Agency Margin

[evilagent]

I've been out of the game for a while (joined the dark side) but have just started looking to hire a couple of guys to our team.

Agency margin (for a preferred supplier) is 15%.

Is that:
a) taking the piss,
b) about right,
c) a bargain?

In my 10+ years of contracting before this job, I never had to suffer any more than 10%...

You could save yourself the agency margin by:
1: advertising your needs across a number of selected portals (at a small cost)
2: filter through numerous CVs to generate a short-list
3: organise interviews
4: make offers to candidates (they may still decide to interview for other options right up to first day on-site)
5: follow up on references
6: ensure that contractor is paid weekly (or agree with contractor on 30 day terms, or whatever)
7: find a suitable contract to sign for services rendered
8: anything else not covered above

all jolly good fun, and easy, I dont know why more clientcos dont do it.

[Eirikur]

Why are people so concerned about the agency margins?
If you're happy with a rate, you're happy with it and it shouldn't matter what the agent gets

[northernladuk]

Why are people so concerned about the agency margins?
If you're happy with a rate, you're happy with it and it shouldn't matter what the agent gets

Yes and no. You need to know what's going on to secure yourself the best rate. Doesn't matter if you are happy with it, no one likes getting screwed over and you would be even happier if you had squeezed another 10 quid plus a day out of it. Getting too upset isn't worth it but throwing good money away because you can't be bothered isn't the way to go. It's business after all.

[kal]

Yes and no. You need to know what's going on to secure yourself the best rate. Doesn't matter if you are happy with it, no one likes getting screwed over and you would be even happier if you had squeezed another 10 quid plus a day out of it. Getting too upset isn't worth it but throwing good money away because you can't be bothered isn't the way to go. It's business after all.

True, an extreme example for illustration purposes : If the client is paying say £600 a day to an agent he's expecting a top drawer contractor on say £500 a day. If the agent then supplies a run of the mill £300 a day resource then the only winner is the agent. The client has been short changed and the contractors skill may not be up to expectations. I have no problem with agents making 10-15%, any more that that starting to take the mick (and 25%+ is in taking the p!ss territory).

[craig1]

Although the margin doesn't bother me too much if I've negotiated in good faith and I think it's a good rate to start with, I do get an expectation of agency standards based on that margin. For example, if the margin is 4% then I'm probably going to expect sharp practices from the agency as they'll struggle to make any money out of me if I'm on weekly bill/weekly pay. If the margin is 15%+ then I'm going to expect an easy ride and some very good service from them, especially around ease of payment, if it's not then you'll start hear me complain to them about what they're doing for their money. If the margin is 25%+ for a contract over 3 months then I'll keep quiet until renewal then be fairly sharp around the "well, you've had your recruitment bonus for the first period, now we're into straight contract admin and I expect you to cut your margin", if they're taking that much of a margin then they're screwing both me and the client. Regardless of what some agencies think, it's a three way deal between me, them and the client, they don't get to be the dominant party taking the proverbial.

[Taita]

I've been out of the game for a while (joined the dark side) but have just started looking to hire a couple of guys to our team.

Agency margin (for a preferred supplier) is 15%.

Is that:
a) taking the piss,
b) about right,
c) a bargain?

In my 10+ years of contracting before this job, I never had to suffer any more than 10%...

Interesting question. Presumably, HR/Purchasing have agreed the margin (or is it mark-up), with the preferred supplier, based on value they perceive they are getting. If so, is it really down to the hiring manager to query or challenge margins directly with the supplier (for specific contractors) or should it be something the hiring manager raises/queries in an internal discussion with other relevant fellow managers?

By all means do what you can to keep your company's costs down but remember this is a double edged sword -- others may question your salary package using similar logic.

More importantly, perhaps, how does your company price its products/services? Are the company's prices pitched at what the market will pay? How does your company respond to arbitrary challenge to its margin?

As has been said here repeatedly, if the contractor is satisfied with his rate and the charge is acceptable to the client..........leave it alone.

[SimonMac]

Also depends on how they are calculating it, contractor rate + 15%? Or Contractor gets 85% of what you are paying the agent

[malvolio]

Also depends on how they are calculating it, contractor rate + 15%? Or Contractor gets 85% of what you are paying the agent

Except they aren't. While the client may take an interest in the agency percentage, they will have costed the work and that is all they will pay the agency. It is fairly rare for the client to discuss a rate for an individual, usually only where the contractor is bringing in something a bit special. Bulk skills - as in 90% of the market - are paid on the basis of a rate card per grade; that costing will have been done and signed off long before the project gets to hire anyone.

[kal]

Except they aren't. While the client may take an interest in the agency percentage, they will have costed the work and that is all they will pay the agency. It is fairly rare for the client to discuss a rate for an individual, usually only where the contractor is bringing in something a bit special. Bulk skills - as in 90% of the market - are paid on the basis of a rate card per grade; that costing will have been done and signed off long before the project gets to hire anyone.

They don't need to if the agency are on a fixed percentage (as most PSL suppliers are) as simple maths can work that out I do think that the fixed margin approach to be the most fair as everyone knows where they stand. The client because he knows he's getting what he's paying for. The contractor because he knows that he's not getting screwed by the agent. And the agent because he knows that the client and contractor don't think hes screwing over the both of them . And the agent being on a fixed %age will earn that money by trying to get the best rate for the contractor, win, win, win in my book.

[malvolio]

They don't need to if the agency are on a fixed percentage (as most PSL suppliers are) as simple maths can work that out I do think that the fixed margin approach to be the most fair as everyone knows where they stand. The client because he knows he's getting what he's paying for. The contractor because he knows that he's not getting screwed by the agent. And the agent because he knows that the client and contractor don't think hes screwing over the both of them . And the agent being on a fixed %age will earn that money by trying to get the best rate for the contractor, win, win, win in my book.

Nope. The client doesn't give a toss how much you get, his bottom line is driven by what he pays the agency for its services and his measure of the agency's performance is how well us guys deliver what he wants. The agency's challenge is to get the best people for the role requirement within the client's stated price and to maximise their own profits. Our challenge is to get the best rate we can for our skills.

It is not a tripartite arrangement