Agency taking 40% cut!

**ladymuck** · 24 May 2022, 09:28

Tell the agency what you know. If they don't want to budge on their nice little earner then I would let HR know that the agency are putting a mark up of x% and recommend they check their contract for the fee that they're supposed to be paying.

**Lance** · 24 May 2022, 09:30

You are being paid a day rate, you have agreed, to provide services. The agency are making some nice wedge it seems though.
Maybe there can be something for you. Some considerations...

Are you willing to leave if you make a demand and they refuse?
Are your skills in short supply such that the agency won't be tempted to refuse any demand you make and replace you?
If the client really wants to keep you then you want them on side in the event of any bun fight. But beware that if the agency thinks you are causing trouble with their other contractors they will drop you like a stone, 40% margin or not.
Just remember they're not taking a cut of your money. They are paying you a rate you are/were happy with. If you believe you are worth more be prepared to walk to get it. Agencies don't like contractors demanding more money based on commercially confidential information.
Also... Your number don't make sense. A 35% increase on the rate card???? I don't believe any client is going to swallow that. Let's say that you were on £500, and the agent on 5% so they charge £525 a day. To increase that by 35% means they have jumped from £525 to £708.75.... They are not going to be able to do that... So be very careful with numbers you clearly don't understand completely.

**northernladuk** · 24 May 2022, 09:49

Originally posted by piggywig123 View Post

I'm coming up to my 3rd contract renewal. I asked for a raise at my second and they refused because the agency said their rate card was too low so there was no room to manoeuvre.

You don't ask. They are going to say no. They will be well aware that you aren't going to leave so what is in it for them to say yes? If you want a rate rise you have to tell them what you want or you are off. It's a negotiation and the agent has to think there is a reason to give you a rise. No way are they going to give you money out of their pocket because you ask politely. They may still say no and let you leave but you've got to make them believe you. They do this as a job so they are more than adept and palming off weak requests for rate rises.

I've since found out accidentally through HR enquiring on a recent rate change that they have increased their rate card by 35%! Meaning they are now taking a 40%+ cut of the rate.

This doesn't make sense to me but it could just be how you've worded it. Who has raised their rate card? Who is they? The agency or the client? The agency doesn't take a cut of your money. They take their margin and give you what is left. It's their money. A pedantic point but useful to know exactly what the score is in some situation.
When did the rate increase? Middle of this last contract? If that information is correct, and I'd be careful here as those numbers don't make sense to me, you can now go in and tell the agent what rate you want but make absolutely certain they know you'll be leaving if you don't get it. They are pro's at this so no half hearted attempts. I still don't think you'll get anything like a 20% uplift though. That's crazy. Something isn't right here.

This is surely quite an outrageous percentage for an agency. Does anyone have any advice on how to negotiate? I feel that I'm in quite a strong position in that the client wants me to continue. Can I mention that I know this information? Also I can't go direct with the client as all contractors have to be through an agency.

It is but it doesn't make sense. So you know how to negotiate. Tell them a number and if you don't meet it you'll go elsewhere. If you aren't prepared to go elsewhere then you've got to hope they'll be nice to you but be ready to carry on on your rate. Remember you signed it and have been happy with it so far. Don't let what is going on in the background ruin a good gig. Being jealous and upset other people are getting X could ruin what you were quite happy to do which isn't good business.

**Andy Hallett** · 24 May 2022, 12:51

In my 20 years doing Contract Recruitment:

a) Big companies normally dictate an agreed margin
b) I've never seen a rate hike of 35%

I'd recheck the figures.

**ConsultingTechArchitect** · 24 May 2022, 14:35

Originally posted by northernladuk View Post

So you know how to negotiate.

Reading his post, I doubt it.

**WTFH** · 24 May 2022, 15:16

Originally posted by Andy Hallett View Post

In my 20 years doing Contract Recruitment:

a) Big companies normally dictate an agreed margin
b) I've never seen a rate hike of 35%

I'd recheck the figures.

He also says they are taking 40%+.
I'm wondering what rates he was looking at and how is he calculating the %. Perhaps he saw the rate including VAT, and perhaps he's thinking that agents take a markup, rather than a margin.

For the OP...
Let's say the contractor is getting £750 a day, and the client is paying £1,200 inc VAT. That means the agent is taking £250, not £550. (750+250 = 1000, then add 20% VAT)
If it was markup, the the agent is taking 33% of the contractor's take home, but it's margin. The agent in this case is taking 25% margin. That's the percentage of the ex VAT amount paid by the client.

**courtg9000** · 24 May 2022, 16:50

You signed a contract.
If you dont like it.
Dont sign the next renewal, leave and get another contract you will like.
Simples.

**d000hg** · 24 May 2022, 17:45

Originally posted by courtg9000 View Post

You signed a contract.
If you dont like it.
Dont sign the next renewal, leave and get another contract you will like.
Simples.

This silly logic like "you are happy what you receive who cares what the agent makes" are rife here and never stop being daft.
Any business relationship which relies on at least one party wanting to hide what they make is fundamentally opportunistic. Very common of course, but a reseller or agent who is genuinely providing a valuable service shouldn't be worried their customer will find out, and that's definitely not the case with a lot of recruiters who work extremely hard to obfuscate this for the simple reason they know the other parties will be pissed.

**courtg9000** · 24 May 2022, 17:54

Originally posted by d000hg View Post

This silly logic like "you are happy what you receive who cares what the agent makes" are rife here and never stop being daft.
Any business relationship which relies on at least one party wanting to hide what they make is fundamentally opportunistic. Very common of course, but a reseller or agent who is genuinely providing a valuable service shouldn't be worried their customer will find out, and that's definitely not the case with a lot of recruiters who work extremely hard to obfuscate this for the simple reason they know the other parties will be pissed.

I can agree with a lot of this. Unfortunately, most recruitment agents are as dodgy as estate agents and will hide what they can where they can. In the past if a client complained about the markup or margin I would say well if you can get a cheaper agent and make the legals work I can move but i'm absolutely not lowering my rate of £X.

Agency taking 40% cut!