreads its yearly occurrences across twelve months, a one-off spreads across its own dates.

How a cost splits depends on the allocation:

A fixed allocation takes a set amount off the cost.
A percentage allocation takes that percent of what is left after the fixed amounts.

Whatever you allocate to a person lowers their loaded margin. Whatever you do not allocate stays as company overhead, and only ever appears in operating margin. It is never pushed onto an individual’s margin. See costs.

How revenue is built

Revenue is what you bill a client for a person’s work on a project. Each assignment carries a rate, and how that rate becomes monthly revenue depends on its type.

Rate types

Monthly is a flat retainer. The rate is the revenue, with no day count.
Daily is rate × billable days × utilisation × engagement.
Hourly is rate × hours per day × billable days × utilisation × engagement.
Weekly is rate × (billable days ÷ 5) × utilisation × engagement.
Fixed or one-off is the total, spread evenly across the assignment’s dates.

The time-based types (hourly, daily, weekly) earn on billable days, which is where public holidays come in.

Public holidays and billable days

A billable day is a weekday a person could actually bill. StaffMargin starts from the weekdays in the month, then subtracts the public holidays that fall on a weekday, taken from the holiday calendar linked to the employee.

billable days = weekdays in the month − weekday public holidays

This matters because the two sides of the margin treat holidays differently. Time-based revenue falls in a holiday-heavy month, because there are fewer billable days to earn on. Salary cost does not change, because you pay a salary for the whole month no matter how many holidays it has. So margin genuinely compresses in a month with many holidays, and StaffMargin shows it. A monthly retainer is unaffected, since it does not depend on day count.

Utilisation and engagement

Two fractions scale time-based revenue, and only time-based revenue.

Utilisation is your assumed billable fraction of capacity, set once for the workspace. It is the haircut between hours available and hours actually billed.
Engagement is how much of a person sits on one assignment: 100 percent for full-time, 50 percent for half-time. It splits a person across several projects.

Neither touches a flat monthly retainer or a fixed fee, which are the agreed amount.

One currency, one month

Your people, clients, and partners can each be billed and paid in different currencies. Before any margin is computed, StaffMargin converts every amount into your single reporting currency using stored historical rates, so a margin you read for a past month always reads the same. See multi-currency and historical rates.

Mixed pay and billing cadences (annual salaries, hourly rates, monthly retainers, one-off fees) are all projected onto the same monthly run-rate, so they can be compared and added. Annual figures divide by twelve. Sub-month rates multiply up through the billable days.

A worked example

Take the employee from the quickstart: Ana, billed at a monthly rate of €6,000, on a €2,500 salary with no payroll rule, plus a €1,200 tool allocated fully to her.

Revenue is the monthly rate: €6,000.
Salary employer cost is the flat figure (no payroll rule): €2,500.
Direct margin: 6,000 − 2,500 = €3,500 (58.3 percent of revenue).
Allocated cost: the full €1,200.
Loaded margin: 3,500 − 1,200 = €2,300 (38.3 percent).
No cost was left unallocated, so overhead is €0, and operating margin equals the loaded margin: €2,300.

Add a payroll rule to that salary and the employer cost rises above €2,500, so every margin below it drops. Give Ana a holiday-heavy month on a daily rate and her revenue falls while the salary holds, so the margin tightens. The number reflects what actually happened.

FAQ

Is salary cost the gross salary or the full employer cost?

The full employer cost: gross plus the employer taxes and contributions for the country, set by the salary's payroll rule. Direct margin subtracts this, not the gross.

What happens if I enter a net salary?

StaffMargin works back through the payroll rule to find the gross that produces that net, then forward to the employer cost. With no payroll rule, net, gross and employer cost are the same flat figure.

Do public holidays reduce my margin?

They reduce time-based revenue (hourly, daily, weekly), because there are fewer billable days in the month. The salary is paid in full regardless, so the margin compresses. A monthly retainer is unaffected. See holiday calendars.

What is the difference between direct, loaded and operating margin?

Direct margin is revenue minus salary cost. Loaded margin also subtracts the costs allocated to that person. Operating margin is the company bottom line: total loaded margin minus unallocated overhead.

How are costs I did not allocate to anyone handled?

They stay as company overhead and only appear in operating margin, never on an individual's margin. Allocate a cost to people and it moves onto their loaded margin instead. See costs.

Does utilisation apply to a monthly retainer?

No. Utilisation and engagement scale time-based revenue only. A flat monthly retainer or a fixed fee is taken at the agreed amount.