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Contractor markup and margin calculator
Price a construction job from its cost: add overhead and contingency, then your profit as a markup on cost or a margin on the price. See the quote before and after sales tax, the markup and the margin side by side, and what you keep once the withholding tax is taken from the bill.
- Markup and margin side by side
- Withholding tax for 2026-27
- Free, no sign-up
Calculator
Price the job
Give what the job costs, what you add for overhead and contingency, and the profit you want. The quote follows.
Your quote
- Markup on cost
- 20%Profit ÷ cost
- Margin on price
- 16.7%Profit ÷ price
- Profit before tax
- Rs 11.5 lakhOn Rs 57.5 lakh of cost
- After the tax withheld
- Rs 5.1 lakh7.4% of the price
A 20% markup on cost is a 16.7% margin on the price: the Rs 1,150,000 profit is 20% of the Rs 57.5 lakh cost but only 16.7% of the Rs 69 lakh price.
The price
- Materials
- Rs 3,000,000
- Labour
- Rs 1,200,000
- Equipment and plant
- Rs 300,000
- Subcontracts
- Rs 500,000
- Direct cost
- Rs 5,000,000
- Overhead at 10%
- Rs 500,000
- Contingency at 5%
- Rs 250,000
- Total cost
- Rs 5,750,000
- Profit20% markup, 16.7% margin
- Rs 1,150,000
- Quote price
- Rs 6,900,000
What you receive
- Quote price
- Rs 6,900,000
- Sales tax at 16%Punjab Revenue Authority
- Rs 1,104,000
- Bill to the client
- Rs 8,004,000
- Less income tax withheld at 8%On the whole bill, section 153(1)(c)
- -Rs 640,320
- Less sales tax withheld
- -Rs 1,104,000
- What you keep
- Rs 6,259,680
The Rs 640,320 withheld is 8% of the whole bill, sales tax included, and takes 56% of the profit. It is a minimum tax for tax year 2027, so it is not refunded if the normal tax on your profit comes to less. To keep a 16.7% margin after it, quote a 35% markup.
Tax rates for tax year 2027 as of September 2026. An estimate: confirm the tax with a tax adviser, and the costs with your own records.
Reference
Markup to margin conversion table
The margin each markup gives, and the markup each margin needs, before tax.
| Markup on cost | Margin on price | Price on Rs 1 lakh of cost |
|---|---|---|
| 5% | 4.8% | Rs 105,000 |
| 10% | 9.1% | Rs 110,000 |
| 15% | 13% | Rs 115,000 |
| 20% | 16.7% | Rs 120,000 |
| 25% | 20% | Rs 125,000 |
| 30% | 23.1% | Rs 130,000 |
| 40% | 28.6% | Rs 140,000 |
| 50% | 33.3% | Rs 150,000 |
| 75% | 42.9% | Rs 175,000 |
| 100% | 50% | Rs 200,000 |
| Margin on price | Markup on cost |
|---|---|
| 5% | 5.3% |
| 10% | 11.1% |
| 15% | 17.6% |
| 20% | 25% |
| 25% | 33.3% |
| 30% | 42.9% |
| 40% | 66.7% |
| 50% | 100% |
Margin = markup ÷ (100 + markup) × 100, and markup = margin ÷ (100 - margin) × 100. The margin is always the smaller figure, because the same profit is measured against the larger price.
How it is worked out
From the cost of a job to its price, and what the tax leaves
Markup and margin measure the same profit against different things. Markup is the profit as a share of the cost; margin is the same profit as a share of the price. On a job costing Rs 57.5 lakh, a 20% markup adds Rs 11.5 lakh for a price of Rs 69 lakh, and that Rs 11.5 lakh is only 16.7% of the price. So a 20% markup is a 16.7% margin, and a 20% margin needs a 25% markup. Margin = markup ÷ (100 + markup) × 100, and markup = margin ÷ (100 - margin) × 100.
To price a construction job, start from the direct cost: the materials, the labour, the equipment and plant, and the work you give to subcontractors, taken off the drawings and the bill of quantities at the rates you actually pay. Then add overhead, the running costs no single job pays for on its own: site staff, the office, transport, insurance and the money tied up between bills. Add a contingency for what goes wrong on this job: price rises, waste and rework. The calculator takes both as a share of the direct cost. Profit goes on last, as a markup on the total cost or as the margin you want left in the price.
Sales tax on the work is charged on top of the price and passes through to the province, so it does not change the markup or the margin. The income tax is different. A company or government client deducts it from the whole bill, sales tax included, under section 153(1)(c): 7.5% for a company and 8% for an individual or firm on the Active Taxpayers List, twice that off it. At 8% on a bill with 16% sales tax, that is 9.3% of the price. It is a minimum tax, so unless the profit is large enough for the normal tax on it to come to more, it is the income tax the job pays, and it comes straight out of the margin.
On the example, the Rs 11.5 lakh profit becomes Rs 5.1 lakh once the Rs 640,320 withheld is taken off: 7.4% of the price instead of 16.7%. Keeping a 16.7% margin after the tax would take a markup of 35%. Price with the tax in mind, not as an afterthought.
The other way round, give a price already quoted, or the rate a client has offered, and the calculator shows the markup and margin it carries, before and after the tax withheld, and whether it covers the cost at all.
The calculator does not add the input tax a registered contractor can set against his sales tax, the retention money held back from each bill, or the cost of waiting for payment beyond what you put in overhead. The retention money calculator works out retention bill by bill, and the contract tax calculator goes through every tax on a bill. Tax rates for tax year 2027 as of September 2026; confirm with a tax adviser before you rely on them.
Words in a price
Terms for pricing a job
- Direct cost
- What the job itself uses up: materials, labour, equipment and plant, and subcontracts. It is what a bill of quantities prices.
- Overhead
- The cost of running the business that no one job carries alone: site staff, the office, vehicles, insurance, and the money tied up between bills. Spread over the jobs as a share of their direct cost.
- Contingency
- An allowance in the price for what goes wrong on this job: material price rises, waste and rework. What is not used becomes profit.
- Markup
- Profit as a share of the cost. A 20% markup on a Rs 100 cost is Rs 20, for a price of Rs 120.
- Margin
- Profit as a share of the price. The same Rs 20 on a Rs 120 price is a 16.7% margin.
- Withholding tax
- The income tax a company or government client deducts from a contractor's bill under section 153 and pays to the FBR. On a works contract it is a minimum tax.
Questions
Markup and margin questions
Still have a question?
Ask our team during Pakistan business hours, in English or Urdu.
+92 333 2466662Chat on WhatsAppWhat is the difference between markup and margin?
Markup is profit as a share of cost; margin is profit as a share of the price. They are the same rupees measured against different amounts, so the margin is always the smaller figure. A job costing Rs 57.5 lakh priced at Rs 69 lakh makes Rs 11.5 lakh: a 20% markup, but a 16.7% margin. Mixing them up is how a contractor who means to earn 20% of the price quotes 20% on cost and earns 16.7%.
How do I convert markup to margin?
Margin = markup ÷ (100 + markup) × 100. A 10% markup is a 9.1% margin, 20% is 16.7%, 25% is 20% and 50% is 33.3%. The other way, markup = margin ÷ (100 - margin) × 100: a 10% margin needs an 11.1% markup, 20% needs 25% and 30% needs 42.9%. The table under the calculator lists the common ones.
How do I price a construction job?
Add up the direct cost, add overhead and a contingency, then add your profit. On the calculator's example, Rs 50 lakh of materials, labour, equipment and subcontracts, with 10% overhead (Rs 500,000) and 5% contingency (Rs 250,000), costs Rs 5,750,000. A 20% markup puts the price at Rs 6,900,000, and 16% PRA sales tax makes the bill to the client Rs 8,004,000. Then check what the withholding tax leaves before you send the quote.
What profit margin do contractors make in Pakistan?
There is no official figure for private work: it depends on the job, the risk and how many others are bidding. What the calculator can show is how little of a markup survives the tax. At 8% withheld on a bill with 16% sales tax, 9.3% of the price goes in income tax, so a 15% markup leaves about 3.8% of the price and a 10% markup nothing at all once the tax is paid. Keeping 10% of the price after the tax takes a markup of about 23.9%.
How much does withholding tax cut a contractor's profit?
The income tax is deducted from the whole bill, sales tax included, so it is a share of the price rather than of the profit. On the example's Rs 8,004,000 bill, 8% is Rs 640,320: 56% of the Rs 11.5 lakh profit, which leaves Rs 5.1 lakh, a 7.4% margin. It is a minimum tax, so it is not refunded when the normal tax on the profit comes to less. A contractor off the Active Taxpayers List has twice as much deducted.
Is markup added before or after sales tax?
Before. Price the job, profit included, and charge the sales tax on that price. The sales tax is the province's money: you collect it, the client may withhold some of it, and you deposit the rest, so it never belongs in the markup or the margin. The withholding income tax, on the other hand, is worked out on the bill with the sales tax in it, which is why it costs more than its rate suggests.
Should overhead and contingency count as cost or as profit?
As cost. Overhead is money the business spends whether or not the job goes well, and contingency is there to be spent if things go wrong. Put them in the cost and the markup is left to be profit. Folded into the markup instead, a good-looking 25% can turn out to be a loss once the office and one delay are paid for.
Price every job from what jobs really cost
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