Agency Markup for UK Contractors: What’s Typical in 2026

A typical UK recruitment agency markup on limited-company and umbrella contractors is 15-20% of the contractor's rate, a 13-17% margin on the charge rate, and that's still the range quoted in 2026, even as the costs underneath it rose through 2024 and 2025. PAYE temps are different: there, a 40% "markup" leaves about £1.20 an hour before overheads. Here are the real numbers, and how to price and defend yours.

Last updated: October 2026. Published by Execue, which builds AI agents for recruitment agencies. We don't sell payroll, funding, umbrella or compliance services, so nothing in the pricing sections is pitched at you; where Execue fits is covered separately near the end. This is commercial guidance, not tax or legal advice.

Quick answer

For limited-company and umbrella contractors in professional sectors (IT, engineering, finance, change and transformation), a typical UK agency markup is 15-20% on the contractor's rate, which is a gross margin of roughly 13-17% of the charge rate. On a £500/day contractor that's £75-100 a day. Large agencies on preferred-supplier lists and MSP programmes run nearer a 7-10% margin (an 8-11% markup). Niche, hard-to-fill or short contracts can justify more, but contractors start calling it high once the agency takes a quarter of the charge rate, which is a 33% markup.

For PAYE temps, the headline number misleads. A 21+ temp on the £12.71 National Living Wage costs £16.38 an hour in wage costs, and £17.99 once sick pay and the GLAA's guideline overhead are added, all before any profit. So a 40% "markup" on pay leaves about £1.20 an hour of gross profit before overheads. Real margins on volume temps run from about 35p to £1.50 an hour above on-costs, and the UK's listed volume-staffing specialist reports a 6% gross margin.

The listed market gives the reality check. Hays' blended temp margin is 15.1%. Robert Walters' professional contract and interim book runs around 16-17% by our estimate from its 2025 results, and engineering and infrastructure contract supply to large clients is nearer 7%. A figure well above those is either a genuine niche premium or a markup being quoted as if it were a margin.

The numbers that matter

• 15-20%: typical markup on professional Ltd or umbrella contractors (a 13-17% margin on the charge rate), the range practitioners and vendors still quote in 2026

• £16.38/hour: the GLAA's April 2026 wage cost for a 21+ temp on the National Living Wage; £17.99 with sick pay and guideline overhead, before profit

• About 14.5%: how much the hourly wage cost of a full-time minimum-wage temp rose between 2024/25 and 2026/27 (our calculation)

• 35p-£1.50/hour: the margin above on-costs reported on volume industrial temps, before overhead

• 15.1%: Hays' group temp margin for the year to June 2026, down from 15.5% two years earlier

• £32-£55/day: the government's new cap on agency fees for school supply staff, from May 2026

• 6 April 2026: the date agencies became jointly and severally liable for umbrella companies' unpaid PAYE

• £2.88/day: what's left of a 15% markup when a £500/day inside-IR35 contractor is priced like an outside one and the agency pays employer NIC as fee-payer (38p if it also pays the Apprenticeship Levy)

• About £24,000: the cash one £500/day contractor ties up when the client pays on 60-day terms

How to read this guide

• If you're a contractor → What your agency takes, and how to ask, then what contractors consider fair

• If you run a contract desk → Benchmarks by sector, Same 15%, four different businesses and Supplying through a master vendor

• If you supply PAYE temps → Where a 45% markup leaves 51p and Overtime, premia and expenses

• If you're a perm agency thinking about contract → Starting a contract desk: the cash and the numbers

• If you're a client or buyer → Markup vs margin and what public buyers publish

• For anyone pricing or defending a rate → What changed 2024-2026, What eats the margin, How to set your markup and How to defend it

• Where Execue fits → More contractors billing, not a different markup

Scope note: this is written mainly for UK recruitment and staffing agency owners, with a section for contractors and notes for clients. Rates and thresholds are for the 2026/27 tax year unless stated. All charge rates are before VAT.

Markup vs margin: why "15%" is two different numbers

Half the arguments about agency fees come from two words used as if they meant the same thing.

Markup is the agency's spread as a percentage of what the contractor is paid: (charge rate minus pay rate) divided by pay rate. Margin is the same spread as a percentage of what the client is charged: (charge rate minus pay rate) divided by charge rate. For the same deal, the margin percentage is always smaller than the markup percentage.

The gap is real money. In Sonovate's worked example on a £325/day contractor, a 20% margin leaves £81.25 a day and a 20% markup leaves £65: same "20%", about £3,500 apart over a year of billing.

Even the base moves: Government Commercial Agency guidance for public buyers calculates markup on pay plus statutory costs. If your terms say "15%" without saying which number and on what base, the other party will read it whichever way suits them.

There's a third number that matters more than either: real gross profit after the employment costs the agency itself carries. For a limited-company contractor outside IR35, the markup is the gross profit, because the agency simply pays an invoice. For a PAYE temp, or a contractor inside IR35 where the agency is the fee-payer, a large slice of the spread goes to HMRC and the pension provider first. That's why published benchmarks look contradictory until you know which kind of worker each one describes.

The rule worth adopting: every rate card, quote and set of terms should say markup or margin, on what base, and should show the fee in pounds as well as percent.

Typical markups by sector and engagement type

There's no official UK survey of agency markups. REC and APSCo don't publish one, and the figures that circulate come from four kinds of source with very different reliability: listed recruiters' results, public-sector frameworks, practitioners, and software vendors. This table keeps them apart.

Three patterns run through the table.

The bigger and more procured the client, the thinner the margin. Hays attributed its slipping temp margin in 2024 and 2025 to faster growth in its enterprise business, where MSP programmes generate about 85% of fees. Gattaca's contract book, heavy on large infrastructure clients, runs at roughly half the margin of Robert Walters' specialist contract and interim business. On an MSP programme you often don't set the markup at all: the programme's rate card does, usually capped by job family and engagement type, with your pay rates submitted through the client's vendor management system.

The higher the rate, the lower the percentage. Fixed pound margins are common at senior levels, and a fixed £75 a day is an 18.75% markup on a £400 contractor but 9.4% on an £800 one.

Headline "temp markups" usually include on-costs. A vendor's 20-30% for industrial temps measures the whole gap between pay and charge rate, most of which is employer NIC, holiday pay and pension. The PAYE section shows the arithmetic.

Day rates have been flat: an IT job board's July 2026 review put the median IT consultant at about £480 a day, "softened slightly" year on year (indicative; it doesn't name its data), and the October 2026 KPMG and REC Report on Jobs found temp billings rising at the slowest pace in five months. With no rate inflation to hide a percentage fee inside, margins get more scrutiny.

What public buyers publish

The most precise margin data in the UK now comes from public buyers, and their language is reaching private procurement.

The press has done its own sums: a Daily Mail audit of ten supply agencies (reported by Staffing Industry Analysts, February 2025) estimated they keep around 28% of what schools pay before their own costs, and in 2024 the BBC reported an NHS trust charged almost £2,000 for a 12-hour nursing shift that paid the nurse about £1,050. The direction is clear: buyers want pay, statutory costs and fee as separate lines, and agencies that itemise first have the easier conversation.

If you're a contractor: what your agency takes, and how to ask

The short answer: on a professional contract outside IR35, most contractors receive 80-90% of what the client pays, because agency margins usually run at 10-20% of the charge rate. The agency doesn't deduct its fee from your rate; it adds it on top, so what the client pays is your rate plus the agency's fee.

Two situations do reduce what reaches you. Through an umbrella, the employer's NIC, the Apprenticeship Levy and the umbrella's own fee (usually £15-£25 a week) come out of the assignment rate before your gross pay is calculated, roughly £68 a day on a £500 rate. And inside IR35, agencies often offer a lower rate than for the same role outside IR35, because they have to fund employer NIC on top of what they pay you (the arithmetic is below).

Working out the margin. If you know both numbers, margin is (charge rate minus your rate) divided by the charge rate. Usually you don't know the charge rate. Contractors tend to find out by accident: a project budget, a client rate card, a rival agency advertising the same role higher, or a conversation with the client's staff. Public frameworks are the exception, because they publish the fee.

Do they have to tell you? In most cases, no. There's no general legal duty to disclose the agency's margin. The Key Information Document you receive covers your pay rate and deductions, not the agency's fee. You can still ask, and agencies that offer a fixed, disclosed margin tend to say so.

Can you ask the client? You can, but experienced contractors mostly advise against it: it rarely raises your rate and can sour the relationship with both sides. Check your contract before thinking about going direct. Limited-company contractors can opt out of the Conduct Regulations before being introduced to a client, and whether you did affects which protections apply if you later work for the client directly or through another agency. Restrictive clauses in your contract matter too, so take advice before acting.

Negotiating. The tactics contractors recommend to each other:

• Ask for a fixed margin before you sign, in writing.

• Treat the first extension as the moment to ask for a rise. The agency's sourcing work is done and replacing you costs them, so a credible alternative carries weight.

• Know the market rate for your skills, and don't anchor on advertised rates, which often aren't real.

• Remember that margin and your rate are separate conversations: a lower margin doesn't automatically become a higher rate unless you agree it does.

The GCA's illustrative temp example shows what's at stake: on a worker earning about £100 a day, negotiating the fee from 38% to 15% put about £15 a day more into their pay, while the client's charge also fell by £10.

What contractors consider fair

The consensus on forums such as ContractorUK has been stable for a decade. Roughly 12-20% of the charge rate is treated as normal for a general IT or professional contract. Large agencies with many contractors on one site are expected to run nearer 7-10%. A quarter of the charge rate and above is "high", and 30-50% figures are cited as the outliers that make contractors feel fleeced. The founder of an IT recruitment agency, asked by ContractorUK what a reasonable margin is, gave a similar range: usually 10-20%, with 4% as unusually low and 50% as the "rip-off" end.

The anger is rarely about the percentage alone. In 2022, a contractor on £550 a day worked out after almost five years at one client that the client paid £750: a 27% margin, roughly £40,000 a year, where he'd assumed about £50 a day. In a 2016 thread, a contractor described an agency boss asking him to hide that he was paid less than the rate agreed with the client; he told the client, and the agency lost its PSL place (a second-hand account).

Three lessons for agency owners follow. Opacity costs more than margin: the stories that end in PSL removals involve broken promises and hidden spreads, not a fair-sounding fee. Long tenure changes the maths in the contractor's head: a 20% margin in month one feels like a finder's fee; the same margin in year four feels like rent. And the contractor's rate is your retention problem, so a margin step-down at the second or third extension is often cheaper than a replacement.

Same 15%, four different businesses: markup by engagement model

Take one contractor paid £500 a day and charged to the client at £575, a 15% markup. Depending on how they're engaged, the agency's real gross profit runs from £75 a day to almost nothing. The figures use 2026/27 rates: employer NIC of 15% above £96.15 a week, the 0.5% Apprenticeship Levy (paid only by employers with a paybill over £3 million), a five-day week, and weekly pay.

The umbrella row is why contractors say employer costs "come out of my rate": the umbrella, as the legal employer, deducts them before calculating the worker's gross pay, and the agency's books carry none of it. The new cost for agencies is risk, covered in the 2024-2026 changes.

Inside IR35: price it before you agree the rate

A medium or large client must issue a Status Determination Statement for each engagement, and each business in the chain must pass it down. If the role is inside IR35 and you're the agency paying the contractor's limited company, you become the fee-payer: you deduct income tax and employee NIC from the payment and pay employer NIC (and the levy, if you're a levy payer) on top. If you fail to pass the determination on, the liability can land on you instead. Employer NIC is the employer's own cost and can't be deducted from the contractor's agreed payment. So a 15% markup that was pure profit outside IR35 becomes £2.88 a day inside it, or 38p for a levy payer.

There are three honest ways to handle it, and all of them have to happen before the rate is agreed:

1. Raise the charge rate. Keeping £75 a day of profit on the same £500 payment needs a charge of about £647-£650, a 30% markup on pay. Clients who've budgeted on outside-IR35 rates often won't wear it.

2. Agree a lower inside-IR35 rate up front. To keep £75 at the original £575 charge, the deemed payment has to be about £435-£437 a day, roughly 13% below the outside rate. This is the "inside rate" contractors see on job adverts; it's lawful as a negotiated rate, but not as a deduction from a rate already agreed.

3. Route the contractor through an umbrella, where the employer costs come out of the assignment rate on the umbrella's side. Many agencies require it for inside-IR35 roles as standard. Contractors understand exactly what this means for their take-home, so it's a negotiation, not a trick.

Two smaller points. The Employment Allowance can't be claimed against off-payroll workers, so it won't soften this. And the off-payroll "small company" test now uses raised limits (two of: turnover up to £15 million, balance sheet up to £7.5 million, 50 or fewer employees) for financial years from 6 April 2025; because the test looks back a year, most clients feel it from 2026/27 or 2027/28. Clients that drop into "small" leave the IR35 decision to the contractor's own company, and the fee-payer cost leaves your chain.

PAYE temps: where a 45% markup leaves 51p after overhead

For agency-employed temps, the Gangmasters and Labour Abuse Authority publishes the clearest public breakdown of what a temp costs before any profit. Its charge-rate guidance effective 1 April 2026, for a worker aged 21 or over on the National Living Wage, per normal working hour:

The GLAA is explicit that these figures contain no profit, and it warns that charge rates below them plus a sustainable margin may indicate illegal activity unless there's a demonstrable explanation. The statutory costs alone add 29% to the pay rate before the agency earns anything.

Now put typical charge rates against that cost (wage cost plus the sick-pay allowance, £16.58):

That's how a "45% markup" becomes £1.92 of gross profit and 51p after overhead, and why one long-time industrial staffing practitioner calls anything over £1.50 an hour on food-industry temps unrealistic today. Staffline's first-half 2026 numbers sit in that range: about £1.21 of gross profit per temp hour on an average charge of roughly £21, a 5.7% margin on temp work alone by our arithmetic (the 6.0% headline includes a small amount of permanent fees).

The same logic holds for skilled temps. On a £16-an-hour driver or administrator, on-costs come to about £5.00 an hour (our calculation on the GLAA's method, on a 40-hour week). A £23.50 charge rate is a 47% markup on pay and £2.50 of gross profit before overhead, a 10.6% margin.

Where your real cost can sit below the GLAA table. Workers under 21 carry no employer NIC on earnings up to £967 a week (the GLAA puts the 18-20 wage cost at £12.22 on £10.85 pay). Auto-enrolment applies automatically only to workers aged 22 or over earning above the £10,000 trigger, tested each pay period (about £192 a week for weekly-paid temps), and can be postponed for up to three months. And for eligible employers, the £10,500 Employment Allowance covers employer NIC on about £70,000 a year of earnings above workers' thresholds. These help with specific workers or a limited slice of payroll; they're not a reason to price below the GLAA line across the board.

The lesson: never quote PAYE temps as a markup on pay. Quote gross profit per hour above fully loaded cost, and let the client see the cost lines if they want to.

Overtime, premia and expenses

Overtime is where flat charge rates quietly lose money. The GLAA's April 2026 guidance costs an hour of time-and-a-half for a 21+ minimum-wage temp (£19.07 pay) at £25.33 in wage costs, because employer NIC applies at 15% to the whole overtime amount once the weekly threshold has been used by normal hours.

The same applies to nights, weekends, bank holidays and call-outs: if the pay multiplier isn't matched on the charge side, the premium comes out of your profit, so write premium charge rates into client terms, not just premium pay into the worker's. Two related protections: a minimum charge per booking stops short shifts eating the margin, and expenses (usually recharged at cost; some client and MSP terms ban any markup on them) should be agreed in writing before the first timesheet.

Supplying through a master vendor

On many large accounts you won't contract with the client at all. A master vendor, often a large staffing firm, holds the client contract and passes roles down to second-tier suppliers. Three things change for you.

Your spread is net of theirs. As an illustration: the client pays the master vendor £575 a day; if the master vendor keeps 3% of the charge (£17.25), it passes £557.75 down to you; you pay the contractor £500 and keep £57.75. That's a 10% margin on the client's charge rate, not 13%. The master vendor's share varies by contract, so get it in writing (the 3% here is only an example).

The risk flows down. Under the April 2026 umbrella rules, HMRC's route is the agency that contracts with the end client, which is the master vendor. HMRC can't pursue you directly for it, but master-vendor contracts can require you to indemnify the master vendor for umbrella PAYE failures in your part of the chain, and to pass Status Determination Statements down correctly. Read those clauses before you price.

Cash takes longer. Tier-two terms are often "pay when paid", so your funding gap is the client's terms plus the master vendor's processing time. Set a higher floor for second-tier work than for direct clients.

What changed in 2024-2026, and what it does to your margin

2024/25 vs 2025/26 vs 2026/27 at a glance

No survey tracks agency markups year by year, but the range practitioners and vendors quote didn't move. The cost underneath a minimum-wage temp rose about 14.5% in two years, and the large agencies' margins edged down each year. Here's the full list of changes that matter for pricing.

The umbrella change alters what a markup has to cover. Under HMRC's guidance, where an agency contracts with the end client, the agency or end client is responsible for making sure PAYE is operated correctly, and HMRC can recover any underpayment from them, even if you did nothing wrong. Advice from law firms and trade bodies has converged on the same steps: a short, vetted umbrella list (accreditation from FCSA, Professional Passport or SEC Group is a common entry test), regular checks that PAYE is actually paid, and contract terms that let you audit it.

The employer NIC rise is the change most likely to be sitting unpriced in older contracts. APSCo advised agencies to check for a legislative-change clause that passes statutory cost increases to the client, and to open talks early where there wasn't one. If you absorbed it in 2025, your PAYE margins are still carrying it.

What eats the margin after you bill

Gross profit isn't profit. Four costs take a predictable share of it.

Funding the gap. Temps and contractors are paid weekly or monthly; clients pay in 30, 60, sometimes 90 days. Most agencies with a meaningful contract book fund that gap with invoice finance. One UK broker's 2026 guide gives typical terms: a service fee of 0.2-1% of turnover plus a discount charge on the money drawn (6.5% a year in its example), with about 85% of each invoice advanced. On £1 million of contract turnover with clients paying in 60 days, that's roughly £9,000 of discount charges plus £2,000-£10,000 of service fees, or 1.1-1.9% of turnover. At a 15% gross margin, funding eats 7-13% of your gross profit; at a 6% volume margin, 18-32%. Every extra 30 days of client payment terms adds roughly another half a percent of turnover. Payment terms are price.

MSP fees, rebates and discounts. MSP management fees paid by clients are commonly 1-3% of spend. Where a programme is supplier-funded, the MSP's fee is taken from your margin instead; at 1-3 points of a 15% margin, that would be 7-20% of your gross profit. PSL agreements add their own giveaways, such as volume rebates and early-payment discounts, which are margin handed back.

Commission. Contract consultants are typically paid 10-20% of the contract gross profit they generate, accruing as timesheets are approved and usually paid monthly or quarterly, sometimes above a threshold. In a 2026 worked example from Commit, a commission software provider, a £400/£300 contractor leaves £65 a day after about £35 of employment costs, about £14,300 a year, of which a 15% commission is about £2,145.

Compliance and risk. Umbrella due diligence, right-to-work and vetting, holiday records, insurance, and the occasional bad debt. No reliable public figures exist for these as a share of margin, which is exactly why they get left out of pricing. If your charge rate has no line for them, your margin is paying for them.

Some vendors put net profit for temp businesses at 5-10% after all this. Treat that as an upper bound: Staffline's GB volume business made an operating profit of about 1% of revenue in the first half of 2026, and Robert Walters made an operating loss in 2025.

Starting a contract desk: the cash and the numbers

For a perm agency, the attraction of contract is that profit recurs. One contractor billing at £75 a day earns about £16,500 of gross profit a year, every year they stay, against a one-off perm fee of around £12,000 on a £60,000 salary at 20%.

The catch is cash. You pay the contractor before the client pays you, and the gap grows with every contractor you add. Assuming £500 a day paid weekly, £575 charged, the client paying 30 or 60 days after each weekly invoice, and funding on the broker terms above:

Three ways to fund it:

• Your own cash. Workable for one or two contractors; beyond that it starves the rest of the business.

• Invoice finance or discounting. The cheapest per pound once you have a facility, though lenders set minimum facility sizes (one broker quotes revolving facilities from £100,000), and you still run payroll, invoicing and credit control yourself.

• A funded back-office provider. It pays your contractors, invoices the client and chases payment, and some providers also take the credit risk; it's usually priced as a percentage of each invoice. It costs more per pound funded but replaces staff and software you'd otherwise need.

A rough break-even check: if a contract consultant costs you £50,000 a year plus 15% commission on the gross profit they bill, it takes about four contractors billing at £75 a day just to cover them, before funding and overheads (our illustration; plug in your own numbers).

Before the first contractor starts, have these in place:

• Client terms that comply with the Conduct Regulations, with a legislative-change clause, temp-to-perm terms and payment terms

• Contractor agreements and Key Information Documents, plus an opt-out process for limited-company contractors where appropriate

• A process for receiving and passing on Status Determination Statements, and a vetted umbrella list

• Insurance: employer's liability is compulsory if you employ PAYE temps, and clients commonly require professional indemnity and public liability

• Timesheets, payroll and invoicing, plus right-to-work checks and vetting

• Tracking for the Agency Workers Regulations' 12-week point on PAYE and umbrella assignments

• A funding line agreed before you need it

How to set your markup

Build from cost, not from pay. The formula that holds up under scrutiny is: charge rate equals pay rate, plus statutory costs, plus explicit risk allowances, plus your fee. Write the fee in pounds per hour or per day first, then check its percentage against the benchmarks. If the percentage looks high, ask whether it's genuinely a niche premium or just on-costs counted as margin.

Run separate rate cards for each engagement model. A single "our markup is 18%" across PAYE, umbrella, outside-IR35 and inside-IR35 supply guarantees that one of them loses money. An illustrative rate card (fees and floors are examples; set your own):

Choose fixed pounds or a percentage deliberately.

Many agencies use a hybrid: a percentage below a certain rate band and a fixed pound margin above it.

Tier and floor it. Group roles into a few bands (standard, specialist, niche) and give each a floor, a target and a ceiling. The floor is the number you walk away below. Short contracts, out-of-hours cover and genuinely scarce skills carry a premium for replacement risk; say so in the quote rather than hiding it in the rate.

Write the rules that protect margin into your terms.

• A legislative-change clause, so statutory cost increases pass through to the client.

• A week-13 rate review: under the Agency Workers Regulations, agency workers (including those employed through umbrellas) are entitled to equal basic pay and conditions after 12 weeks in the same role with the same hirer, and since April 2020 there's been no "Swedish derogation" route around it. If parity lifts pay and your charge rate doesn't follow, your margin pays for it.

• Temp-to-perm terms that are enforceable. Under regulation 10 of the Conduct Regulations, a transfer fee is only enforceable if the hirer is offered an extended period of hire as an alternative, and only if the worker is taken on within 14 weeks of starting or 8 weeks of finishing, whichever ends later. You set the length of the extended hire in your terms, so set it so that the margin it earns is roughly equal to the fee.

• Opt-out paperwork for limited-company contractors. A Ltd contractor can opt out of the Conduct Regulations only before being introduced to the client, never where the work involves vulnerable people, and you can't make your service conditional on it. Opting out changes which protections apply, so have your terms reviewed for both cases, including your contract-to-perm fee (MSP programmes commonly taper these by weeks worked, for example 0-13, 13-26 and 26-plus).

• Overtime and premium charge rates, not just pay rates (see overtime).

• Payment terms linked to price, so a client who wants 60 days pays for the funding.

• A recharge clause for short-notice cancellation payments, ahead of the guaranteed-hours rules expected in 2027.

How to defend it

Itemise before you're asked. When a client asks what your margin is, the strongest answer is a breakdown, not a percentage.

A script that works, adapted to your numbers:

"Happy to show you. Of the £575 day rate, £500 goes to the contractor's company and £75 a day is our fee. That covers finding and vetting them, the compliance checks, paying them weekly while you're on 45-day terms, and finding a replacement fast if they leave. If the scope or the terms change, the number can change with them."

It works because it reframes the fee as a set of services the client would otherwise have to buy, and it leaves room to trade.

Trade, don't discount. When procurement pushes, give a lower margin only in exchange for something: more volume, a longer commitment, exclusivity, or faster payment. A discount for nothing becomes the new baseline.

Decide the renewal question before the contractor asks it. At extension, someone will want a rise. Decide in advance whether it's funded by the client, by your margin, or split. Contractors expect margins to fall on long engagements, so a voluntary step-down in the second year, offered before anyone threatens to leave, often costs less than a replacement.

Don't let the spread be discovered. Every PSL removal story on the contractor forums starts the same way: a hidden margin, found by accident. If a margin can't survive being seen, it won't survive long.

Remember which lever is bigger. Two points of margin on a £575 day rate is £11.50 a day, about £2,500 a year. One extra contractor at £75 a day is about £16,500 a year. SThree's Q3 trading update in September 2026 makes the point at scale: with group net fees still falling, its contract order book grew 5% and extensions held up. The contract book's size and length matter more than its percentage, and that's the part of this problem software can genuinely help with (see below).

Where Execue fits: more contractors billing, not a different markup

A straight note, because markup is a commercial decision and no software should make it for you. Execue doesn't set rates, run payroll or timesheets, fund invoices, vet umbrellas or decide IR35 status. For those you need a back-office or funding provider, a payroll system and an IR35 status service, chosen on their own merits.

Where Execue helps is the bigger lever above: how many contractors you have billing, and how quickly you fill the next requirement.

Companies posting contract roles in your niche, every week. Execue's AI agents watch live company signals, including new contract and interim roles posted, funding rounds, headcount growth and new hiring managers, and turn them into a short list of companies worth calling this week, with outreach drafted for your review. They run as scheduled, evergreen operations, so the list refreshes without anyone rebuilding it.

Redeploy before you re-source. When a contract requirement lands, Execue searches your own ATS against the job description, so people you've already placed or vetted, including contractors coming to the end of an assignment, surface before you pay to source from scratch. Speed of fill is most of what a client is paying your margin for, and a contractor redeployed is a contractor who keeps billing.

The hiring managers who already use you. When a manager who has used your contractors moves to a new company, that's one of the warmest new-client signals there is. Execue tracks those job changes and flags them.

Every message goes out only after a person reviews it, from your own email and LinkedIn. Execue connects to the popular agency ATSs, including Bullhorn, Vincere, JobAdder, Recruit CRM, Loxo and Recruiterflow, and its AI configures the connection during setup. Pricing is per seat, billed annually in US dollars: Core at $254 a seat a month and Scale at $509, as of September 2026.

Where to start

This week: list every live contractor and temp with four numbers: pay rate, charge rate, engagement model, and real gross profit per day after the on-costs you carry. Sort by the last column. It's common to find a placement or two earning far less than the rate card suggests: an inside-IR35 or PAYE worker priced like an outside-IR35 one, overtime billed at the normal rate, or an account where an MSP fee or years of extensions have eaten the spread.

This month: rebuild your rate card from cost. Separate cards for outside IR35, inside IR35, umbrella and PAYE; fees in pounds as well as percent; floors you'll walk away below; overtime and premium charge rates. Add the clauses that protect margin: legislative change, week-13 review, enforceable temp-to-perm, and a cancellation-payment recharge. Cut your umbrella list to providers you've actually checked.

This quarter: reprice the thinnest accounts, starting with any where you absorbed the 2025 NIC rise. Map every contract ending in the next 90 days and decide which to extend, at what rate, and who funds the rise. If you're perm-only today, run the cash table with your own numbers before you place a first contractor. Then put real time into the bigger lever: more contractors billing, not more pence per contractor.

If the bottleneck is finding the companies hiring contractors in your niche right now, or filling the next requirement from people you already know, that's the part Execue automates: start at execue.io.

The one-line version: a good markup is one you can show the client line by line, on a contract you'll still have next year.

FAQ

Q: What is the typical recruitment agency markup for contractors in the UK?

A: For limited-company and umbrella contractors in professional sectors, typically 15-20% on the contractor's rate, which is a 13-17% margin on the charge rate, or £75-£100 a day on a £500/day contractor. Large agencies on PSL and MSP accounts run nearer a 7-10% margin; niche or short contracts can carry more. PAYE temps are different, because on-costs of around 29% of pay come out of the spread first.

Q: How much does a recruitment agency take from my day rate?

A: The agency doesn't take a cut of your rate; it adds its fee on top. On a professional contract outside IR35, that fee is typically 10-20% of what the client pays, so you receive 80-90% of it: on a £600 charge rate, £480-£540. Through an umbrella, employer NIC, the levy and the umbrella's fee also come out of the assignment rate, about £68 a day on £500.

Q: Is a 20% agency margin too high?

A: Usually not. A 20% margin on the charge rate (a 25% markup) sits at the top of the 12-20% range contractors on UK forums treat as normal for a general professional contract. It starts to look high on long engagements, very high day rates, or large PSL accounts where 7-10% is common, and above a quarter of the charge rate most contractors call it high.

Q: What's the difference between agency markup and margin?

A: Markup is the agency's spread as a percentage of the contractor's pay; margin is the same spread as a percentage of the client's charge. So a 25% markup is a 20% margin. On a £500/day contractor, a 15% markup gives a £575 charge rate and £75 a day, while a 15% margin needs a £588 charge and leaves £88. Always state which one, and on what base.

Q: How much does an agency make on a £500/day contractor?

A: Usually £75-£100 a day at a 15-20% markup, before funding, commission and overheads, if the contractor works through a limited company outside IR35 or through an umbrella. If the contractor is inside IR35 and the agency is the fee-payer, employer NIC alone costs about £72 a day (plus £2.50 of levy for agencies with a paybill over £3 million), so the same £575 charge leaves almost nothing.

Q: What markup do agencies charge on minimum-wage temps?

A: Charge rates are often 40-55% above the pay rate, but most of that is statutory on-cost. The GLAA puts the April 2026 wage cost of a 21+ temp on £12.71 at £16.38 an hour, and £17.99 with sick pay and guideline overhead, before profit. Real margins on volume temps are typically 35p to £1.50 an hour above on-costs, and the UK's listed volume specialist reports a 6% gross margin.

Q: What is a fair agency margin for an IT contractor?

A: Contractor forums broadly treat 12-20% of the charge rate (a 14-25% markup) as fair for a general IT contract, 7-10% as typical for large agencies with many contractors on one site, and a quarter of the charge rate or more as high. Fairness also depends on transparency and tenure: a disclosed margin that steps down on long engagements causes far less friction than a hidden one.

Q: How does IR35 affect agency markup?

A: Outside IR35, the markup is the agency's gross profit. Inside IR35, where the agency is the fee-payer, it must pay employer NIC (15% above £96.15 a week), plus the 0.5% Apprenticeship Levy if it's a levy payer, on top of the contractor's payment, and can't deduct them from an agreed rate. Agencies handle this by charging more, agreeing a lower inside-IR35 rate up front, or using an umbrella.

Q: Does the umbrella company's fee come out of the agency's margin?

A: No. The agency pays the umbrella an assignment rate and keeps its own markup above it. The umbrella deducts its fee, typically £15-£25 a week, plus employer NIC and the levy from the assignment rate before calculating the worker's pay. Since 6 April 2026, though, the agency is jointly and severally liable if the umbrella fails to pay PAYE.

Q: How do margins work through a master vendor?

A: The master vendor holds the client contract and keeps its own share of the charge before passing the rest to you, so your spread is smaller than the client's markup suggests. If it keeps 3% of a £575 charge, you receive £557.75 and keep £57.75 on a £500 contractor. Master-vendor contracts may also require you to indemnify them for umbrella PAYE and IR35 failures in your part of the chain.

Q: How much cash do I need to start a contract desk?

A: Roughly the contractor's pay for as long as your client takes to pay, plus a week. One £500/day contractor paid weekly ties up about £13,000 on 30-day client terms and £24,000 on 60-day terms; five tie up roughly £66,000-£120,000. Most agencies fund this with invoice finance or a funded back-office provider rather than their own cash.

Q: What changed for agency margins in April 2026?

A: Four things. Agencies became liable for umbrella companies' unpaid PAYE. Statutory Sick Pay became payable from day one with no lower earnings limit. The National Living Wage rose to £12.71. And employers must now keep six years of holiday pay records, enforced by the new Fair Work Agency. All four push up the cost of PAYE and umbrella supply.

Q: Do agencies have to tell contractors their margin?

A: In most cases, no. There's no general legal duty in the UK to disclose the agency's margin to a contractor; the Key Information Document covers the worker's pay rate and deductions, not the agency's fee. Public buyers increasingly require itemised fees, though, and contractors often find out the charge rate anyway, so many agencies now disclose a fixed margin by choice.

Q: How much do agencies charge schools for supply teachers?

A: Under the Department for Education's STeER framework, launched in May 2026, the maximum agency fee per worker per day is £32-£55, depending on role: £40 for non-STEM teachers, £45 for STEM and £55 for senior leaders. The DfE's own pre-framework example was a £71 fee on £200 a day of pay. Academy trusts must use the framework or match its rates from September 2026.

Q: Should I charge a fixed pound margin or a percentage markup?

A: A fixed pound margin suits high day rates, PSL and MSP accounts and long contracts: it's easy for procurement to accept and protects you from rate squeezes, but you must reprice when statutory costs rise. A percentage suits lower rates and short assignments, and grows when pay rises. Many agencies use a percentage below a rate threshold and fixed pounds above it.

Q: Can I charge a temp-to-perm transfer fee?

A: Yes, within the Conduct Regulations. A transfer fee is only enforceable if the hirer is offered an extended period of hire as an alternative, and only if the worker is taken on within 14 weeks of their first day or 8 weeks of their last day on assignment, whichever ends later. Your terms set the length of the extended hire.

Q: How does the NHS agency price cap work?

A: NHS England caps the total hourly amount a trust can pay for an agency worker at 2016 basic pay plus 55%, excluding VAT. That single figure must cover the worker's pay, holiday pay, employer NIC, pension, the agency fee and the framework fee. The caps don't rise with pay awards, so every pay rise leaves less room for the agency fee.

Related Reading

• Recruitment Fees and Terms: Contingency, Retained, and Container

• Backdoor Hires: How Recruitment Agencies Catch and Recover Lost Fees

• Client Retention for Recruitment Agencies

• How to Get Clients for a Recruitment Agency

• Sourcing From Your ATS: Matching Candidates to a Job Description

• Best Recruitment Software for Small Agencies

Written by Artem Pravda (CPO & CDO, Execue), drawing on HMRC and GOV.UK rates and thresholds for 2024/25 to 2026/27; the GLAA's charge-rate guidance (Brief 91, April 2026); HMRC guidance on PAYE in umbrella supply chains from April 2026 and law-firm analysis (Hill Dickinson, Knights, Pinsent Masons, haysmacintyre, Osborne Clarke, Lewis Silkin, Stevens & Bolton); the Employment Rights Act 2025 implementation timeline; legislation.gov.uk (Conduct Regulations 2003, including regulations 10 and 32, and the Employment Agencies Act 1973); Acas guidance on sick pay and holiday pay; APSCo, FCSA and REC business-partner guidance; Government Commercial Agency guidance on agency mark-up; listed-company results from Hays (FY24-FY26), SThree (Q3 FY26), Staffline (H1 2026), Robert Walters (FY25) and Gattaca (H1 FY25); the KPMG and REC Report on Jobs (October 2026); Department for Education, NHS England and Homecare Association publications; Sonovate, Rullion, RecruitBPM, Commit, Recruitly, Making Business Matter and Clifton Private Finance guides; Trans.info reporting on HGV agency pay; contractor discussions on the ContractorUK forums and ContractorCalculator; and supply-teacher and nursing cases reported by Staffing Industry Analysts and the BBC. Sector ranges from software vendors are unaudited, and the Robert Walters, Gattaca and Staffline per-hour figures, the wage-cost builds for 2024/25 and 2025/26, the HGV and £16-an-hour cost figures, and the contract-desk cash and break-even tables are our own arithmetic from published rates and results; treat them as indicative. Forum anecdotes date from 2016-2022. Tax and employment rules change frequently: this is commercial guidance, not tax or legal advice, so check current HMRC guidance and have your terms reviewed.