One of the biggest profit leaks in the tradie industry is the confusion between markup and margin. If you think a 42% markup means a 42% margin, you're leaving thousands on the table every year.
In this guide, we'll break down job costing, explain why markup and margin are different, and show you how to factor in the true cost of labour—including ACC levies, KiwiSaver, and leave—so you can quote jobs that actually make money.
The Markup vs Margin Trap
Many tradies price jobs using markup without realizing their true profit percentage is much lower.
Markup is the percentage you add to your cost. Margin is the percentage of the final price that's profit.
Here's a real example:
Job: Kitchen renovation labour ($8,000 cost) - You apply a 50% markup: $8,000 + $4,000 = $12,000 quote - Client pays: $12,000 - Your profit: $4,000 - Your margin: 33% (not 50%)
Why? Because your margin is calculated as: (Profit ÷ Selling Price) × 100
$4,000 ÷ $12,000 = 33.3% margin
This is why understanding the difference matters. A 42% markup is only a 30% margin. A 50% markup is only a 33% margin. And a 100% markup (doubling your cost) is only a 50% margin.
Rule of thumb: If you want a 30% margin, you need roughly a 43% markup. If you want a 40% margin, you need a 67% markup.
The True Cost of Labour (This Is The Big One)
Here's where most tradies lose money without realizing it. When you pay an employee $25/hour, that isn't the true cost to your business.
All-In Labour Cost Calculation
Gross wage: $25.00/hour Add employer KiwiSaver contribution: $25.00 × 3% = $0.75 Add ACC levies: ~$0.80–$1.00/hour (varies by trade; approx 3–4%) Add leave entitlements: ~$1.25/hour (4 weeks paid leave = ~8% of annual wages) Add sick leave, bereavement, etc.: ~$0.50/hour Total all-in cost: ~$27.50–$28.50/hour
Your tradie employee costing $25/hour is really costing you $27.50–$28.50/hour.
Add vehicle, tools, insurance, admin overhead, and the real burden could be 30–35% above the wage.
Minimum Wage Update (April 2026)
The adult minimum wage in New Zealand is now $23.95/hour (as of 1 April 2026).
For apprentices: - Starting-out rate (first 3 months): $19.16/hour - Training rate: $19.16/hour - Adult rate after 3 months: $23.95/hour
If you're budgeting for a labourer at the minimum wage, the all-in cost is closer to $30–$31/hour once you factor in ACC, KiwiSaver, and leave.
How to Calculate True Job Costs
Let's work through a plastering job:
Materials: - Plasterboard (20 sheets × $28/sheet): $560 - Joint compound, tape, primer, paint: $240 - Total materials: $800
Labour: - 40 hours at $28/hour all-in cost: $1,120 - Total labour: $1,120
Overheads (vehicle, tools, insurance, admin): - Estimated at 25% of labour cost: $280 - Total overheads: $280
Total Job Cost: $800 + $1,120 + $280 = $2,200
If you want a 35% margin: - Quote = $2,200 ÷ 0.65 = $3,385 - Your profit = $1,185 - Margin = 35%
Many tradies would have quoted $3,300 (50% markup on $2,200) and actually only made a 33% margin, which is eating into their contingency.
Material Cost Trends in 2026
According to the latest data, construction material costs are rising modestly in 2026:
- Concrete prices: Increased (varies by region and supplier)
- Framing timber: Up approximately 3%
- Plasterboard/Gib: Recent price increases
- Overall forecast: 2.2% rise in total construction costs for 2026
This means material quotes from 6 months ago are outdated. Update your supplier prices quarterly and adjust your quotes accordingly. Use bulk purchase discounts and supplier loyalty programs to offset these increases.
Three-Tier Pricing Strategy
Instead of giving one quote, offer three options:
Basic (economy, minimal finishing): $3,000 Standard (your recommended spec): $3,385 Premium (upgraded materials, extended warranty): $3,800
This keeps price-conscious clients engaged while showing the full value of what you offer. Many will choose Standard, and some will upgrade to Premium.
Free Tools to Help
- Use our GST Calculator to ensure you're quoting correctly with GST included
- Check the Labour Cost Calculator to find your true all-in hourly cost
- See the Profit Margin Calculator to verify margin vs markup
Key Takeaways
- Markup ≠ Margin. A 50% markup is only a 33% margin.
- True labour cost is 20–35% above the wage. Don't forget ACC, KiwiSaver, and leave.
- Review quotes quarterly. Material costs change; update your templates.
- Use three-tier pricing. It increases average job value without being pushy.
- Track overheads. If you don't know your overhead rate, you're guessing on margin.
Once you nail job costing, you'll quote faster, win more work, and actually make the profit you think you're making.
For daily job management and quoting, check out Fastcrew—a free tool designed for NZ tradies that tracks labour time and material costs automatically.
Download our free NZ tradie templates at tradietools.nz/templates/—including job costing sheets and quote templates.
NZ Tradie Tools provides free calculators, templates and guides for New Zealand tradies. Visit tradietools.nz.