Rate changes

[Theonenonly]

Hi,

I am currently on my first 6 month contract (I am exactly half way through) and I have just stumbled across a purchase order for my services to my agency and they are taking a 37% cut for every hour.

Is this normal?

I have read things like 20% seems to be the going rate which is fair for both parties but with this being my first contract I am unsure.

Should I speak to the agency to see if I can lower their cut? How would I go about it? Would this even be possible?

Any advice is appreciated

Thanks

[northernladuk]

There is no normal. They will take whatever they can after you have negotiated your rate. If you didn't negotiate very well they get a bigger cut. If you push it hard they get a less one. You are going to have to make sure this doesn't eat away at you and you get pissed off. It is always problematic when contractors see the agents cut.

Look at the number, take it as a learning curve, promise yourself to push hard at renewal and move on for now.

[VirtualMonkey]

That is high but if you're happy with your rate then there's no problem. At the end of the day it's the clientco that's being swindled, not you.

It does lend itself to a decent chance of an increase at renewal time though. Put together a good case, do a good job and you should be able to negotiate with them. Negotiations will be helped if clientco aren't ready to lose you yet so make sure you get nice and cosy with them (in a non IR35 breaching way of course)

[Theonenonly]

Good advice thanks.

I wont let it eat at me, however the lad I work with has known about this figure since the start and is a little resentful. After seeing the rate myself I dont blame him.

There is a chance that this contract will be renewed in Feb, even if it is only for another month or so, so thats when I will strike and try and take them down to about 20/25%.

[Theonenonly]

I asked for a review Friday just gone to discuss how I am getting on and if there was anything I need to change or do better.

In the meeting the client had only praise, so they are very happy with my services.

I think I will take the advice of leaving it for now and if there is an extention to be had then fight my corner. The job is alot more involved then I first thought but the rate is still great for my skill level and with it being my first contract as Northenlad said, its a learning curve and I will know for the future

Thanks again

[Wanderer]

my agency are taking a 37% cut for every hour. Is this normal?

That's very high but sadly not abnormal. In the last 6 months they've made their money now you want to get this down to 15% or less at renewal time, don't take no for an answer. Point out that if you walk then the agency get nothing and with a markup like this they won't be the sole supplier to the client so there is no guarantee that they will recruit a replacement for you - some other agency might get someone in.

Start negotiations for a renewal at least a month before the contract ends and ask them straight up how much they are taking. You've got to play hard ball here, it's your money that they are taking. If there are other contractors in the place with big markups then tell the agency you are going to blow this thing wide open if you don't get a fair percentage for your contract. If you do get a fair percentage then you will keep quiet.

You can also see if you can get the client on side on this one but that's a high risk strategy. The client may be willing to give the agency a rocket about it (which will be very effective at getting you a payrise) or they may be utterly indifferent about it and get annoyed that you want them to fight your battles, so tread very carefully. Drop a few subtle hints about agency markups and see how they react but only if the agency won't move.


Good luck.

[BlasterBates]

Use a bit of psychology, say you have an offer of X elsewhere and if they match it you'll stay.

I would pitch it in the 20-25% margin side, still a hefty rise, you're still fairly new, so I think 15% margin would make an agency wince.

I would say a 15% margin would be longterm contract margin.

An "acceptable" margin is dependent on how long a contract runs. An agent has to do as much work for a 3 monther as he does for a two year contract, so shorter contracts are always going to have higher margins, but once the agency has his money back so to speak you can pressure down on the margin.

[Jubber]

My experience of this was only when I was on a low rate (in comparison to what I have been paid) It was a simple database job (3 months) about 8 years ago -- just around the corner from where I was living at the time out in the deep south west. It was paying 14 per hour. The agency I found out where charging 22.

The last agency contract I had in London was paying 4.5 times that rate and the agency were on a 12.5% margin. I had access to all the HR records (shhhhh) so I could see everything. I did notice (ahem) that one of the temps sitting just opposite was on 11 per hour and the agency was charging 18. Further analysis on all my colleagues (natch) proved that it was the norm at this particular client. The margins seemed to rise the lower the rate.

[nomadd]

That's very high but sadly not abnormal. In the last 6 months they've made their money now you want to get this down to 15% or less at renewal time, don't take no for an answer.

This^

If the agency cut you quoted is real, then you are getting your ass ripped. Really, don't go past the next renewal without sorting that out.

[Theonenonly]

My experience of this was only when I was on a low rate (in comparison to what I have been paid) It was a simple database job (3 months) about 8 years ago -- just around the corner from where I was living at the time out in the deep south west. It was paying 14 per hour. The agency I found out where charging 22.

The last agency contract I had in London was paying 4.5 times that rate and the agency were on a 12.5% margin. I had access to all the HR records (shhhhh) so I could see everything. I did notice (ahem) that one of the temps sitting just opposite was on 11 per hour and the agency was charging 18. Further analysis on all my colleagues (natch) proved that it was the norm at this particular client. The margins seemed to rise the lower the rate.

Yes this is how I found out I actually got handed a purchase order from HR for my services to pass on to the boss and just so happened to spot the hourly rate, worked it out that the agencys cut to be 37%.

I have just had a performance review that I personally asked for, I have just emailed my agency with the outcome of the meeting and my contact is very impressed. I have asked if it would be an appropriate time to discuss rates, coming from my end as a sort of bonus for performing well over the last 3 month.

Waiting to hear back so watch this space.

Again I greatly appreciate all your help and advice as without your comments I wouldnt have known where to start.

Thanks again