Reply to: Negotiation: What cut of my wages do agencies get?

[colinrobinson]

Yes - I'd ask why he needed to charge more. Would you just accept it?

It's a question of supply and demand. If my plumber asked for an increase just because he was mid-way through a job and wanted more money, then I'd fire him and get another plumber - there are plenty around. Conversely, he can probably afford to take the risk (in the short term) because there is work for plumbers and he can easily change client - until he gets the reputation for trying to hold his customers over a barrel each time, of course.

If you know you can walk away from the role straight into something which pays an equivalent or better rate, then asking for an increase because you can is certainly one strategy that your business could adopt. This becomes potentially more viable if you know that the client cannot replace you easily - you can demand something and they pretty much have to pay or suffer the consequences. Again, this only works while people don't know that you try to shaft them at every opportunity, at which point you may find that your business model suffers.

I had a client once that thought I was mission critical, would not let me take holiday in contract fair enough id contracted to be there, I took holiday on renewal said id be back in 3 weeks. On the monday I got back they said they have learned i wasnt Mission critical and served notice. you take the same risk when negotiating rate they will look to see if you can be easily replaced before agreeing to increase.

[TheFaQQer]

You're a business, would you look for the plumber's justification for an increased rate?

Yes - I'd ask why he needed to charge more. Would you just accept it?

It's a question of supply and demand. If my plumber asked for an increase just because he was mid-way through a job and wanted more money, then I'd fire him and get another plumber - there are plenty around. Conversely, he can probably afford to take the risk (in the short term) because there is work for plumbers and he can easily change client - until he gets the reputation for trying to hold his customers over a barrel each time, of course.

If you know you can walk away from the role straight into something which pays an equivalent or better rate, then asking for an increase because you can is certainly one strategy that your business could adopt. This becomes potentially more viable if you know that the client cannot replace you easily - you can demand something and they pretty much have to pay or suffer the consequences. Again, this only works while people don't know that you try to shaft them at every opportunity, at which point you may find that your business model suffers.

[TheFaQQer]

I see what you're saying but for all the renewals and rate rises I've had, the need for justification has never come up. The agent has never asked for a reason why the client should pay more for my service. It's always been a yes to a rise and negotiation as to what that rise is. A friend of mine, 6 months into contracting, got a rate rise without any justification.

What I'm saying, your point makes sense but is it fitting with the real world.

It depends on who is going to give you the rise. When I've had people ask for an increase, just because, it's always been knocked back.

Your experience obviously varies, though, so ask for the increase and get it.

[PerfectStorm]

I think if you're going into any sort of pay negotiation with a "justification" then you're immediately putting yourself on the back foot. Go in with a price, be prepared to haggle or walk out. Justifying it says that you're there to have the justification declined.

You're a business, would you look for the plumber's justification for an increased rate?

[heyya99]

Justify your existence and you might stand a chance. Asking for an increase just because you've done what was expected of you wouldn't get a look in as far as I'm concerned.

Why should anyone offer you more money - is the role different? Have you got extra responsibilities in the role that you didn't know of before? Basic things like "the commute is worse than I thought" or "the cost of living is higher" or even "I've been caught by the 24 month rule so I can't claim expenses" aren't good enough, IMHO - they are things you should have been aware of.

Make a good enough case, though, and you might get what you want.

I see what you're saying but for all the renewals and rate rises I've had, the need for justification has never come up. The agent has never asked for a reason why the client should pay more for my service. It's always been a yes to a rise and negotiation as to what that rise is. A friend of mine, 6 months into contracting, got a rate rise without any justification.

What I'm saying, your point makes sense but is it fitting with the real world.

[TheFaQQer]

Is asking for a rate increase upon renewal time after only being onsite 4.5 months cheeky/waste of time?

Justify your existence and you might stand a chance. Asking for an increase just because you've done what was expected of you wouldn't get a look in as far as I'm concerned.

Why should anyone offer you more money - is the role different? Have you got extra responsibilities in the role that you didn't know of before? Basic things like "the commute is worse than I thought" or "the cost of living is higher" or even "I've been caught by the 24 month rule so I can't claim expenses" aren't good enough, IMHO - they are things you should have been aware of.

Make a good enough case, though, and you might get what you want.

[TheFaQQer]

Hence in permie scenario, the client has paid the commission. In contractor scenario, the contractor has paid the commission. Thats why contractors get miffed about agencies!

In the contractor scenario, the client pays the agency the rate that they agreed; the agency then pays the contractor a percentage of that rate, which they agreed. The client pays the agency the rate agreed for finding someone appropriate; the agency pays the rate agreed for finding someone appropriate. The commission is paid by the client.

And what do you think would happen in this situation...client wants a "senior developer", paying £500/day agent "find" candidates (search on cwjobs really), contacts them and "joe" will do the role for £300/day but his skills are average. "fred" will only do the role for £400/day but his skills are great and a 100% match to what the client wants. You and I know what will happen when the agency picks someone to put forward to the client...Fred would be perfect and enhance the clients projects...but the agency will put "joe" forward because they can make more money off him. Happens all the time folks.

The person who is vetting the contractors has a responsibility to make sure they are up to the task. If the client looks at the candidate, checks their CV and interviews them to find something about their skills, and they choose an unsuitable candidate then they need to review their recruitment process.

I did a project a while back where at the start of the project, I was told I was too expensive and they had found someone who was £150 a day cheaper than me. They wanted me, and if I'd come down to that level, then the role was mine. I walked away. Two years later, same client came back to me, and offered more than my original rate because they needed someone to rescue the project from the mess they now found themselves in. They deliberately chose to underpay, and suffered the consequences. Happens all the time.

[heyya99]

Is asking for a rate increase upon renewal time after only being onsite 4.5 months cheeky/waste of time?

[h0m3r]

Agency "cut" is how much they can get off you!

Regards the quote from this agent "Frankly, it is a matter between the agency and client and the reason some contractors get excited by it, when permanent staff don't, says more about the nature of some contractors, it's really none of their concern."

The reason being that when hiring permie staff as a hiring manager we are told the job of "senior developer" has a salary of £35,000/year" and the agency if they place a candidate with us gets 10% of that as a ONE-OFF fee. Hence our accounts department know that in that 1st year, they will pay out £38,500. (6 months probation for candidate of course). We the client pay that...as highlighted in the job advert that says "job for £35k"...its doesn't mention the £3.5k for the agency.

With contractors, we are told the job of "senior developer" has a rate of £500/day This is the amount we are going to pay over 1 year. Hence, if you pay the contractor £300/day, you taking 40% of their income...there's no one-off fee. The job advert won't say "£500/day"...it will say whatever the agent wants...usually, no rate or "market rate"...a term used by agencies to try to get maximum commission.

Hence in permie scenario, the client has paid the commission. In contractor scenario, the contractor has paid the commission. Thats why contractors get miffed about agencies!

And what do you think would happen in this situation...client wants a "senior developer", paying £500/day agent "find" candidates (search on cwjobs really), contacts them and "joe" will do the role for £300/day but his skills are average. "fred" will only do the role for £400/day but his skills are great and a 100% match to what the client wants. You and I know what will happen when the agency picks someone to put forward to the client...Fred would be perfect and enhance the clients projects...but the agency will put "joe" forward because they can make more money off him. Happens all the time folks.

The country is crying out for computer programmers...many kids aren't going into the field because for the effort the pay isn't what it should be. Take out agency commission above 10% and maybe we could have a influx of good programmers as they can see the rates are good £500/day+...solving the problem in the UK of I.T skills shortage.

[h0m3r]

Agency "cut" is how much they can get off you!

I worked on a NHS contract....there were 4 contractors in the team...I'd been there the longest but found out i was paid the least, but all of doing he same role. The client (NHS) was paying £450/day, and the agency was taking a cut of £185/day....yep over 40%. Fixed margins??? your having a laugh. The senior management didn't know what our rate was...i got friendly with one of them and when i told him he was shocked. There was a high turnover of contractors on that team mainly because better contracts (i.e. ones where the agency weren't taking a huge cut) arose and contractors left. Why get paid £x when you can get paid £1.4x?? The agency in question was computer-people who were owned by adecco. Lesson learnt for both contractor and client.

There are no morals in business

[expat]

...
The client has defined my maximum worth as the amount paid to the agency.

This may be representing the client as being more rational economic beings than they actually are...

[Contractor UK]

Recently published on home page CUK: How much do agents take?

Contractor’s Question :Is there a rule of thumb for the margin a recruitment agent makes on your contract?

I am in my first contract (IT Project Management) and have worked out that the agent that placed me is taking 25% of the daily rate the company is paying for my services. Is that pretty average or outrageous? What sort of margin is usual or does it vary widely? And does an agent increase their rate when contractors are squeezed or do clients have a say?


Answer, by a City recruiter, supplying financial and IT project consultants:

The percentage the agency takes is negotiated between the agency and their client, and typically there is no negotiation at all, just a fixed percentage set by the client which might normally be anything between 10-35%.

This has no bearing on the contractor's rate as it is worked out as 'contractor’s rate + agency fee', just as a permanent placement fee has no impact on the salary of the candidate placed.

Frankly, it is a matter between the agency and client and the reason some contractors get excited by it, when permanent staff don't, says more about the nature of some contractors, it's really none of their concern.


Answer, by a global IT staffing firm, specialising in permanent and contract placements:

We have formal agreements with clients where they quote a rate they would like to pay for the contractor, not a charge rate (i.e. contractor rate plus our margin) .Margins do vary but where there is a formal agreement between us and a client; it would be at the lower end of the quoted [10-35%] range.

http://www.contractoruk.com/003758.html

[LittlestHobbo]

Given how hard the agencies work to shaft us, why are you surprised that they also shaft their own staff? As I said, he personally made no further commission - the agency was still taking the same cut, but he didn't see any of it.

A friend of my mine is a high billing agent in another sector (not IT), and they get treated pretty bloody well to be honest...treated to weekends away, he's just been given a pair of new £700 speakers, quite often free nights out, large car allowance. They work pretty hard for their money he doesn't do less than a 60 hour week.

The agents are the agency..if the managment screw them over they won't have any (good) staff left. You don't meet alot of older aged agents which suggests its a pretty high stressed job with high levels of burnout. Either that or they've all made so much money that they are siiting in the sun sipping cocktails and smoking cigars...bloody money grabbing mercenary scum....(oh wait that's us isn't it?)

[QueenElizabeth]

Well you're going wrong right there.
Do you really think that the client doesn't realise that the agency are taking a cut of the money they pay?

Of course not.

Do you think that if there were no agency in between that the client would give all that money to you?

Upon re-reading my post I was able see how my discussion on earnings potential, which I meant to imply an upper bound on my worth, could have been interpretted as you have done. Sorry.

The client knows that they are paying the agency a cut.
When you negotiate direct the first thing the client will do is remove the agency's cut from the rate and that will be the maximum they want to pay. Why should the client pay an extra 20% for an agencies cut if there is no agency?

The client has defined my maximum worth as the amount paid to the agency. If I were representing myself, how much more I could get above the cut rate and how close I could aproach the upper bound is dependant on my negotiating skills. Since I am no pro, I couldn't expect to reach the agency rate.

[Inside Agent]

The simple answer is:

A) At large international companies their will be an airtight list of suppliers all at a fixed rate. These range from 8-15% margin in general.

B) At SME clients the recruitment tends to be less organised and the deals struck focus more on the end rate. Think of agencies as brokers here, they try and get highest price from client and lowest supply rate for contractors.

General rule is get a rate you are happy and don't worry about what your charge out rate is.