Is there any legal limit on how big a cut an agency can take

[Ben81]

The mistake is really to go in cheap, i.e. the PM has his budget he's going to take the best man and the agency know that.

To be honest if the Agent had said to the client that the contractor didn't think he was really up to it but he'd be prepared to give it a go for half price he'd probably not even have interviewed. Generally, the last thing a PM wants is a "half-speed" contractor.

Depends on the circumstances, if you have the choice of paying someone twice as much who is an expert in the field, or someone who is a bit rusty, and may need a bit more time and support at the start, then depending on the constraints of the project and the skill sets available to support the contractor, it may be better to take the "half speed" contractor.

Or to look at it another way, if it was a case of we have a good one and a bad one, then obviously you take the good one regardless of cost, but if given the choice between someone who is average, but experienced in say the latest version, over someone who is very good but has no experience of the latest version, so needs bringing up to speed, but is willing to come in under his normal rate to compensate for the extra training required, knowing that it will be beneficial in the long run.

A slightly convoluted point, but I hope you understand where I'm coming from.

[BlasterBates]

Depends on the circumstances, if you have the choice of paying someone twice as much who is an expert in the field, or someone who is a bit rusty, and may need a bit more time and support at the start, then depending on the constraints of the project and the skill sets available to support the contractor, it may be better to take the "half speed" contractor.

Or to look at it another way, if it was a case of we have a good one and a bad one, then obviously you take the good one regardless of cost, but if given the choice between someone who is average, but experienced in say the latest version, over someone who is very good but has no experience of the latest version, so needs bringing up to speed, but is willing to come in under his normal rate to compensate for the extra training required, knowing that it will be beneficial in the long run.

A slightly convoluted point, but I hope you understand where I'm coming from.

This would be true if your client was the managing director of his own business, but not for a PM in a large organisation. A PM doesn't generally earn commission on his "budget". A PM puts in a request for an external resource it either gets approved or it doesn't, once it has been approved they automatically go ahead with their approved suppliers, if an agency were to offer the PM someone at "half-price" the PM doesn't really have a motivation go through with it. He doesn't really get anything from it. Therefore offering yourself cheap doesn't usually work. The PM is judged purely on whether he delivers what he's promised, hence the risk of not delivering outweighs a financially vacuous "pat on the back" from the purchasing dept.

If you work with PM's they're not at all interested in sacking or removing contractors to save money, they simply hold on to what they've got so they can deliver more. The accountants generall give them "head counts" not absolute budgets with which the could run a small profit centre.

Now if the PM was running his own business your strategy would work, because that would be money in his own pocket.

[Ben81]

This would be true if your client was the managing director of his own business, but not for a PM in a large organisation. A PM doesn't generally earn commission on his "budget". A PM puts in a request for an external resource it either gets approved or it doesn't, once it has been approved they automatically go ahead with their approved suppliers, if an agency were to offer the PM someone at "half-price" the PM doesn't really have a motivation go through with it. He doesn't really get anything from it. Therefore offering yourself cheap doesn't usually work. The PM is judged purely on whether he delivers what he's promised, hence the risk of not delivering outweighs a financially vacuous "pat on the back" from the purchasing dept.

If you work with PM's they're not at all interested in sacking or removing contractors to save money, they simply hold on to what they've got so they can deliver more. The accountants generall give them "head counts" not absolute budgets with which the could run a small profit centre.

Now if the PM was running his own business your strategy would work, because that would be money in his own pocket.

Fair enough, I will bow to your greater experience on these matters, I am still a bit green to all of this, and tend to avoid getting involved in that side of things where possible.

[d000hg]

But when you agreed the rate presumably you were happy. The fact that that they take a huge cut shouldn't affect your "happiness". Whether they earn a lot or less won't make any difference to your financial well being. Lets say you complain and the client then forces the agent to take a huge cut; the agency will earn less but this will make no difference to you. If you were to go through another agency there is a very good chance that he would just simply add 20% or 30% to your rate, to get in with the client ("hey we've got a cheap contractor") so you wouldn't necessarily be any better off.

Lets say for example that an agency is taking 10%, how do you know the client isn't ripping you off by "pocketing" say 20% of what they might have been prepared to pay.

I would have absolutely no problem at all working through an agency who took 50%, because I know that I'm getting the rate I asked for.

I still think this is daft logic. If you were the client, would you be happy paying an agency £500 a day for a £200/day resource?

You might be happy on what you were getting, but that's kind of irrelevant. You might not want a bigger %, but you can sensibly want the client to pay less so that they can afford you more easily.

It's pretty poor business not to care if someone is screwing you... business is about maximising your profit, not "being happy" with the profit.

[jmo21]

I still think this is daft logic. If you were the client, would you be happy paying an agency £500 a day for a £200/day resource?

You might be happy on what you were getting, but that's kind of irrelevant. You might not want a bigger %, but you can sensibly want the client to pay less so that they can afford you more easily.

It's pretty poor business not to care if someone is screwing you... business is about maximising your profit, not "being happy" with the profit.

Have to agree. It's not just about the money, although that is obviously a massive part of it.

It might mean you are the first contractor to get cut when their budget needs tightening, or they cannot afford to extend you come renewal time.

[kingcook]

I have been aware for a while that on a contract I did for an agency a while ago that I was receiving less than 50% of what they were charging me out for, I am just wondering if there is a minimum % that they are required to pay to the contractor.

Yes there is a minimum - it's 0% (if the contractor agrees).

[BlasterBates]

I still think this is daft logic. If you were the client, would you be happy paying an agency £500 a day for a £200/day resource?

You might be happy on what you were getting, but that's kind of irrelevant. You might not want a bigger %, but you can sensibly want the client to pay less so that they can afford you more easily.

It's pretty poor business not to care if someone is screwing you... business is about maximising your profit, not "being happy" with the profit.

Do you negotiate contracts based on the margin ie give me 80% of whatever you get, or do you negotiate based on the rate you want?

You can't have it both ways.

[d000hg]

Do you negotiate contracts based on the margin ie give me 80% of whatever you get, or do you negotiate based on the rate you want?

You can't have it both ways.

The whole concept of having an agent is they take a cut of what you bring in, for providing services. The fact you're legally taking a cut of their pay doesn't change this.

But if you're happy being screwed over, that's your choice I suppose. I might be happy on £400 a day but I'd be more happy on £600

[BolshieBastard]

Firstly no there isn't a legal limit, secondly, where you happy with the rate before you knew what there cut was? If yes why are you complaining now.

Sorry, that attitude is a bit lame.

Wouldnt you feel ripped off if you sold say a piece of pottery for a couple of hundred quid when the potential buyer told you it was only worth maybe 500 quid then find out the buyer knew its true worth and had sold it for say 10 grand?

OK the figures are different but would you still be 'happy' with what you got for the pottery!?

People including experienced contractors make decisions on rate based on all sorts of factors but, if the agent 'cons' you one way or another, I certainly wouldnt be happy about accepting a rate I knew the agent was underplaying.

[dogzilla]

Interesting thread.

I'm wondering if we can do better in the way we negotiate with agents....

My current contract role went like this... Agent called me up, asked me how much I want per day, I was caught off-guard (first contract in a while) and she offered the price. It seemed quite reasonable and I said yeah I would be interested. So we go through the process and she's keen to stress the day rate "we agreed" at every possible opportunity.

Then I do the interview, apparently client was super impressed and offered the job immediately after speaking with me. Never discussed price after that... I was hook line and sinker. Anyway I am happy with the rate so no bother, if they renew I will negotiate further.

However going back, I think I could have played it better...

1. When agent mentioned price on the first phonecall, I should have said "yes that would be in the region, but I'd have to do the interview and find out what will be expected before I agree to a price"
2. After the client came back with the offer I should have opened up the salary negotiations straight away.

I'm pretty sure I'm getting done for 50%. This is my first contract gig in a while as I say, but the clientco is under the impression I'm some sort of uber consultant, i had a meeting with a head of delivery for europe and he's like "we are so excited to have someone of your experience on board".... To be fair I am very good at what I do and I have worked with the best in the industry so I'm hoping I'll be able to get another 30% next time around.