Negotiation: What cut of my wages do agencies get?

[QueenElizabeth]

The first thing an agency says to me when considering sending my cv over to the employer is "What rate are you looking for?"

When I first arrived in the uk I had just come from working in a country with a depressed currency and no feeling for rates here. My first response was to double the sum I had been getting overseas: £30ph, I came up with. Fortunately the agent was not a greedy one and said "Well I'm going to put you down for £34, this is what they are offering."

At the time, I hadn't heard that agencies bill the employer a rate on top of every hour a contractor works. A year later I was on the job site and another contractor mentioned he was accidentally faxed the invoice from his agency, intended for the employer. In addition to VAT he found they were charging 19% more than he was getting. I was surprised and privately computed that the agency was probably getting and extra £7ph for every hour I worked.. money that feels like it is being stolen from me.

My next contract, I told the agency I was expecting £35ph - a minor increase as I gained experience in this country. This was for a programming job in the south west. At the end of the contract, my manager mentioned that when he is looking for a contractor, he just tells the agency what he is willing to pay (£45ph in my case) and the agency sends over CVs. It was both interesting and frustrating to learn what the agency is getting for my work. I'm not sure if this included VAT, however if it does it works out to an additional 11% of my wages going to the agency.

My main question is, what margins do the agencies work with? Is 10-20% a fair guess?


I assume when an agency looks for a contractor, they take the max rate the employer has specified and subtracts VAT and the agency margin to arrive at the suggested rate a contractor will take. If you are asking for more than this rate, they say they need to ask the employer for more money and will get back to you... I sometimes wonder if the agent is just going to his own manager and asking if the agency is willing to accept a smaller margin. Is this how it might work?

What is the minimum % margin the agency will accept before refusing to send a cv to the employer for being too expensive?

[BolshieBastard]

Too many contractors get hung up about what the agent makes, imo.

If you ask for and get a rate you want, does it really make a difference if you later find out the agency is taking 30% off the top instead of the 15% you may have thought they were taking?

In my experience, you wouldnt have got the job if you'd have asked for a higher rate anyway.

[slackbloke]

The first thing an agency says to me when considering sending my cv over to the employer is "What rate are you looking for?"

When I first arrived in the uk I had just come from working in a country with a depressed currency and no feeling for rates here. My first response was to double the sum I had been getting overseas: £30ph, I came up with. Fortunately the agent was not a greedy one and said "Well I'm going to put you down for £34, this is what they are offering."

At the time, I hadn't heard that agencies bill the employer a rate on top of every hour a contractor works. A year later I was on the job site and another contractor mentioned he was accidentally faxed the invoice from his agency, intended for the employer. In addition to VAT he found they were charging 19% more than he was getting. I was surprised and privately computed that the agency was probably getting and extra £7ph for every hour I worked.. money that feels like it is being stolen from me.

My next contract, I told the agency I was expecting £35ph - a minor increase as I gained experience in this country. This was for a programming job in the south west. At the end of the contract, my manager mentioned that when he is looking for a contractor, he just tells the agency what he is willing to pay (£45ph in my case) and the agency sends over CVs. It was both interesting and frustrating to learn what the agency is getting for my work. I'm not sure if this included VAT, however if it does it works out to an additional 11% of my wages going to the agency.

My main question is, what margins do the agencies work with? Is 10-20% a fair guess?


I assume when an agency looks for a contractor, they take the max rate the employer has specified and subtracts VAT and the agency margin to arrive at the suggested rate a contractor will take. If you are asking for more than this rate, they say they need to ask the employer for more money and will get back to you... I sometimes wonder if the agent is just going to his own manager and asking if the agency is willing to accept a smaller margin. Is this how it might work?

What is the minimum % margin the agency will accept before refusing to send a cv to the employer for being too expensive?

lol Did you think the pimps worked for free?
The stock response to this is something along these lines : If you are happy with your rate, then the agents cut is irrelevant.

[Amar]

I totally agree, while the fishing carried out by the agencies is annoying, you do get some genuine leads which turn into a contract. This has happened to me. I asked for something but the agency said the client couldnt pay that much. So i accepted the contract for less as its only 10 minutes from my house. Therefore i am saving money on travel, living expenses etc.

So to finish my post, i will say what the above two posts say. If i get what i asked for then i don't care how much they charge the client.

[NickFitz]

VAT doesn't really enter into it - a VAT-registered business offsets the VAT it is charged against the VAT it charges, so the end result is usually nil. This is why business-to-business charges are normally stated as <some amount> + VAT - the VAT is virtually irrelevant. Business-to-consumer prices (e.g. in shops, or on Amazon) normally include VAT as the consumer cannot reclaim the VAT charged.

This is why you should always obtain a receipt specifying the VAT paid and the VAT number of the supplier when purchasing anything relating to the operation of a VAT-registered business.

Although you're working through a brolly (umbrella company) at the moment, it's still important to obtain VAT receipts for anything for which you intend to make an expenses claim.

[NickFitz]

Oh, and as to your main question: to hell with the pimp's margin. I tell them that (for example) I won't work in (say) London for less than £xxx, as otherwise it's not worth my while. If I get that rate, fine. If they offer less, I usually walk away. If they want to place the best person for the job (that's me) with the client, I don't really care if they're making a little extra, or making a whole lot less, than they expected. I just want what I ask for, and if the markup isn't acceptable to the client (because that's who pays it) then the client can whinge about it.

Just don't undersell yourself... although you need to know what you're worth in a shifting market

FWIW, most customers will, for reasons they don't understand, want to buy the most expensive thing they're offered - so make yourself expensive and you'll get more, and better, work

[chicane]

FWIW, most customers will, for reasons they don't understand, want to buy the most expensive thing they're offered - so make yourself expensive and you'll get more, and better, work

With the inevitable exception of creative/new media agencies, that always go for the cheapest option and then wonder why the services delivered are shoddy and late.

[RichardCranium]

I started writing a response that was detailed, explanatory and positive. I've done that before, I'm that kind of chap. But on seconds thoughts, going through each of your points, I decided 'bollocks to that' so I've deleted it.

You've moved from one country to another without doing any research, you don't even know how the tax system works, were just given work by being placed in a role which pays over twice the national wage, the agent did you a favour and paid you above what you asked, you've got work in one of the depressed parts of the country, you've got a second role paying more than the first, in a country where about a quarter of the adult population has no work,

AND YOU'RE MOANING ABOUT IT.

****off back home then if you're not happy you ungrateful tulip.

[adestor]

I started writing a response that was detailed, explanatory and positive. I've done that before, I'm that kind of chap. But on seconds thoughts, going through each of your points, I decided 'bollocks to that' so I've deleted it.

You've moved from one country to another without doing any research, you don't even know how the tax system works, were just given work by being placed in a role which pays over twice the national wage, the agent did you a favour and paid you above what you asked, you've got work in one of the depressed parts of the country, you've got a second role paying more than the first, in a country where about a quarter of the adult population has no work,

AND YOU'RE MOANING ABOUT IT.

****off back home then if you're not happy you ungrateful tulip.

Amen to that RC

[BrilloPad]

1st time contractors are always considered fresh meat - clients pay less and pimps take a bigger cut.

the more contracts you do - the better it gets.