Clientco Rate Cut - Agency Commission Cut Negotiation?

[TFour]

Clientco is reducing the contractor rates paid to the agency my company has a contract with by 10%. Clientco has an open-book relationship with the agency where they pay the agency my company's rate plus 5%. My company's contract with the agency pays an hourly rate for all hours of service provided to clientco.

The agency did not introduce me to the client (I secured the contract through my own business contacts). For 2.5 years they have been collecting approximately £5k a year for administering weekly contract payments from a timesheet/self-invoice to a bank payment.

I asked them to consider reducing their commission (thereby recovering some of the rate I receive) in light of the client's 10% cut. After getting through various excuses they have refused point blank to consider this.

I am feeling a bit like they are a parasite bleeding money off every hour I earn. If I work 40 hours a week, they make their commission. If I put extra effort in and work 50 hours per week, they make even more commission for no additional effort whatsoever. While their commission % is not high, the amount of money they are making what seems almost entirely off my own back (my own business contacts, my own hard work, my own reputation maintaining continued working) just for "laundering" money between clientco and my company seems excessive. When food is aplenty no-one feels it too much if leeches take a bit of blood....but in times of famine the bites feel really hard.

After further reflection I thought about suggesting a capped rate - for 37 hours per week they make their 5% commission, for additional hours my company gets their 5% margin......but fear this will still fall on deaf ears.

Does anyone have experience of trying to negotiate similar compromises? What about changing agencies at contract renewal?

[MonzaMike]

Normally your contract would prevent you simply changing agents, however given that you found the contract and not the agent then I'd like to think this doesn't apply to you.

The other question would be whether the client wants to work with another agency. These fixed comission deals are often because the agency has some level of exclusivity with the client. Unless you are really important to the client they probably don't want the hassle of dealing with another supplier.

Some of the agents on this forum have quoted elsewhere what they would charge for simply factoring your payments.

[TFour]

I know the agency does a lot of work with the client but they don't have total exclusivity - other contractors in similar arrangements are with different agencies.

[NotAllThere]

£5000 a year, means they're getting about £20 a day. So you're on, what, £400 a day?

Client currently paying £420. So 10% reduction means they'll pay £378 a day. So you'll be down to £360 and they're getting £18.

Not much room for manoeuvre, is it?

Capping the commission is probably something they're not set up for, so they're unlikely to think it worth it. In any case, what's your leverage? Why should they give you some of their now reduced commission?

[TFour]

£5000 a year, means they're getting about £20 a day. So you're on, what, £400 a day?

Client currently paying £420. So 10% reduction means they'll pay £378 a day. So you'll be down to £360 and they're getting £18.

Not much room for manoeuvre, is it?

Capping the commission is probably something they're not set up for, so they're unlikely to think it worth it. In any case, what's your leverage? Why should they give you some of their now reduced commission?

I worked out after I posted - I wouldn't gain much on a capped commission other than moral satisfaction -a few hundred quid.

Why should they reduce their commission? They would have to consider whether they would be making decent money on the reduced commission (I'd argue they're making a killing at £100 a day for processing an invoice into a bank payment) AND whether they want to be in business with my company in the long term.

My leverage is I have a good relationship with clientco and barring a catastrophe there seems to be a lot more work to come. I am not reliant on the agency - they are reliant on me and my hard work.

[tim123]

After further reflection I thought about suggesting a capped rate - for 37 hours per week they make their 5% commission, for additional hours my company gets their 5% margin......but fear this will still fall on deaf ears.

Does anyone have experience of trying to negotiate similar compromises? What about changing agencies at contract renewal?

The problem is that they are factoring your money for you.

Factoring twice as much, costs them twice as much.

This idea that you have that they don't have any costs for the "overtime" money is completely false

tim

[NotAllThere]

...
Why should they reduce their commission? They would have to consider whether ... they want to be in business with my company in the long term.

Probably not. Most agencies couldn't care less.

My leverage is I have a good relationship with clientco and barring a catastrophe there seems to be a lot more work to come. I am not reliant on the agency - they are reliant on me and my hard work.

Not if you're locked into using them. Then your only leverage is to quit and go and work somewhere else.

If you're not locked into them then you could try going through another agency. You might find one that'll do it for less. But you also have to consider their financial stability.

If you've such a good relationship with clientco - why are they cutting your rate?

[Not So Wise]

While I love to see agents get screwed and always believe any company should do what they can to improve their profit margin honestly think you are pushing your luck here.

Agency are currently getting 5% for providing a billing and factoring service, you are already getting a very good deal, asking them to cut their rates is just you getting greedy.

5% (5k) would be barely worth the effort/risk to them as is.

If you are really that fussed about them earning more for OT you do, you could try a fixed fee service from them, aka you pay them a fixed fee (in advance) for invoicing/factoring, they pay full amount of earnings to you.

But to be honest unless they are capable of thinking of the box (aka realising they are getting paid for factoring not as "employment business") don't see them going for that

[TFour]

If you've such a good relationship with clientco - why are they cutting your rate?

Clientco are cutting all contractor rates, because in the current market they think they can and most contractors will swallow it (they are probably right in the short to medium term at least). It's being done at a corporate level not by the local business client contact.

[TFour]

While I love to see agents get screwed and always believe any company should do what they can to improve their profit margin honestly think you are pushing your luck here.

Agency are currently getting 5% for providing a billing and factoring service, you are already getting a very good deal, asking them to cut their rates is just you getting greedy.

5% (5k) would be barely worth the effort/risk to them as is.

If you are really that fussed about them earning more for OT you do, you could try a fixed fee service from them, aka you pay them a fixed fee (in advance) for invoicing/factoring, they pay full amount of earnings to you.

But to be honest unless they are capable of thinking of the box (aka realising they are getting paid for factoring not as "employment business") don't see them going for that

Barely worth the effort...really? Give me £5k each a year for 20 contractors and I'll do the work the agency does. It should take me all of....3 hours a week...and that's if the payments are manual and not automated?

I wouldn't call it being greedy, I would call it market conditions (clientco's rate cut) forcing me to look at the value chain and work out who is getting how much for what.....coupled with who is reliant on who.

Agreed....inability to "think out of the box" is where this relationship is deteriorating.