Extension on reduced rate - getting agent to reduce commision - thoughts please!

[Glencky]

Hi all, looking for collective wisdom or experience that might help me. Might not be much to say over what I already know, but worth an ask.

Situation:

Current contract was due to end early April, but was boomed for 2 months due to COVID (I know - lucky). It now appears they want me to stay to do an entirely new and different project, also kicked off as a result of COVID. But there's a catch - only on a reduced rate. I'm actually fine with it. I know the lay of the land enough to know it's not a heinous attempt to shaft me. I'm on a good rate at the moment - if I dropped 20% I'd be about midrange for many large organisations' rates for my role and level.

I know the hiring manager from a previous organisation where they were also my hiring manager, which is how I got this gig - we have a good relationship. So far we've agreed in principle that hiring manager has a new opportunity and I'm potentially interested. Hiring manager has highlighted it can't be on the same rate, and gone off to work out what they can do and come back to me. If it doesn't work out, I'm confident there'll be no hard feelings either way.

I'm better off than many right now: I'd been planning a break after this contract which I planned financially for. However I'm realistic/ pessimistic about the market for the next.. well, N years. There'll be opportunities for contractors because there always are when times are volatile - but lots of us are going to be out of work for periods, I think. And rates will likely (on average) be depressed. So, I'm totally open to continuing same organisation for a lower rate in a different role. (sidenote: IR35 is irrelevant to me as I choose to operate inside and always have done, so if anyone thinks of any aspect of this that's IR35-relevant, it isn't!)


Question/ help

How best can I approach negotiating with the agent to reduce their commission to soften the blow of an extension with a rate cut?

I'm currently through a large agency, who have done nothing on this contract other than invoice for me. They did nothing to 'find' me as I had the prior relationship with the hiring manager, so they've had a lucky break and good deal throughout with me. Hiring manager already knew me and I'd been interviewed by 2 people, offered the role and accepted before the agency even knew I existed. So all they've done is onboard me and obviously provide the admin. Whatever fee they're on, they're not earning it much! (although it has to be said they've generally been good and I've nothing against them).

Assuming hiring manager comes back to me with something I'm prepared to go with, I want to tell the agent I'll take it if they'll effectively increase my rate by splitting the difference with me on their fee/ commission.

I have no idea in this contract whether the agent is on a fixed daily fee or a percentage. As a hiring manager I've had contractors on a percentage or a flat fee of somewhere under £100 a day on top of the contractor's day rate, but it's been a few years since I've been in a role where I had that visibility and I've no idea what's happening in this organisation (where I'm one of the only contractors to the point where I don't know any others).

Anyone ever done this and got any thoughts? My start point is I'll simply have the conversation with the agent but wondering if there's anything else I should be thinking about.

[northernladuk]

If be asking the situation around fixed rate or not first. If they are then nothing you can do so no need to worry unnecessarily.

[GhostofTarbera]

If big org the agent will be on a fixed fee per contractor - something like 7% so zero wiggle room

You are over thinking this, accept the lower rate, might be a year before you work again


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[Old Greg]

If big org the agent will be on a fixed fee per contractor - something like 7% so zero wiggle room

You are over thinking this, accept the lower rate, might be a year before you work again


Sent from my iPhone using Contractor UK Forum

Agreed. There are agencies like Hays who typically do this kind of work for 5% markup.

[ladymuck]

You say you're fine with the lower rate so why exactly are you pushing for more?

My view with rates (and it's different to most on here) is that if I'm able to pay my bills then I'm happy with it. I have had so much repeat work because I don't screw clients / agencies over for every penny. Or I'm just awesome at my job (I think I know which one is more likely).

Now is not the time to be greedy. By all means ask what the agent's fee basis is but don't let that impact continuing to work when you're happy with the rate being offered.

If you're not on paid when paid terms with the contract, some of that margin is going towards covering payments when clients pay slowly. Just because they didn't 'find' you for this role (that just means you can get the handcuff clause removed on the new contract), it doesn't mean their fixed costs have suddenly reduced.

[BlasterBates]

Not a good idea to play hardball if you have no alternative. No harm in trying but this usually only works if you do play hardball.

[LondonManc]

85% of normal day rate > 100% of bench rate.

Challenging times we're in and some clients are taking advantage.

[northernladuk]

Just bear in mind. If you are taking a cut in rate then the agents are taking a cut in their commission as well. You will be asking them to reduce their part of an already reduced figure. If they have been playing fair and their percentage is around average then they won't be able to take a double hit, particularly when they know full well they don't need to. Remember they know how hard times are and how lucky you are to get offered a gig at this point in time. You don't have any negotiating power at all.

The only way you may get this to stick is if the agent has really been taking the piss on a high percentage and you should really know what type of agency they are by now.

Just something to bear in mind before potentially rocking the boat.

[Glencky]

Hi all, sorry for delay in coming back to this - back to back calls all morning.

Taking the sum total effect of the answers - yep, collective wisdom is right on this. You're all right!

* I got the handcuff clause removed in my first contract for exactly the reason the agents 'did nothing'

* I agree with the consensus about not being greedy, the realities of the current market etc. Also agree that on rate I also have tended to be more focused on what I 'need' (and how much I'm interested in the role) than an arbitrary personal view of what I'm 'worth' which in reality is rightly subject to market rates.

...So why was I thinking like this? More a point of commercial principle than anything because as a point of principle I don't think it's an unreasonable thought process - and these are tricky times for all of us, after all. However, it's right that if they're on % commission then they're automatically sharing the pain of a rate cut. Interesting that it could be only 5 or 7%. On a flat rate, it rather depends what it is as to how I feel about it. Having done zero recruitment and basically just processing one uncomplicated invoice a week, £1k+ a month isn't bad money for that, I would say! (even taking into account the cost of factoring etc and I do appreciate there are overheads).

Conclusion: I was in the middle of typing this response when I got the nod saying that what's currently on the table is actually less than 10% less than my current rate. So I definitely will just be saying thanks and cracking on with the renewal. It's not in the bag quite yet (and even when it is, my sense is that it'll go one of two ways - either fizzle out in a short period of time or run and run). But looking good (particularly in this environment).

Thanks for your responses.

[LondonManc]

* I agree with the consensus about not being greedy, the realities of the current market etc. Also agree that on rate I also have tended to be more focused on what I 'need' (and how much I'm interested in the role) than an arbitrary personal view of what I'm 'worth' which in reality is rightly subject to market rates.

This is the key to it all. Through no fault of your own, you're worth less than you were six months ago as a contractor. That's just the nature of a supply and demand economy. Rates have gone up and down over the years by both location and skillset. Ride the rough, enjoy the smooth (oo-er).