Agency Making 50% margin

[northernladuk]

Its not budget cost, its actual daily rate the client is paying to the agency.


I have been doing contracting for last 10 years. I have managed to involve my clients in previous projects where I wanted to raise the rate. I have never gone to agency to ask for a rate rise rather clients have gone to agency and agreed for a rate rise. In last 10 years, in every contract, I knew the rate the client was paying to the agency and I knew the agency margin.


I know client will not be pleased about this once they know and may push agency to increase the rate. The only issue is that agency may or may not agree and as you said I may have to leave the gig completely.

I am a single contractor. There is no consultancy agreement. This is bum on seat contractor. There is no account manager or any such thing. The agency is simply making 50% of my rate.

You said 400 so the client is paying 800 for you?
Something just isn't right here.

[NoviceContractor]

You said 400 so the client is paying 800 for you?
Something just isn't right here.

The client is paying 1200 out of which Agency is keeping 400 and paying me the rest thus making 50% on my rate.

[WTFH]

Agency Making 50% margin

Agency do not have to pay me VAT form the pocket. They get to claim it back every quarter.

What Old Greg is saying is: when you saw the figure, did that include VAT or not?

Basically, you claim to have seen a figure. If, for example, it’s in the client’s AP as a payment, then that includes VAT.
Take 20% off £1200 and you get £960.
Without knowing what you were looking at, you can’t be certain, and based on your reply to OG, I’m not sure you understand VAT.

[Old Greg]

The client is paying 1200 out of which Agency is keeping 400 and paying me the rest thus making 50% on my rate.

That's a 50% markup, not margin.

[WTFH]

That's a 50% markup, not margin.

True, it’s 33% margin.

[NoviceContractor]

That's a 50% markup, not margin.

Agreed its markup and not margin.

[northernladuk]

The client is paying 1200 out of which Agency is keeping 400 and paying me the rest thus making 50% on my rate.

Jesus. I'd be having a word in the clients shell like if that's the situation. Who the hell pays 1200 for a contractor. You can get an Accenture consultant for that.

Oh. That said you'll never get anywhere near that. The client is being over charged, not you being massively underpaid. You'll know what market rate is for your skill set.

[NoviceContractor]

What Old Greg is saying is: when you saw the figure, did that include VAT or not?

Basically, you claim to have seen a figure. If, for example, it’s in the client’s AP as a payment, then that includes VAT.
Take 20% off £1200 and you get £960.
Without knowing what you were looking at, you can’t be certain, and based on your reply to OG, I’m not sure you understand VAT.

Clients rate is exclusive of VAT. VAT is paid on top of this rate. As I said, I work with this data day in day out and I know what I am talking about here. I also understand VAT.

[NoviceContractor]

Looks like the focus has shifted to what I said and what I understand.
What I wanted to find out here was what should be best way or ways to attempt a rate rise in this case.
Anyway, appreciate your views.
Thanks.

[NoviceContractor]

Jesus. I'd be having a word in the clients shell like if that's the situation. Who the hell pays 1200 for a contractor. You can get an Accenture consultant for that.

Oh. That said you'll never get anywhere near that. The client is being over charged, not you being massively underpaid. You'll know what market rate is for your skill set.

Rate is dependent on the skills and demand supply. Many niche skills pays even more than this.
Even if you know what is market rate for your skill, sometime you take a cut to carry on (just to realise later on that the agency has tricked you)