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Reply to: Tips on going direct?
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Previously on "Tips on going direct?"
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I have had a couple of direct contracts (and one hybrid setup where myself and the agent invoiced the client separately) and to be honest there hasn't been much difference apart from having to chase getting paid. Not to say that the odd agent hasn't been a bit tardy on that front but invoices being settled on time with no need to remind people is not to be underestimated.
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Are direct contracts still a thing with major companies?
i had a direct contract with a FTSE 100 where a director who had previously worked for me brought me in. It worked fine, although their 60 day payment terms were missed more often than not (meaning I was paid for a day worked up to four months later). A couple of years later the VP I had worked for was being promoted and asked me to step in, which I did for a couple of years. However by then they wanted the work to go through an umbrella
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Originally posted by BlasterBates View Post
I've always quoted my rate, it might be too expensive for some agents but in the end it's my quote. When I take my car to a garage the garage owner makes the quote not me. You take it or leave it. Agreed demand will determine how you set your rates but that is no different to Nestle setting prices on chocolate bars. At the end of the day as a consumer of chocolate bars you don't set the price.
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Originally posted by Robinho View PostSorry to be clear my scenario was a fictional world where agents didn't exist and there was perfect information about gigs and contractors available and their skills. Of course we don't live in that world and that's why agents exist.
Both sides do essentially pay for and benefit from the agents though.
It's a similar concept to tax incidence. https://en.wikipedia.org/wiki/Tax_incidence
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Originally posted by northernladuk View Post
I'd say you've got that arse about face. It doesn't start at a contractors rate, it starts with how much the client is willing to pay.
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Originally posted by northernladuk View PostAs I mentioned above this is not correct. You've completely forgotten to consider the work the client would have to do instead of the agency which costs time and money. I don't believe for one minute, even if it were true which it isn't, that clients would hire more contractors just because they are saving circa 15% on contractors. I also think hiring more, therefore increasing the number of contractors would put upward pressure on rates. I think that whole paragraph is flawed from start to finish so no conclusion can be gained from it.
Sorry to be clear my scenario was a fictional world where agents didn't exist and there was perfect information about gigs and contractors available and their skills. Of course we don't live in that world and that's why agents exist.
Both sides do essentially pay for and benefit from the agents though.
It's a similar concept to tax incidence. https://en.wikipedia.org/wiki/Tax_incidence
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Originally posted by northernladuk View Post
I'd say you've got that arse about face. It doesn't start at a contractors rate, it starts with how much the client is willing to pay.
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Originally posted by BlasterBates View Post
It isn't shared, if it were the contractor would pay the agent commission. Basically a contractor quotes a rate, the agency pays that rate in full, the client then pays extra to the agency for the service provided by the agency. A client will rightly see that not using an agency will result in a cost saving to the client.
Not using an agency does not necessarily mean there is a cost saving. Like using any external supplier it is done to remove the burden from the client. If the client didn't have an agency they would have to spend time (and dollars) on the work their staff have to do to find and manage the contractor. To think that you can pocket the agencies commission just because you go direct is wholly wrong. Possible in some cases but generally wrong. There is a charge for the external service instead of time spent internally.
Originally posted by Robinho View Post
Yes the client is billed. However if there were no agent fees, supply/demand dictates that companies would hire more contractors - as they are cheaper. And by hiring more that would put upwards pressure on rates, until it settled somewhere in between and both sides are getting a slice of the agent fees.
So we are both paying for agents even though the client is the one that ponies up the cash.Last edited by northernladuk; 1 June 2022, 14:14.
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Originally posted by BlasterBates View Post
It isn't shared, if it were the contractor would pay the agent commission. Basically a contractor quotes a rate, the agency pays that rate in full, the client then pays extra to the agency for the service provided by the agency. A client will rightly see that not using an agency will result in a cost saving to the client.
So we are both paying for agents even though the client is the one that ponies up the cash.
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Originally posted by d000hg View Post
Do agencies all use fixed (and transparent) margins these days or is there still a lot of murkyness that the client has no idea how much extra the agency is costing them?
If it's not a fixed margin then I'm sure the clients know what the agency is costing them. It's in the paperwork. What they won't know in some cases is how much the agent is paying the contractor. We've had a couple of threads on here where the client has been surprised by the rate the agency is taking. They are paying 500 quid and getting a 300 quid contractor so should be concerned about that but I don't think it's commonplace. It's very bad business by the agency to do that to a client so as pretty rare thankfully. .
We know that rates can be from 8% to 20% and that is dictated by the number of contractors on site and so on so a client has to expect if they only have a couple of contractors the agent cut is going to be higher than a sausage factory situation so the agency can make their money.
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Originally posted by d000hg View Post
Do agencies all use fixed (and transparent) margins these days or is there still a lot of murkyness that the client has no idea how much extra the agency is costing them?
Large clients dictate the rates to the agency.
But there may be another agency below that who takes the margin they want.
Smaller clients get less say as they less buying power.
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Originally posted by BlasterBates View Post
It isn't shared, if it were the contractor would pay the agent commission. Basically a contractor quotes a rate, the agency pays that rate in full, the client then pays extra to the agency for the service provided by the agency. A client will rightly see that not using an agency will result in a cost saving to the client.
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Originally posted by Robinho View Post
The burden of the agent fee is shared between the client and contractor. In a world where everyone had perfect knowledge of gigs and contractors available, contractors would charge more and clients would be saving money as well.
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Originally posted by BlasterBates View PostContractors mistakenly assume that if they cut out the agent they get to keep the agent's margin. The problem is the margin doesn't belong to the contractor it actually belongs to the client. A client who is paying a contractor directly will expect to pay less for the contractor, otherwise why should they bother.
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Depending on how big the margin is, there might be easily enough pie for both parties to get a slice.
Every company I've worked (contractor or employed) has really hated how much recruiters et al cost them and consider it about as distasteful as we do; caveat I work at smaller companies.
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