Rate differences between independent and consultancy contractors

[sijomon]

Hi,

I was hoping someone might be able to explain something which has always confused me concerning the difference in daily rate between contractors employed independently (whether directly or via an agency) and those employed via a consultancy firm.

It seems to me that the latter generally gave daily rates significantly higher than the former

As an example from a client I recently worked for I was employed as senior architect on a rate of £450 per day via an agency who bumped the cost to the client up to £500 per day. I became aware that the same client was paying £850 a day for a java developer who was via a consultancy and £1000 a day for a Php developed also via a consultancy. Having spoken to these people I know that they were seeing less than half the rate the consultancy was charging. Having also spoken to other contractors employed directly this pattern of a significant rate increase when via a consultancy appears to be fairly commonplace.

Can someone explain why the difference, and has anyone any advice on how to negotiate a rate closer to the consultancy rate when employed directly.

Many thanks,

Simon

[malvolio]

Hi,

I was hoping someone might be able to explain something which has always confused me concerning the difference in daily rate between contractors employed independently (whether directly or via an agency) and those employed via a consultancy firm.

It seems to me that the latter generally gave daily rates significantly higher than the former

As an example from a client I recently worked for I was employed as senior architect on a rate of £450 per day via an agency who bumped the cost to the client up to £500 per day. I became aware that the same client was paying £850 a day for a java developer who was via a consultancy and £1000 a day for a Php developed also via a consultancy. Having spoken to these people I know that they were seeing less than half the rate the consultancy was charging. Having also spoken to other contractors employed directly this pattern of a significant rate increase when via a consultancy appears to be fairly commonplace.

Can someone explain why the difference, and has anyone any advice on how to negotiate a rate closer to the consultancy rate when employed directly.

Many thanks,

Simon

Offer the same credit ratings, risk guarantees, penalty clauses and long-term history and resilience as a major consultancy and you can charge what they do.

BTW, the agency didn't bump the cost up, you didn't negotiate a big enough fee for your services: the client was only ever going to pay £500

[meridian]

They're paying for the name. When it all goes pear-shaped they can say to upper management "Wasn't our fault, we hired xxx consultancy so we covered our risk". <\cynic>

When I was a junior accountant the general rule of thumb is that I was charged to clients at three times my rate - one for my wages, one for overheads (building costs, etc) and one for the partners' profits.

[SpontaneousOrder]

Is this a joke thread?

[BolshieBastard]

Hi,

I was hoping someone might be able to explain something which has always confused me concerning the difference in daily rate between contractors employed independently (whether directly or via an agency) and those employed via a consultancy firm.

It seems to me that the latter generally gave daily rates significantly higher than the former

As an example from a client I recently worked for I was employed as senior architect on a rate of £450 per day via an agency who bumped the cost to the client up to £500 per day. I became aware that the same client was paying £850 a day for a java developer who was via a consultancy and £1000 a day for a Php developed also via a consultancy. Having spoken to these people I know that they were seeing less than half the rate the consultancy was charging. Having also spoken to other contractors employed directly this pattern of a significant rate increase when via a consultancy appears to be fairly commonplace.

Can someone explain why the difference, and has anyone any advice on how to negotiate a rate closer to the consultancy rate when employed directly.

Many thanks,

Simon

In the past Ive worked on projects where Ive worked alongside consultancies. Their people may be charged at a higher rate but that doesnt mean the individual gets that money. One or two I worked with were 'juniors.' They received around £200 a day. Not a lot.

But its the old chestnut again, why are you displaying a permie mindset that you should get the same as the next guy? This is business not collective bargaining.

[TheFaQQer]

My last permie job, management moaned that they were paying expensive contractors £550 a day, and then brought in a graduate from Oracle to do some spreadsheet work and happily paid Oracle £650 a day for him. The solution architect (from Oracle) had clocked up well over £1 million in fees to Oracle in the time he was there.

My last consultancy role I was billed out at a discounted rate of £1500 a day, but clients won't pay that to an individual. As others have said - offer the same penalty clauses and blameability and you'll get the rates.

[sijomon]

Offer the same credit ratings, risk guarantees, penalty clauses and long-term history and resilience as a major consultancy and you can charge what they do.

BTW, the agency didn't bump the cost up, you didn't negotiate a big enough fee for your services: the client was only ever going to pay £500

Thanks for the response, as a matter of interest why are credit ratings relevant; I am only every being paid, never paying so why is my credit rate relevant? Also, RE risk guarantees I have several million pounds worth of professional indemnity and public liability insurance, what would the consultancies be offering over and above this? Long-term history wise, I've been operating as a contractor longer than both the companies cited in my OP have been in existence. The Resilience issue I get, but that seems to be the only relevant one. What am I misunderstanding here?

[unixman]

The client and the consultancy have a large business relationship, probably involving a lot more than renting a body or two. The individual fees will be agreed in the overarching contract.

Like others, I have been hired out by a consultancy, actually working on the client site. I received good permy wages, while the company was getting over 800 pd (according to rumour), and that was years ago.

[northernladuk]

One offers a body, that it, no other supporting services, the other offers a service or a managed solution with all the bells and whistles.

The extra is to pay for seamless transition of other resources when existing ones visas run out, training before attending site, account/Service managers and a lot of ancillary staff in the background that are not being paid by the client yadda yadda

I am slightly surprised when contractors can't work this out tbh. Surely as an independent supplier you should understand all the different types of engagement to you client. It's your job after all. If not that at least understand the roles and offerings of all the stakeholders on site.

[FatLazyContractor]

I am slightly surprised when contractors can't work this out tbh. Surely as an independent supplier you should understand all the different types of engagement to you client. It's your job after all. If not that at least understand the roles and offerings of all the stakeholders on site.

Interesting thought that. Might be easy for someone like a Prog. Mgr or a Proj.Mgr to know such information, however a developer/BA/Architect may not have the required reach/contacts to get that info.

Yes, stakeholder management and all that usual stuff applies by default, however you may not be able to apply the information you know at the same client. May be 'a learning' for the next engagement ....