Reply to: Advice on renewal rate negotiation

[Lewis]

What I do know is that the consultancy charge me out to the Bank for £738/day but I am sure that is not what the consultancy's agency charge. So the consultancy make a margin and then the agency do also. I've no access to the finance system to find out the true cost, so I'm not able to work it back as you've been able to, I can only guess!

Shame. I did this once. Double margin is a real pain. Personally I won't do that again. I was effectively the same as every other contractor (I had virtually no further contact with the consultancy!) and cost the bank the same as the rest but got paid less! I only stayed 3 months. It was the same gig as the agent taking 25%!

[Lewis]

Unfortunately not, don't think at this stage I'm in a position to ask the Client.

The complicating factor is that I am contracted to a consultancy and working on a Bank account. The agency is part of the overall consultancy group although I am sure they operate as a commercial entity and cross charge the cost - I presume their profit is derived from the margin.

Think I will have to accept at this stage!

Thanks.

You should ask the agent (by email so you have something in writing) what their margin is. If they are professional they will tell you, if they refuse it says something about them (I'd assume the margin is unreasonable!). At renewal is a good time to ask as they want you to stick with the gig so will act more reasonably.

I was once told verbally by an agent they were takling 15% to find later from the client they were taking 25%! if I had something in writing I would have had some come back as I was lied to. This was many years ago. As a matter of course I always ask the agent now as I would never accept an agent taking more than 15%. In 10 years an agent has never refused to tell me.

I wouldn't even be surprised if the agent got the £500 p/day from the start and then took the £25 p/day out of his marging to give you the £475 p/day, especially as this is your first contract, call me cynical but I think agents try all the tricks in the book on newbies! I had lots of tricks like this played on me in the early days and they try it again and again. Fortunately I am now wise to most of them and have no fear in asking the client the rate they are paying when I start if I need to.

And ignore all the comments about ignore the margin and just be happy or not with the rate. Margins are negotiable and I see no reason why you (and your family) should suffer an agent taking an above market rate margin (which is around 10%-15%).

[oracleslave]

Heh I can beat that, being charged out at 1065 and being paid 350 in a gig a few years ago.

I hope that was a lesson learnt!

[NickNick]

What I do know is that the consultancy charge me out to the Bank for £738/day but I am sure that is not what the consultancy's agency charge. So the consultancy make a margin and then the agency do also. I've no access to the finance system to find out the true cost, so I'm not able to work it back as you've been able to, I can only guess!

Heh I can beat that, being charged out at 1065 and being paid 350 in a gig a few years ago.

[apb]

As a senior PM and unless your finance division is padlocked, surely your own project or portfolio resource plans and financials should indicate exactly what the business is paying the agency for your skills?

As a lead PM at my current client, my daily pay rate (from my agency to me) is £550 but when I do my monthly reporting, I drag all my actual costs out of SAP and use a figure of £582 which is the true cost that the business pays the agency i.e. a margin of about 6.5%. Which is pretty good.

What I do know is that the consultancy charge me out to the Bank for £738/day but I am sure that is not what the consultancy's agency charge. So the consultancy make a margin and then the agency do also. I've no access to the finance system to find out the true cost, so I'm not able to work it back as you've been able to, I can only guess!

[Svalbaard]

As a senior PM and unless your finance division is padlocked, surely your own project or portfolio resource plans and financials should indicate exactly what the business is paying the agency for your skills?

As a lead PM at my current client, my daily pay rate (from my agency to me) is £550 but when I do my monthly reporting, I drag all my actual costs out of SAP and use a figure of £582 which is the true cost that the business pays the agency i.e. a margin of about 6.5%. Which is pretty good.

[apb]

The agent has pocketed the extra £25.

When he was 'consulting with the Client' he was really bragging to his boss and high-fiving his colleagues. Probably rang the office bell too. I believe the phrase they use is "like taking candy from kids".

HTH

Yep -I suspect I have been had - but the rate is still good, although in the future I'll be looking to recoup!!!

[swamp]

I was offered Senior PM at £450 - I stated I was expecting £500 and after a couple of minutes 'consulting with the Client' the agent came back with £475. As I had no role to go to after resigning from my permie job and working my notice I jumped at it.

The agent has pocketed the extra £25.

When he was 'consulting with the Client' he was really bragging to his boss and high-fiving his colleagues. Probably rang the office bell too. I believe the phrase they use is "like taking candy from kids".

HTH

[thunderlizard]

I have advised the agent that I would like a rate rise given the above and he has stated that he would have to consult with the client - and 'could I reply to the offer email outlining the reasons why.'

You should think up some reasons, in order to play ball politely. It won't make any difference to the outcome, because the only real reason is "you can't get better cheaper elsewhere", but if they do sign you again it'll make them feel a bit happier about it.

Think about the last time your gas company put up the bills - they try and explain it away with reference to operating costs, but the real reason is "because out competitors are putting theirs up, so we think we can".

[apb]

Have you any idea what margin the agency is on?

Unfortunately not, don't think at this stage I'm in a position to ask the Client.

The complicating factor is that I am contracted to a consultancy and working on a Bank account. The agency is part of the overall consultancy group although I am sure they operate as a commercial entity and cross charge the cost - I presume their profit is derived from the margin.

Think I will have to accept at this stage!

Thanks.

[BrilloPad]

Have you any idea what margin the agency is on?

[apb]

If you are after a £25 per day rise, over the 18 months you seem to imply that you will get on the project that equates to £9,000. If, however, the client thinks, no way, greedy so & so and withdraws renewal, then at your current rate it would take 19 days to recoup this. Ask yourself:

1. Am I happy with the rate I am getting?
2. Am I happy in this gig?
3. If I get the chop for asking for more, will I get another gig within 19 days or will I have no more than 19 days between gigs over the course of the next 18 months?
4. Will the agent actually reduce their margin to give you a rise?
5. Will you want another rise at the next renewal (or will that be the clients perception)?
6. If you leave this gig, will you need to spend more travelling / overnights stays, etc at a new gig.

In my opinion, I would get yourself a little bit more established within the project and at the clients, but it is your call

I think you all have provided some very valid points and yes if I was in the Client's position I would think it is a little early and may indicate that at every renewal I will be asking for more.

Given the market, it's not the time to cry over £25/day - I think I will accept the renewal and assess the position at the next renewal.

Thanks for all your help - it's really useful to get other views rather than relying on my limited experience in this game.

[Dow Jones]

Must be justified...

I can't see any grounds to justify a rate increase.
Original rate was £ 450-500, offered £ 450, asked £ 500, settled for £ 475 (admittedly on the low side for the amount of work, but was accepted).
However, it looks like you got an extra £ 25 and now asking for another £ 25 (another in 3 m/6m/9m ???).
In principle, you get no increase after 1st extension. Min after a year, rarely after 6 m.

[BA to the Stars]

If you are after a £25 per day rise, over the 18 months you seem to imply that you will get on the project that equates to £9,000. If, however, the client thinks, no way, greedy so & so and withdraws renewal, then at your current rate it would take 19 days to recoup this. Ask yourself:

1. Am I happy with the rate I am getting?
2. Am I happy in this gig?
3. If I get the chop for asking for more, will I get another gig within 19 days or will I have no more than 19 days between gigs over the course of the next 18 months?
4. Will the agent actually reduce their margin to give you a rise?
5. Will you want another rise at the next renewal (or will that be the clients perception)?
6. If you leave this gig, will you need to spend more travelling / overnights stays, etc at a new gig.

In my opinion, I would get yourself a little bit more established within the project and at the clients, but it is your call

[malvolio]

Yes, you're a bit early, but...

You can only justify it on the grounds of either severe scope creep so you're doing significantly more work (or more responsible work) than you were before, or that you have brought significant value-add to the project over and above the client's expectaion of what they're paying you to do, which is probably quite high anyway. Also, you are paid by the agency, so negotiate with them. How they recover their costs is their problem, either by reducing margins or charging more. The agency are quite right to ask you to defend your request, but you have to make a financial case, not a market one (especially right now).

So no harm trying if you think it justified. But be aware the only weapon you have is the right to walk away. If you do that you have a three month, incomplete project on your CV, which would do more harm than good, and you won't be earning anything while you find a new job. You would be better IMHO sticking the with the rate you have and getting the job done.