What Is A Normal Agency "Cut"?

[evilagent]

a) can be resolved by invoice discounting or factoring.
discounting is essentially getting an advance on the value of the invoice.
Done through banks, for a fee. (of course, a fee).
Once the invoice is paid, you get the remainder after costs.
If the invoice isn't paid, you have effectively borrowed against a bad debt!
I am sure you can get insurances for that.

factoring is where you sell the invoice. the invoice is now owned by a third party, who will be collect what is now theirs. you probably wont get as much as when discounting.
downside is whether a slow paying company being hassled by this third party will adversely affect your relationship with client.

issue is how contractors feel about waiting several weeks for an invoice to drop.

[malvolio]

a) can be resolved by invoice discounting or factoring.
discounting is essentially getting an advance on the value of the invoice.
Done through banks, for a fee. (of course, a fee).
Once the invoice is paid, you get the remainder after costs.
If the invoice isn't paid, you have effectively borrowed against a bad debt!
I am sure you can get insurances for that.

factoring is where you sell the invoice. the invoice is now owned by a third party, who will be collect what is now theirs. you probably wont get as much as when discounting.
downside is whether a slow paying company being hassled by this third party will adversely affect your relationship with client.

Yes, I understand factoring. Getting the client to pay up would be the agency's job, that's what we would be paying you for.

issue is how contractors feel about waiting several weeks for an invoice to drop.

Most won't stand for it; but they are conditioned by the weekly-payment-or-else mind-set. As long as payment is fairly consistent, the gap between invoice and payment is simply a matter of planning cash flow. Ah, I see the problem...

[masonryan]

Hi Gents,

I've recently started a new contract, and during the interview, the client mistakenly revealed the amount the agency would be getting per day... It was higher that I imagined, at 21.8%

Is that regarded as high, low, or in the middle?

Not a bad deal for the agency, as the project is expected to go on for about 2 years!

It seems that removing middle-men, and/or being transparent on charges is the way forward in so many areas of business nowadays. The exception I can think of are recruitment agents who pretend they're YOUR agent when really they put themselves and end client first, they get really angry when you start asking what their cut is & have you noticed they always try and push your rates down whilst claiming they are trying to get you the most possible as they get more commission that way?

Seems anyone can set themselves up as an agent nowadays and must enjoy the fact they don't need to be transparent on anything as they casually stab you in the back whilst pretending to work for you.

[Andy Hallett]

Never ceases to amaze me how short-sighted some contractors and indeed agencies can be. Whilst we all debate a few percentage points here and there the MSP's and end clients are depressing the overall rates and sending loads of work offshore.

It is the equivalent of two bald men squabbling over a comb.

FWIW, on contract roles I have never seen our role as an agent, more a broker.

*puffs out chest, awaits incoming*

[masonryan]

Whilst we all debate a few percentage points here and there the MSP's and end clients are depressing the overall rates and sending loads of work offshore.

A lot of people are working contracts in the first place because they're facilitating sending things offshore. Daily rates might be nice for now but there might be unemployment for a long time once the work has sailed away.

[evilagent]

A lot of people are working contracts in the first place because they're facilitating sending things offshore. Daily rates might be nice for now but there might be unemployment for a long time once the work has sailed away.

Come on, masonryan, you can try harder.
Surely you can contort the above the make out it's recruiters fault, instead of clientcos cutting overheads to the bare bones.

[evilagent]

It seems that removing middle-men, and/or being transparent on charges is the way forward in so many areas of business nowadays. The exception I can think of are recruitment agents who pretend they're YOUR agent when really they put themselves and end client first, they get really angry when you start asking what their cut is & have you noticed they always try and push your rates down whilst claiming they are trying to get you the most possible as they get more commission that way?

Seems anyone can set themselves up as an agent nowadays and must enjoy the fact they don't need to be transparent on anything as they casually stab you in the back whilst pretending to work for you.

True enough, anyone can become a recruiter.
I have stated elsewhere that the industry currently prefers sales ability over industry knowledge.

If you remove the middleman, that's a perfectly valid approach.
But don't fool yourself you're going to get a higher rate. The clientco will simply say that now that they have removed the middleman, they pocket the "commission".
You still get the "day rate".
The only benficiary is the clientco.

Considering contractors are also stop-gap middlemen, of a sort, the clientco could take the leap and just take on permies and save even more.
I am sure you are aware of the phenomenon of Fixed Term Contracts, where contractors are paid a pro-rata'ed salary, but without the benefits of employment. (nor pensions, sick pay, etc)

[Dominic Connor]

I agree with Andy Hallett, a good agent is a broker, I've worked for brokers in the City and done properly the work is very similar.

We're not just arguing over semantics here, the word "agent" sets expectations that are false.

An agent in law and in English is someone who acts on your behalf, I am not an agent, I act on my behalf and that of my firm, as a director that is my legal obligation, if I was a wage slave then my employment contract would say much the same thing.

If I were an "agent" I'd have some formal obligation to act in the best interests of someone else, which begs the question of who ?

That doesn't mean I have to screw people over, in the long term that is counterproductive, but given the broken market with its false expectations, not as counterproductive as we'd like.

Margins are now usually too low to give the service that clients want, but too high for the service they often get.

This is because the word "client" is also misleading.

The project manager wants good people that he can afford. Most are smart enough to know that one person who can do it properly is worth two that aren't good and if that means spending 1.5 X on one guy rather than 2X on 2 then that is a good deal.

However purchasing and HR just see the margin, they are vaguely aware that some contractors or permies are better than others but how many HR people do you think know the differences between Oracle and Microsoft SQL ?

If HR/Purchasing get the margin cut by X, they can bask in the love of their bosses for making a saving and since bodies still come in, that seems wise, but isn't.

[quackhandle]

I agree with Andy Hallett, a good agent is a broker, I've worked for brokers in the City and done properly the work is very similar.

We're not just arguing over semantics here, the word "agent" sets expectations that are false.

An agent in law and in English is someone who acts on your behalf, I am not an agent, I act on my behalf and that of my firm, as a director that is my legal obligation, if I was a wage slave then my employment contract would say much the same thing.

If I were an "agent" I'd have some formal obligation to act in the best interests of someone else, which begs the question of who ?

That doesn't mean I have to screw people over, in the long term that is counterproductive, but given the broken market with its false expectations, not as counterproductive as we'd like.

Margins are now usually too low to give the service that clients want, but too high for the service they often get.

This is because the word "client" is also misleading.

The project manager wants good people that he can afford. Most are smart enough to know that one person who can do it properly is worth two that aren't good and if that means spending 1.5 X on one guy rather than 2X on 2 then that is a good deal.

However purchasing and HR just see the margin, they are vaguely aware that some contractors or permies are better than others but how many HR people do you think know the differences between Oracle and Microsoft SQL ?

If HR/Purchasing get the margin cut by X, they can bask in the love of their bosses for making a saving and since bodies still come in, that seems wise, but isn't.

Not just HR people, "but it's just a database isn't it? Surely you can tell why it's not working?"

qh

[masonryan]

Come on, masonryan, you can try harder.
Surely you can contort the above the make out it's recruiters fault, instead of clientcos cutting overheads to the bare bones.

clientcos are using agencies to do their dirty work for them of finding cheap people without publicising how poor they intend to pay them. In the past, perhaps agencies helped them to get the right people. It was a different market back then.