Determining Agency Cut

[Denny]

Hi,

I hope this is the right area to post this, I'm new

To explain my situation: I'm currently a permie, generally looking for permie work. An agent picked up my CV from an online job search and contacted me on a whim, as I have some very specific skills requested in the contract.

The initial rate offered when the agent put my CV across was very inviting and enough to make me consider finally making the jump to contracting (thought about it many times, but the situation was never right).

Since then I've had two phone calls from the agency, each time telling me that the rate is lower. I know for a fact that the agent is taking advantage of me being a newbie to increase their cut.

Despite this, I am still considering going to the interview (what harm is there? Any interview practice is good practice...) But I'm curious, is it considered bad form to ask how much the agency is charging the client? I know that if I ask the agent, they're bound to lie, and the client is more likely to tell the truth.

Any opinions are gladly received.

Ultimately, you have to assess what your own financial risk is here. You are potentially new to contracting so getting your first assignment is imperative to build up your CV.

Having said that, I disagree with the 'none of your business' comments because as a contractor your client will perceive your worth and what you can do according to how much they are paying for your services - and that includes the EBs cut. So if they are expecting the value of a racehorse and getting a donkey then you need to know that, and how can you assess that unless you know what the EBs cut is.

I would take a mid way approach here and ask for the cut, assess for yourself whether they are taking the piss (anything over 25% is taking the piss) but if they tell you 30% and you can swallow that the other 5% is at your expense then still take it if the job is worth doing. Ultimately, once the role starts you can let your client know what your rate is should they ever get shirty with you at any time about how much you are costing to the amount of value you are producing. This happened to me in my first contract. I was paid a decent amount but discovered the EB was taking another 50% on top. I then got two rises but the PM insisted that the EB swallowed these rises themselves and that the client was't charged more. Of course, they weren't happy about it, but I was on the assignment longer than I would otherwise would have.

If there are rumbles then you can then go back to the EB and complain about their cut and suggest either they put your rate up to reflect the amount or charge their client less. I would suggest the latter is better than for former for this first assignment, mainly because we are well past the post 2000 compliance market now and the client are more likely to hold their own costs down rather than increase your rate. That means the client will be charged less margin rather than increase your rate to a more proportionate EB to contractor percentage ratio.

[Ardesco]

Having said that, I disagree with the 'none of your business' comments because as a contractor your client will perceive your worth and what you can do according to how much they are paying for your services - and that includes the EBs cut. So if they are expecting the value of a racehorse and getting a donkey then you need to know that, and how can you assess that unless you know what the EBs cut is.

I would disagree. IMHO you can work out what level of competance they are expecting from you by the role spec and the interview. Once they have questioned you to see if you are fit for the role and they have explained what they want done you should know if you can do it or not.

This is the point where you go back to the agent and say "They expect this, this and this. If you want somebody to do all of that you need to pay £xxx more". If you are able to do the job, are happy with what is required of you, and happy with your rate it doesn't matter if the pimp is taking 5% or 500%.

[Denny]

I would disagree. IMHO you can work out what level of competance they are expecting from you by the role spec and the interview. Once they have questioned you to see if you are fit for the role and they have explained what they want done you should know if you can do it or not.

This is the point where you go back to the agent and say "They expect this, this and this. If you want somebody to do all of that you need to pay £xxx more". If you are able to do the job, are happy with what is required of you, and happy with your rate it doesn't matter if the pimp is taking 5% or 500%.

That's all very fine and dandy in an ideal world. But we're not living in an ideal world. True the spec can indicate what is required of a contractor but ultimately a client will be less inclined to renew contracts if they think that they can get someone cheaper if other EBs can reduce their margin and charge the client less. So they will either expect the contractor to put in a load of extras skills to cover the amount the client is being charged or else the client will simply look for their bread to be buttered elsewhere and rehire someone else at lower overall cost. Why not apply some joined up thinking here, Ad' and look at the IT contractor site. There is a thread running there whereby contractors are being pressurised into working for longer hours at no extra charge than the contractural hours stated on the works schedule for their daily fee. Presumably, this could be because the EB is taking too high a margin, at least in some cases, so the client wants their extra pound of flesh somehow to justify the overall cost of hiring.

Also, why should the contractor risk or actually suffer an unnecessary termination or non renewal based on an EBs greed, when the next contractor will get the same rate but the EB charge a lower percentage?

[Ardesco]

That's all very fine and dandy in an ideal world. But we're not living in an ideal world. True the spec can indicate what is required of a contractor but ultimately a client will be less inclined to renew contracts if they think that they can get someone cheaper if other EBs can reduce their margin and charge the client less. So they will either expect the contractor to put in a load of extras skills to cover the amount the client is being charged or else the client will simply look for their bread to be buttered elsewhere and rehire someone else at lower overall cost. Why not apply some joined up thinking here, Ad' and look at the IT contractor site. There is a thread running there whereby contractors are being pressurised into working for longer days than the contractural hours stated on the works schedule. Presumably, this could be because the EB is taking too high a margin, at least in some cases, so the client wants their extra pound of flesh somehow to justify the overall cost of hiring.

Also, why should the contractor risk or actually suffer an unnecessary termination or non renewal based on an EBs greed? The market simply isn't in favour of the contractor at the moment.

My god you love to argue over the pointless don't you. Any professional contractor will make sure he/she knows the expectations before starting the job. If the client has given you the expectations they aren't suddenly going to say oh by the way as well as the initial expectations we also want you to tulip gold and piss champagne. If they do it is probably a tulipty company to provide a service for anyway and you have lost nothing by not getting an extension.

This isn't the ideal world so the agent is either not going to tell you thier cut or lie to make it sound reasonable. The only way to mitigate this is to make sure you are aware of the expectations before you start to make sure the agent has not tried to sell you as something you are not. If this is the case what I stated above comes into play, this is where you go back to the agent and haggle an increase to your rate.

Agents cut still doesn't mean tulip.

[NotAllThere]

If the client can get someone as good for less money, they'll switch. The trick is simply to ensure that you are value for money. So, for example, I'm four times more expensive than my client's offshore development team. But I'm five times quicker.

If they could find someone as good as me offshore, of course I'd be stuffed.

I still want to know the agency cut, because I want to ensure I remain value for money. All other things being equal, a lower agency cut means I'm more likely to be renewed.

[Denny]

If the client can get someone as good for less money, they'll switch. The trick is simply to ensure that you are value for money. So, for example, I'm four times more expensive than my client's offshore development team. But I'm five times quicker.

If they could find someone as good as me offshore, of course I'd be stuffed.

I still want to know the agency cut, because I want to ensure I remain value for money. All other things being equal, a lower agency cut means I'm more likely to be renewed.

Sez you.

Correctly, I might add, particularly now that the market is looking a bit dodgy for contractors at the moment.

[Denny]

My god you love to argue over the pointless don't you. Any professional contractor will make sure he/she knows the expectations before starting the job. If the client has given you the expectations they aren't suddenly going to say oh by the way as well as the initial expectations we also want you to tulip gold and piss champagne. If they do it is probably a tulipty company to provide a service for anyway and you have lost nothing by not getting an extension.

Agents cut still doesn't mean tulip.

Why is it pointless? It was query raised by a contractor. If you thought it was pointless why answer it?

You obviously have had a very lucky run with your contracts. Some contractors don't and do have to put in extra skills or hours and the reason is probably to do with the EB mark up, in some cases.

If the law states that the EB mark up should be disclosed (someone posted a link earlier) can't you just assume that there must be a good reason for that?

There is far too much disjointed thinking surrounding contracting and that is why we're in such a mess about ir35 as well.

Contracting seems mostly about throwing darts at the dartboard blindfolded and hoping for the best. I don't regard this as satisfactory and I'm sure other contractors feel the same way, even if you don't Ardesco.

[Emily]

Recruiter POV

Although, I'm no longer working on the agency side of recruitment I just wanted to give the recruiter point of view.

There are a few alternative explanations for your predicament:
1) The agency are taking the mickey and trying to increase their cut. Annoyingly for good agencies this is the immediate assumption of most people, and sometimes (too often that appropriate) this is the case.

2) The consultant got over excited when he first saw your CV and wanted to get you over to the client as fast as he could (i.e. before you were nabbed by someone else) and so he promised to offer you a great rate that the end client didn't agree to. The client then came back and said no way, thus the drop in rates.

Nowadays, most companies agree fixed margins with recruiters so they won't take any of your 'cut' because they have a fixed margin. This generally means it is in their interest to get you more money.

To be honest this agency could be a complete rogue but I think he just put you in at too high a rate for the client and thus he has had to lower the rate. I would take a guess that he is on a fixed margin so he will have no incentive to lower your rate other than to get you placed.

[DodgyAgent]

Why is it pointless? It was query raised by a contractor. If you thought it was pointless why answer it?

You obviously have had a very lucky run with your contracts. Some contractors don't and do have to put in extra skills or hours and the reason is probably to do with the EB mark up, in some cases.

If the law states that the EB mark up should be disclosed (someone posted a link earlier) can't you just assume that there must be a good reason for that?

There is far too much disjointed thinking surrounding contracting and that is why we're in such a mess about ir35 as well.

Contracting seems mostly about throwing darts at the dartboard blindfolded and hoping for the best. I don't regard this as satisfactory and I'm sure other contractors feel the same way, even if you don't Ardesco.

Since when have laws been made for "good reasons" ?

[Sausage Surprise]

Correctly, I might add, particularly now that the market is looking a bit dodgy for contractors at the moment.

Why do you say that?