What is a fair cut for an agency to take?

[Cowboy Bob]

Wrong. The price for the job is set between them and the client. You get what's left after they take their cut. Very rarely is the price for the job set by the contractor.

True, but you're splitting hairs. At the end of the day, if the contractor is getting what they consider a fair price for the contract, then whatever cut the agency has managed to negotiate must be considered fair, since all parties are in agreement with regards to fees received/fees paid.

[oraclesmith]

f) Profit

As a business they've got to make a profit. Drucker.

Not all agencies are on fixed rate. The better ones are, but there are quite a few that subscribe to the wholesale-retail business model. They may have a minimum percentage in their head when they negotiate with the contractor, to cover overheads, but they try to make as much margin as possible to increase their personal commission and of course profits for the company.

I seem to remember some agency group CEO boasting about only going for high margin business.

[expat]

I seem to remember some agency group CEO boasting about only going for high margin business.

S3.

[MarillionFan]

15% Max

[tim123]

Sorry to hear that.

But don't they have insurance for that sort of thing?

They self insure. It's what the margin is for.

I was just pointing out that this calculation of what is a sensible margin based upon what it costs the agent to run just oneself is the incorrect way to do it. The margin also has to cover all of the losses incurred by placements that go sour, for whatever reason, be it dodgy contractor or dodgy client. And whilst it doesn't happen often, it does happen and one bad placement has the potential to cost the agency a lot of money.

tim

[abc]

True, but you're splitting hairs. At the end of the day, if the contractor is getting what they consider a fair price for the contract, then whatever cut the agency has managed to negotiate must be considered fair, since all parties are in agreement with regards to fees received/fees paid.

Well I don't see how an agreement can be considered to be fair, when one of the parties (the contractor), is often kept in the dark, or sometimes simply lied to, about what the client will actually pay.

Say I ask an agent for 45/hour, but the agent lies to me, saying that sadly on this occasion the client can only afford 40 (when in fact the client would pay the 45).

I am not happy about it, but in order to be flexible and work with the agency to secure the work, I say "yes". I sometimes give the agent the benefit of the doubt, because to be fair, they do not always lie. Just most of the time.

The agent then arranges his/her contract with the client, such that this extra 5/hour is still paid by the client, but is trousered by the agency, instead of me.

When later I find this out, I am not happy.

[Cowboy Bob]

Say I ask an agent for 45/hour, but the agent lies to me, saying that sadly on this occasion the client can only afford 40 (when in fact the client would pay the 45).

Whenever an agent says this they are trying to increase their margin. The client has already agreed the fees with the agent before you even get involved. Always stick to the original rate.

At the end of the day, if you're not happy with 40 per hour, don't accept it. If you accept it, it has to be assumed that you're happy with that rate - regardless of what excuse the agent gives for the rate change and whether they're lying or not. If they said that the new rate was 30 per hour would you accept? No, because you wouldn't be happy with that rate. You were happy to accept 40 though. The agent is simply haggling with you and you accepted the proposal, simple as that.

[BlasterBates]

Competition means on the whole the Agency cut is largely OK.

You ...as a contractor can contact any agency right.

You ...as a contractor can quote any rate you want.

Therefore there is no problem.

If agencies cuts were unfair, they would be making huge profit margins, in which case other agencies would move in and offer margins that were slightly less, so taking business from unfair agencies...and so this process goes on until the margins reach a point at which the salaries of Agents would be equivalent to Dustbin men, at which point all the agents go off and start refuse collecting.

That is what one refers to as a "free market", and means that profit margins are such that agents get paid a little bit more than dustbin men.

[abc]

Whenever an agent says this they are trying to increase their margin. The client has already agreed the fees with the agent before you even get involved. Always stick to the original rate.

At the end of the day, if you're not happy with 40 per hour, don't accept it. If you accept it, it has to be assumed that you're happy with that rate - regardless of what excuse the agent gives for the rate change and whether they're lying or not. If they said that the new rate was 30 per hour would you accept? No, because you wouldn't be happy with that rate. You were happy to accept 40 though. The agent is simply haggling with you and you accepted the proposal, simple as that.

Haggling is what you do when you are selling a used car. Of course I do realise that many agents come from that background.

In this market, that approach only leads to friction and bad feeling, which is bad for everyone in the end. Just scan some of the content on this site or elsewhere to see the negative effect it has on the attitude of contractors to agents.

I don't think that it is unreasonable of a contractor to hope that when an agent says that a client will pay a maximum rate of XX/hour, that the agent would be telling the truth.

I do partly agree that perhaps identifying and sticking to a fixed original rate, rather than being flexible over a range, is one other way to go. But it is not flexible and so does not cater for the good agents (yes there are some) who are telling you the truth and are just making an honest effort to find a compromise figure that both the contractor and client can live with.

In a nutshell, I am only happy if I am not being ripped off.

[Swamp Thing]

12-15%