Calculating Margin and Markup

Appendix: Calculating Margin and Markup

This appendix presents an overview of margin and markup and discusses how to:

Set up margin indicators.
Configure margin.

Understanding Margin and Markup

This section discusses:

Margin statuses.
How margin and markup are calculated.
Determining related costs for margin markup calculations.

Margin Statuses

Margin represents the amount of money that you make for every hour that a person works. Markup is the percent difference between the bill rate and pay rate. The following table lists the available statuses for margins. These statuses apply to the rates in the temporary orders on the Assignment pages.

(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 diamond appears next to the field.
(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.
(Red = critical)	Unacceptable margin. If the calculated margin falls at or below the critical margin established for the specified job code, a red box appears next to this field.

Note. Margin and markup functionality is only applicable to temporary orders and temporary assignments.

How Margin and Markup are Calculated

When a bill and pay rate is entered on the assignment, the margin and markup calculations are dependent upon your prior margin configuration. This section discusses how you calculate margin and markup.

Calculating Margin

The margin calculation on the Assignment page subtracts costs from the bill rate and then divides by the bill rate, taking into consideration 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 Assignment page subtracts the pay rate from the bill rate and then divides by the pay rate.

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

Determining Related Cost for Margin Markup Calculations

This section discusses how to obtain the following components of the margin and markup calculations:

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. This fixed cost margin is defined as part of the staffing branch configuration.

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 cost prior to determining the markup or margin.

Cost = Pay Rate + Fixed Cost + Workers Compensation Cost

Setting Up Margin Indicators

Margin indicators identify at what percentages the system triggers caution and critical warning indicators on the Order and Assignments pages.

You configure job codes in HCM and application messaging sends the information to Financials. In Financials, you can set up the margin indicators as supplemental setup using the Job Code Definition page, which we describe in the Staffing Front Office PeopleBook.

This section discusses how to set up margin indicators.

Page Used to Establish Margin Indicators

Page Name	Object Name	Navigation	Usage
Job Code Definition	RS_CM_JOBCODE_TBL	Set Up Financials/Supply Chain, Common Definitions, Resources Data, Jobcodes	Displays the job codes originally configured in HCM that have been sent to the Financials database through application messaging. See PeopleSoft Enterprise Staffing Front Office 8.9 PeopleBook, Structuring Your PeopleSoft Staffing Front Office Processing Environment, Setting Up Job Codes
Billing Calculation	FO_JOB_BILLING	Set Up Financials/Supply Chain, Common Definitions, Resources Data, Jobcodes, Billing Calculation	Set up supplemental job code configuration to define standard pay and bill rates based on pay grades as well as caution and critical margin levels. See PeopleSoft Enterprise Staffing Front Office 8.9 PeopleBook, Structuring Your PeopleSoft Staffing Front Office Processing Environment, Entering Default Values for Pay Grades and Margin Rates

Page Name

Object Name

Navigation

Usage

Job Code Definition

RS_CM_JOBCODE_TBL

Set Up Financials/Supply Chain, Common Definitions, Resources Data, Jobcodes

Displays the job codes originally configured in HCM that have been sent to the Financials database through application messaging.

See PeopleSoft Enterprise Staffing Front Office 8.9 PeopleBook, Structuring Your PeopleSoft Staffing Front Office Processing Environment, Setting Up Job Codes

Billing Calculation

FO_JOB_BILLING

Set Up Financials/Supply Chain, Common Definitions, Resources Data, Jobcodes, Billing Calculation

Set up supplemental job code configuration to define standard pay and bill rates based on pay grades as well as caution and critical margin levels.

See PeopleSoft Enterprise Staffing Front Office 8.9 PeopleBook, Structuring Your PeopleSoft Staffing Front Office Processing Environment, Entering Default Values for Pay Grades and Margin Rates

Entering Margin Indicators

Access the Billing Calculation page.

Caution	Enter a margin percentage at which the system triggers a caution warning for an order or assignment. This indicates that the margin is below normal levels and changes the order or assignment to a Yellow status.
Critical	Enter a margin percentage at which the system triggers a critical warning for an order or assignment. This indicates that the margin is at an unacceptable level and changes the order or assignment to a Red status.

Configuring Margin

The margin calculation requires configuration prior to entering orders and assignments and calculating margins based on pay and bill rates. Your implementation team configures the values that the system uses in the margin calculation. Your organization bases these calculations on the costs associated with filling a position as well as the expected profit that is generated when you fill the order.

This section discusses how to configure margin.

Page Used to Configure Margin

Page Name	Object Name	Navigation	Usage
Staffing Branch	BUS_UNIT_TBL_FO	Set Up Financials/Supply Chain, Product Related, Staffing, General, Branch/BU Mapping	Configure the fixed cost margin to be associated with each staffing branch.

Configuring Margin

To configure margin:

Establish fixed costs by branch.

Record the fixed cost margin for the system by branch on the Staffing Branch page. The fixed cost margin is the percentage of cost that is incurred for every hour of employee pay. The figure should be entered as a number (not percent) with a maximum of two decimal places. For example, if the burden rate is 12.98 percent, enter a margin estimator of 12.98.

Some costs that should be used in the calculation of this percentage include: FICA, FUTA, SUTA, as well as other mandated payroll-related costs.
Establish workers' compensation policy and rates.

In your HCM database, select Set Up HRMS, Product Related, Staffing, Workers' Compensation.