Reply to: Agency Margins

[tickledpinkies]

My agency gets 30%

The current contract is coming to an end, but another department wants to offer me another one after in the new year. I don't know if I can switch agencies at that point. I think they have some type of anti poaching clause, but I've had enough of them.

[Andy2]

Are they skimming you or the client ?

If you had negotiated directly with the client they would have given you the rate you asked for and you would be happy. The fact that an agency paid the rate you asked for and is charging the client more means they are skimming the client, because if you'd have gone direct the client would be paying less and you wouldn't earn anymore.

It's up to the contractor to pitch his rate, the agency will try and get the highest margin possible.

in which world ? Most large companies in the UK have PSL agencies and will not allow you to go direct.

[BlasterBates]

anyone with hays ?
they are skimming off 18% from my day rate

Are they skimming you or the client ?

If you had negotiated directly with the client they would have given you the rate you asked for and you would be happy. The fact that an agency paid the rate you asked for and is charging the client more means they are skimming the client, because if you'd have gone direct the client would be paying less and you wouldn't earn anymore.

It's up to the contractor to pitch his rate, the agency will try and get the highest margin possible.

[northernladuk]

anyone with hays ?
they are skimming off 18% from my day rate

No they aren't. You are getting a cut of their day rate.

[NotAllThere]

anyone with hays ?
they are skimming off 18% from my day rate

Wow. I wish most agencies were as low as that. I did have one try to argue that a higher rate justified a higher % margin. Nice try. Anyway, with me Hays currently take 6% of what they charge their client. If your rate is high enough, the margin in absolute terms can be quite big too.

(OK, I approached them, already having the contract).

[edison]

If you bring the role to them, Hays have the lowest margins when it come to payrolling - they take 1/21 of the rate to client and calculate YourCo's rate to the penny (and round up IIRC).

Of course if they found the role, then you are taking 82% of their rate. That may be a little low for your liking, so go and find a better rate somewhere else.

Sounds about right. There were quite a lot of contractors who effectively got the role direct themselves with my recent client but had to contract through Hays. Their margins for contingent perm hires are relatively low too.

[Old Greg]

anyone with hays ?
they are skimming off 18% from my day rate

If you bring the role to them, Hays have the lowest margins when it come to payrolling - they take 1/21 of the rate to client and calculate YourCo's rate to the penny (and round up IIRC).

Of course if they found the role, then you are taking 82% of their rate. That may be a little low for your liking, so go and find a better rate somewhere else.

[oilboil]

Many of my contracts are for specialist services for a few days/weeks to support other consulting companies do stuff they don't have people qualified to do.

On some of these contracts the day rate can be £1000+; the consultancy firm charges their equivalent rates to the client, sometimes that is more than double what I charge, sometimes it is less (but they wouldn't get the work without the role I do and they'd rather lose £200 a day for 10 days than not get 1500 days works at £800 for their staff)

You should never look at what the "pimp" is getting, only ever care about what you are getting, if you are happy with the rate it doesn't matter whether they get £10 or £1010 as their margin

[FIERCE TANK BATTLE]

Had a call a few days back. Asked for my rate, I said £X, they said OK, then later got back in touch saying the client budget won't go that far, will you accept X-£30

I said yes, but the scenario seems so unlikely. The client must have a budget in mind already, surely. So the agent would know if what I was asking matched up.

Anyhoo haven't heard anything since, so perhaps it is moot.

[LondonManc]

Sounds a bit high for Hays, they tend to work high volume and lower margin than some agencies as they are on a lot of PSLs. I had one client recently where they were the exclusive recruitment partner and their contract margin was quite a bit lower than when I used them for a different client a couple of years ago.

Buyer's market these days. Client's can pretty much tell them what the margin is.

[edison]

anyone with hays ?
they are skimming off 18% from my day rate

Sounds a bit high for Hays, they tend to work high volume and lower margin than some agencies as they are on a lot of PSLs. I had one client recently where they were the exclusive recruitment partner and their contract margin was quite a bit lower than when I used them for a different client a couple of years ago.

[LondonManc]

Ignore the 40%. You get a percentage of the agency's fee - in your case 72%. The agency does not get 40% on top of yours. It's their business, after all.

You are right to focus on what you get though. Ignore the agency margin, your aim (and your duty as a director ) is to get the best rate you can.

The agency mark up really only comes into play when the client is moaning about value for money or renewal time and you know what the margin is so know they’ve had a nice initial bonus. I must admit it’s probably not the right time of market to be haggling too much.

[Lance]

The way margins work, i was only going 15% below market, not 40%.
The numbers were something like this (this was a long time ago).
Market rate was £350 a day. I was happy to take £300. Agent put me in at 420 including agency fee.
Agency mark up on my rate was 40%. (But 28% of the whole)
My rate was about 15% below market (50 quid less than 350)

It was an initial 3 month contract and i was trying to get my foot in the door with this client, so wasnt too fussed about rate.

Market rate £350
Agent rate £420
Agency margin = 16% (70/420). A little on the high side but not eye watering.

It's a 20% mark-up though. Take care not to confuse mark-up with margin. They are different.

The £300 you were happy to take was just a £50 a day gift to the agent

[eek]

anyone with hays ?
they are skimming off 18% from my day rate

Nope - they have negotiated a rate with the client and offered you a rate that you found acceptable.

The fact you don't like the difference is your problem and not Hays nor your end clients (unless you client has a fixed percentage markup specified in the contract between the Hays and your client and that 18% is above the agreed markup)

[Andy2]

anyone with hays ?
they are skimming off 18% from my day rate