Agency Margin

[kal]

The client does care in fact my current client is evidence of that, being screwed over by agents rankles with them as much as us.

[northernladuk]

The client does care in fact my current client is evidence of that, being screwed over by agents rankles with them as much as us.

Because he is paying good money for contractors and getting a load of useless tossers?

[Wanderer]

The client does care in fact my current client is evidence of that, being screwed over by agents rankles with them as much as us.

I've had a few clients like that too - they make sure their contractors know what the agency should be paying them and they tell the contractors what the agency margin is too. It's a nice way to do business.

And 15% is quite high for a PSL agency, I would expect 5-7%.

[dty]

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

On the 2 occasions I (as a permie) have even responsible for hiring contractors, it has not worked like this. Both occasions were in big banks with PSLs.

The agent sends me the candidates' CVs and tells me what the candidates are looking for. One candidate wants £300; the next wants £450 because he's been around the block more and has broader skills. I interview them, choose one, negotiate on the rate a bit, and the agent gets paid the agreed rate + margin (12% in both cases in this example).

What the contractor ends up costing my project is unrelated! All contractors cost the project the same amount (say, £500/day). And all permies cost the project a fixed amount regardless of grade, salary, experience, ability, etc. (a figure known as Full-Time Equivalent, FTE). This figure is anywhere from 30%-50% more than you'd "expect" to pay someone of average salary and covers employers costs - obvious ones like NI, healthcare, pensions and less obvious ones like effectively apportioning building rent, security staff, "subsidised" gym & canteen, electricity, IT helpdesk, etc.

This makes is much easier to plan and budget the project and incentivises me to get better people (perm and contract) because I don't pay any more for them out of my budget!

[kal]

Because he is paying good money for contractors and getting a load of useless tossers?

Exactly if you're paying for a Rolls Royce and the dealer provides a Ford Escort for the same money then you ain't gonna be happy!

[northernladuk]

Exactly if you're paying for a Rolls Royce and the dealer provides a Ford Escort for the same money then you ain't gonna be happy!

I don't think you saw what I did there.

[kal]

Your inference is that the rate a contractor charges is no indication of his competence, are you an agent in disguise...

[malvolio]

On the 2 occasions I (as a permie) have even responsible for hiring contractors, it has not worked like this. Both occasions were in big banks with PSLs.

The agent sends me the candidates' CVs and tells me what the candidates are looking for. One candidate wants £300; the next wants £450 because he's been around the block more and has broader skills. I interview them, choose one, negotiate on the rate a bit, and the agent gets paid the agreed rate + margin (12% in both cases in this example).

What the contractor ends up costing my project is unrelated! All contractors cost the project the same amount (say, £500/day). And all permies cost the project a fixed amount regardless of grade, salary, experience, ability, etc. (a figure known as Full-Time Equivalent, FTE). This figure is anywhere from 30%-50% more than you'd "expect" to pay someone of average salary and covers employers costs - obvious ones like NI, healthcare, pensions and less obvious ones like effectively apportioning building rent, security staff, "subsidised" gym & canteen, electricity, IT helpdesk, etc.

This makes is much easier to plan and budget the project and incentivises me to get better people (perm and contract) because I don't pay any more for them out of my budget!

And there's the difference between a Project Budget and a P&L. I'm not talking about the former, I'm talking about the latter. And FTAOD I've also hired staff and contractors both for project work and line of business work, and have done for many years. And since I spend a lot of time costing and pricing end-to-end business models these days, I hope I'm reasonably aware of what an FTE is.

Also, if you're paying your contractors more than the charge to the project budget, someone needs a word with your accounts department.

[dty]

We didn't attribute quite such high overheads to contractors as we did to permies. It's possible that occasional contractors (+ agency margin) would be paid more than the project rate but most weren't so it netted off.

Anyway, the point was: there are many organisations who deal with contractors and agents in terms of the contractors' rate and understand full well what the contractors are on and what the agency is making.

It's not simply a case of "I have enough budget to pay this agency £500/day for a body" and not knowing/caring whether said body is making £200 or £450.

[kal]

We didn't attribute quite such high overheads to contractors as we did to permies. It's possible that occasional contractors (+ agency margin) would be paid more than the project rate but most weren't so it netted off.

Anyway, the point was: there are many organisations who deal with contractors and agents in terms of the contractors' rate and understand full well what the contractors are on and what the agency is making.

It's not simply a case of "I have enough budget to pay this agency £500/day for a body" and not knowing/caring whether said body is making £200 or £450.

Exactly and one would question the motives of any one who disputes this common sense approach on an anonymous public forum...