How to Price a Cleaning Tender Without Guessing the Margin

Most cleaning tender pricing starts with a margin target and works backwards. Five per cent is a common choice. The trouble is that a margin is only the gap between price and cost. At five per cent that gap is small enough for one guessed line to close it.

This blog is a small research paper. One question. The published data that answers it. The finding. And what it means for the person pricing the next bid. Every figure comes from a named source or is calculated in a numbered table.

Price the hour before you price the margin. Operify AI builds cleaning tender pricing from statutory rates line by line so the margin you submit is the margin you earn.

Key Findings#

• 1 per cent of cost is 19 per cent of margin. At a 5 per cent priced margin every 1 per cent of cost left out of a bid removes 19 per cent of the margin.
• The hour costs £16.00 before anything else. Wage and employer National Insurance and pension and holiday for a 25 hour operative at April 2026 rates come to £16.00 per productive hour [1][2][3][4].
• Missing holiday accrual turns plus 5 into minus 4.8. Pricing per paid hour instead of per productive hour leaves out £1.72 an hour and turns a 5 per cent margin into a loss.
• A Real Living Wage clause takes the whole margin. A bid priced at £12.71 for a tender that requires £13.45 understates cost by £1.00 an hour and earns minus 0.2 per cent. In London at £14.80 it earns minus 9.6 per cent [5].
• A market leader works at 4.7 per cent. Mitie reported an operating margin before other items of 4.7 per cent for the year to March 2026 and recovered 76 per cent of a £49 million rise in employer National Insurance [6].

1. The Question#

How much of a 5 per cent priced margin survives when a single cost line in a cleaning tender is guessed rather than calculated?

Margins in this sector are thin even at the top. Mitie is one of the largest UK facilities contractors. In the year to March 2026 it earned 4.7 per cent before other items and 2.7 per cent on a statutory basis. It passed on 76 per cent of its employer National Insurance increase and absorbed the rest [6]. A contractor with a fraction of that buying power has less room.

Competitive bidding makes the risk worse. Thaler described the winners curse where the winning bidder in a common value auction is often the one whose estimate was furthest out [7]. In a tender the most optimistic guess at cost is the one most likely to win.

2. The Data and the Method#

Table 1. Sources used and what each one answers

We built an illustrative site of 180 contracted hours a week or 9360 hours a year. Operatives work 25 hours a week on the National Living Wage at a large employer. Absence cover uses the ONS rate of 2.9 per cent [8] at the wage floor. Supervision and consumables and equipment and insurance and overhead are held at an assumed £2.00 an hour because they are specific to each contract. The price is set to earn 5 per cent. We then change one line at a time and recalculate the margin the bid actually earns.

3. What the Data Shows#

3.1 The Arithmetic of a Thin Margin#

Table 2. The illustrative price build per productive hour

Calculated except row 2.6 which is an assumption. Revenue on 9360 hours is £181.0 thousand and the margin is £9049 a year. Replace row 2.6 with your own figures.

Margin is 97 pence an hour. Every penny an hour left out of the bid costs £93.60 a year on this site. And because cost is 95 per cent of price every 1 per cent of cost that goes missing removes 19 per cent of the margin.

3.2 What One Guessed Line Does#

Table 3. Margin the bid earns when one line is guessed

Modelled on the site in Table 2. Each bid is priced at 5 per cent on its own cost estimate. Margin earned is measured against the true cost of £18.37.

The largest single error is the denominator. A bid that divides annual pay by paid hours rather than productive hours leaves out the 5.6 weeks of holiday and loses money on every hour. Carrying the pre April 2025 National Insurance regime into a new bid takes almost two thirds of the margin.

Flat uplifts fail in both directions. At 20 per cent the bid loses money. At 30 per cent it is 0.8 per cent dearer than it needs to be. At a 40 per cent price weighting that is about a third of a mark given away for nothing.

3.3 Wage Clauses and the Next April#

Many tenders set the wage. The Real Living Wage is £13.45 an hour and £14.80 in London. New rates will be announced on 15 October 2026 and accredited employers have until 1 May 2027 to pay them [5]. Even without a clause the market pays above the floor. Full time employees in cleaning activities averaged £12.86 an hour in 2025 [10].

Table 4. A bid priced at £12.71 against the wage it actually has to pay

Modelled on the site in Table 2. Cost missed includes the change in absence cover.

The calendar matters too. A three year contract priced today crosses at least one April uprating. The Low Pay Commission central estimate for April 2027 is £13.18 within a range of £13.02 to £13.34 [9]. That is a projection and not a rate.

Table 5. Year two margin at a fixed price with no indexation

Projection. Based on the published LPC range. The final rate is set by the government.

One guessed line can take the whole margin. The costing and bids module builds cleaning tender pricing from current statutory rates and blocks a bid that falls below the floor.

4. What It Means for a Contractor#

Guessing is not one decision. It is a habit that shows up in seven places. Replace each one with a line.

• Start from productive hours. Divide by 46.4 working weeks and not 52 paid weeks.
• Build the hour from rates. Wage and National Insurance and pension each on its own line at current rates.
• Price absence as a line. 2.9 per cent of hours is a rate and not an exception.
• Read the wage clause first. A Real Living Wage or London clause changes every line that scales with pay.
• Index the later years. Ask for an annual uplift tied to the statutory wage or price the projection range.
• Price periodics and supervision on their own. Never inside the hourly rate.
• Apply margin last. On the total cost and not on labour alone.

Each of those lines feeds the cost per hour worked. The periodics need their own schedule and their own hours. Answers to the ITT should show the build so a buyer can see the price is deliverable. After award any extra work belongs in a priced variation rather than absorbed as scope creep.

In Operify AI the costing engine holds employer NI below the secondary threshold and pension and holiday and bank holiday accrual and periodic works gross up. A won bid becomes the contract and its service plan in one action. That is how the win more tenders promise works without underbidding. After go live the priced margin is compared with the measured margin each week and under delivery shows in hours and pounds. See stop margin leakage for that view.

5. What This Does Not Show#

• The site is illustrative. 180 hours a week and £2.00 of contract specific lines are a model and not a customer.
• Absence cover is a floor. It is costed at £12.71 and agency cover costs more.
• The employer is large. A micro business claiming the Employment Allowance pays less NI and its numbers differ.
• The 2027 wage is a projection. The LPC range is published but the final rate is set later [9].
• One large company is not the market. Mitie reports a group margin across many services and not a cleaning margin [6].

6. Conclusion#

At a 5 per cent margin the cost model is the margin. Each 1 per cent of cost missed takes 19 per cent of the profit. The most common shortcuts are not small. Leaving out holiday accrual or ignoring a Real Living Wage clause each takes the whole margin and more.

The fix is not a better guess. It is a price built line by line from rates that anyone can check and recalculated every April. Then the margin on the submission is the margin the contract actually earns.

Bring us your next ITT. In thirty minutes we will price it line by line and show the margin each guess would have cost you. Book a demo.

FAQ#

What margin should a cleaning tender carry?#

There is no single right number. For context Mitie earned 4.7 per cent before other items in its 2026 results. A margin only means something if the cost under it is built from rates.

What does an operative hour cost at April 2026 rates?#

For a 25 hour operative on the National Living Wage the statutory hour is £16.00 per productive hour. Absence cover and supervision and consumables and overhead sit on top.

Why divide by productive hours?#

Because operatives are paid for 52 weeks and deliver for 46.4. Dividing by paid hours leaves out holiday and on our model turns a 5 per cent margin into minus 4.8 per cent.

Is a flat on cost percentage good enough?#

Rarely. On our site a 20 per cent uplift loses money and a 30 per cent uplift overprices the bid. The right loading depends on hours and pay and employer size.

How does a Real Living Wage clause change the price?#

At £13.45 the statutory hour rises from £16.00 to £16.98. A bid priced at £12.71 against that clause earns minus 0.2 per cent.

When do Real Living Wage rates change?#

The Living Wage Foundation announces 2026 to 2027 rates on 15 October 2026. Accredited employers then have until 1 May 2027 to pay them.

How should a multi year bid handle April 2027?#

Ask for indexation linked to the statutory wage. Without it the central LPC estimate of £13.18 cuts year two margin on our site to 1.7 per cent.

How much does one missed penny cost?#

On a site of 180 hours a week each penny an hour is £93.60 a year. Across a portfolio of twenty such sites it is £1872.

What is the winners curse in tendering?#

The tendency for the winning bid to be the one that most underestimated cost. A price built from rates is the defence against it.

How much does Operify AI cost?#

Pricing is built around operatives and sites and the modules taken rather than a per head licence so cost stays steady through turnover. The figure is given on the demo call. See pricing or email hello@operifyai.co.uk.

References#

[1] UK Government. National Minimum Wage and National Living Wage rates. £12.71 an hour for workers aged 21 and over from April 2026. Available at National Living Wage rates (accessed October 2026).

[2] HMRC. Rates and thresholds for employers 2026 to 2027. Employer rate of 15 per cent above a secondary threshold of £5000 a year. Available at rates and thresholds for employers (accessed October 2026).

[3] The Pensions Regulator. Making contributions to your pension scheme. Minimum employer contribution of 3 per cent of qualifying earnings between £6240 and £50270. Available at pension contributions guidance (accessed October 2026).

[4] UK Government. Holiday entitlement. 5.6 weeks of paid holiday a year. Available at holiday entitlement (accessed October 2026).

[5] Living Wage Foundation. What is the Real Living Wage. £13.45 across the UK and £14.80 in London for 2025 to 2026. Rates for 2026 to 2027 announced on 15 October 2026 with implementation by 1 May 2027. Available at Real Living Wage rates (accessed October 2026).

[6] Mitie Group plc. Full year results for the year ended 31 March 2026. Published 4 June 2026. Revenue £5619 million. Operating profit margin before other items 4.7 per cent and statutory margin 2.7 per cent. Employer NI increase of £49 million with £37 million recovered through pricing. Company announcement. Available at Mitie full year results 2026 (accessed October 2026).

[7] Thaler R H. Anomalies. The Winners Curse. Journal of Economic Perspectives 2(1) pages 191 to 202. 1988. Peer reviewed. Available at Journal of Economic Perspectives (accessed October 2026).

[8] Office for National Statistics. Sickness absence in the UK labour market 2023 and 2024. Released 4 June 2025. Elementary occupations 2.9 per cent. Available at ONS sickness absence in the UK labour market (accessed October 2026).

[9] Low Pay Commission. Consultation letter 2026. Central estimate for the April 2027 National Living Wage of £13.18 within a range of £13.02 to £13.34. Projection and not a set rate. Available at LPC consultation letter 2026 (accessed October 2026).

[10] British Cleaning Council. Research Report 2026. Table 9 average hourly pay for full time employees. Cleaning activities £12.86 in 2025. Available at British Cleaning Council Research Report 2026 (accessed October 2026).

About Operify AI#

We sell tender costing software. That is a commercial interest in this finding and readers should weigh it. Two things constrain it. Every rate is published and named so any reader can rerun the arithmetic. Section 5 states what the model does not show.

Operify AI is operated by Codedevza AI Ltd company number 16485057. Correspondence to hello@operifyai.co.uk.