Agency Rates

[washed up contractor]

Is 50% a reasonable cut for an agent or should you haggle?

[billybiro]

I would be happy if it was 50% of £5000 pd, but unhappy if 50% of £500 pd.

Bear in mind that, in the first instance, the client is still paying £5000 per day for your services and will thus expect £5000 worth of value from you, irrespective of the amount of that £5000 you actually see.

[billybiro]

BTW - it's not a cut. You get a percentage of the agency's charge to the end client, not the other way round. Don't ever forget that minor detail.

There's also a bottom level of income the agency need to live on of course, so the lower the fee the higher the apparent percentage they will retain.

Yes and no.

Technically, yes, you're correct. The contractor gets a percentage of the agency's fee.

Realistically, no, you're wrong in so far as, the client (who is paying the full agency fee) feels that they paying that amount for the actual contractor. Therefore, if we have two contractors A & B. A's agent charges client £1000 per day and gives A £500. B's agent charges client £700 per day and gives B £600. Thus B earns more than A, but from the client's perspective, A is more expensive than B, and thus more "value" is expected from A.

It's for this reason that you need to know your agency's cut and thus the actual price the client is paying for your services. This is even more important if the A & B contractors above are doing the same role for the client. It's even easier for the client to make such comparisons between two similar contractors doing the same thing.

And guess which one gets the boot when the client need to reduce headcount/budget?

[pauldee]

Different agencies work in different ways. Some charge the client then pay the contractor, some will be clear with the client how much they are paying the contractor and charge n%.

[malvolio]

Yes and no.

Technically, yes, you're correct. The contractor gets a percentage of the agency's fee.

Realistically, no, you're wrong in so far as, the client (who is paying the full agency fee) feels that they paying that amount for the actual contractor. Therefore, if we have two contractors A & B. A's agent charges client £1000 per day and gives A £500. B's agent charges client £700 per day and gives B £600. Thus B earns more than A, but from the client's perspective, A is more expensive than B, and thus more "value" is expected from A.

Heard that before., Having worked both sides of the hiring divide, I do not accept it...

It's for this reason that you need to know your agency's cut and thus the actual price the client is paying for your services. This is even more important if the A & B contractors above are doing the same role for the client. It's even easier for the client to make such comparisons between two similar contractors doing the same thing.

Except, among other things, it is very difficult to find out the margin accurately unless you can see the whole invoice trail. It is commercially confidential, after all.

And guess which one gets the boot when the client need to reduce headcount/budget?

Simple. IME the one doing the worse job or the one with the worse attendance/error/rework/irritation stats. Not the most expensive. In fact I once got binned because the client had committed to another guy for a fixed term so they gave him my role, even though he couldn't actually do it.

[billybiro]

Heard that before., Having worked both sides of the hiring divide, I do not accept it...

I can't disagree with you, obviously, but I'm genuinely curious to hear more about why you don't agree with it. In a lot (not necessarily all, but most) of the gigs and clients I've worked with over the years, they do generally tend to expect more from the more expensive contractors. Admittedly, if the difference is £500 vs £600, maybe not so much, but if the difference is £500 vs £800+, then yes.

Except, among other things, it is very difficult to find out the margin accurately unless you can see the whole invoice trail. It is commercially confidential, after all.

Very true. I make no attempt to give advice on exactly how one might find out such information and I'd certainly not advocate poking your nose too far in order to find it out if that could potentially jeopardise your contract, but on the other hand, if the information is available fairly easily, I'd certainly advice trying to gain that knowledge for the reasons I've stated.

Simple. IME the one doing the worse job or the one with the worse attendance/error/rework/irritation stats. Not the most expensive. In fact I once got binned because the client had committed to another guy for a fixed term so they gave him my role, even though he couldn't actually do it.

Well, yes, but on the assumption that all else is equal - or at least perceived by the client / client's representative who may have a say in who goes and who stays to be equal - then it's the one costing more that goes, whilst the cheaper one stays. Again, generally speaking.

Also bear in mind that the bean counters that might make the decision of who goes and who stays may not know or even care who is "doing the better job". These are usually HR/Budgetary folks who are probably far removed from the actual work happening "at the coalface".

[silverlight1]

The higher your rate the more likely you are to face the chop when the someone realises what you are being paid...it's human nature.

If the agency is taking a 50% cut then your rate is inflated and more likelihood you'll get the chop.

He's being paid £££x and we can get a Bob to do the job for $150...