IT Contract Rate - Agency opinion

[dern]

I'm currently being put forward for a contract at what I consider to be an average rate for what I do. This has been born out by the fact that I've been put forward for a few contract recently and the rate I've asked for from this one is one of the lowest but the job looks interesting, I'm happy with it and it's more or less what I've been on for a year. The company didn't want to pay the rate I wanted but agreed after seeing my CV as I have a lot of experience in my field. However when I went for the interview I noticed the rate the agency was asking was written on my CV that my interviewer had and I'd be getting 78% and the agency would be getting 22%. In my opinion that's pretty high given that I thought that 15% was the average agency percentage. Now I don't mind them making money but this makes me look greedy at worst and uncompetative at best. I've been contracting for eight and a half years and in the short term don't want to be out of work but also don't my reputation to be damaged given that it's a pretty big company.

Can any agency people offer an opinion... preferably that I'm worrying unnecessarily and that this is a perfectly normal percentage split.

Regards,

Mark

[ledger]

never been contractor, but of the few that work for me 10-15% seems more usual.

Shouldn't they have told you upfront what the commision would be ?

[Incorrigible]

Ring the agency, it's up to them how much they ask from the client

They also do approximately fk all for their money. I'd have thought 10% would have been more than adequate

[abels]

From a contractors point of view.

22% seems to be very high and I would think that the company will think the same. The average with the guys in my office who are with different agents is about 12%.
I do not believe that the company will think you are being greedy if they see the split.

[Plotloss]

I think my clients have suffered as much as a 30% agency cut in the past...

[hedders]

When I used to do office temping for about £5 an hour the agency were charging my employer about £10 an hour!

I ended up splitting the difference with a few of them and working directly for them instead (naughty I know)

[JonRB]

I always get confused between rate, mark-up and comission (two of those being the same thing).

One is the ratio that you've mentioned (78:22) and the other is the percentage that they add on before presenting it to the client.

So, for a rate of £30ph (to make the calculation easier), £30 + 15% = £34.50, whereas 78% of £34.50 is £26.91

Rearrange the above into a cohesive and informative post. Cos I can't.

I agree it sounds a bit high though. Ask the client if their agency is on a fixed percentage.

[rich1231]

Do you care?

You are getting the rate you want, the client get what they want, the agency are getting what they want.

Come renewal you can squeeze the agency abit :-)

[JonRB]

rich1231 said:

You are getting the rate you want, the client get what they want, the agency are getting what they want.

No, the client may be paying what they consider to be 'over the odds' for Mark in which case they might not want to renew come renewal time as they already consider him 'too expensive', even though he is only seeing a lower proportion of that money than acceptable.

[viper_larry]

Join the PCG, draft up your own contract and go direct. If not for this contract, at least for future ones. 22% seems very high to me - negotiate with them.

[rich1231]

JonRB said:

rich1231 said: You are getting the rate you want, the client get what they want, the agency are getting what they want. No, the client may be paying what they consider to be 'over the odds' for Mark in which case they might not want to renew come renewal time as they already consider him 'too expensive', even though he is only seeing a lower proportion of that money than acceptable.

Dont agree, I think clents tend to look at the total cost.

Had an example of this here recently. Interviewed someone based upon a total cost per day of X.

I didnt care how much the contractor was getting .

[rich1231]

viper_larry said:

Join the PCG, draft up your own contract and go direct. If not for this contract, at least for future ones. 22% seems very high to me - negotiate with them.

So he's been introduced to the firm by Agency, then goes direct and cuts agency out? Is that what you are suggesting.

Bad Idea.

I used to work for Deutsche on a direct basis... never again will I do that.
Also worked abroad and got stiffed big time for 30k. Not doing that again either.

[dern]

rich1231 said:

Do you care?

You're right I don't really care that much except for two points... Firstly I haven't been offered the contract yet and a second agency phoned me up this morning offering me the same role saying the job was still up for grabs and this is after the agency that got me the interview last week said it was a done deal on friday and that they'd call me first thing monday (no word yet and he's always on the phone) Secondly if the guy leaves this cv around on his desk as he appeared to have done with 'my' rate on the top then the perms will believe I'm on an unbelievable rate and I'll probably get stick for it which is not the end of the world but I'd rather get on well with people.

Regards,

Mark

[t1grm]

22% is high. 15-18% is the norm in my field. As JonRB said, you have to be careful how you work it out though. Say the agent’s paying you 30 ph and charging the client 35 ph then you can either look at that as a 16.6% mark-up or 14.3% commission. i.e. £35 is 16.6% more than £30 or £5 is, 14.3% of £35.

Do you want more money or are you just worried that the agent is overcharging the client and making you look expensive? If the former then tell the agent you know how much the client is being charged, you’re not happy and you’d like a smaller mark up. If the latter then tell the client how much the agent is paying you and that you think they should pressure the agent to drop the rate. If the try to pass the drop onto you tell them to f-off. Clearly the client has decided they like you and want you to do the job. If they end up loosing you and having to go through the recruitment process again because of intransigence on the agent’s part then that will look very bad on the agent and the chances are they will try to avoid that situation by compromising.

[JonRB]

rich1231 said:

Dont agree, I think clents tend to look at the total cost.

I wasn't disagreeing. I was pointing out that they might consider that the total cost for Mark is a little high (but are going to hire him anyway) not realising that if they forced a fixed margin on their agency they could get him for a cheaper total cost.
Mark is worried about being tarred as being 'a bit pricey' even though it is down to the agency rather than his own rates.

[Edit: I see the above has already been covered whilst I've been typing. ]

Personally I think the whole Contractor-Agency, Agency-Client dual contract with only the agency having the full picture totally sucks from a business perspective. With the exception of matchmaking (which can be done on a website) and payroll (which can be provided by a 3rd Party), agencies are parasites. I apologise to the agents here on PH, some of whom I have met, for saying this but it is true.
Give me a direct contract any day, even if it means increased financial risk due to a defaulting client (which is good from an IR35 point of view actually).

>> Edited by JonRB on Monday 11th April 15:36

[M@H]

dern said:

the perms will believe I'm on an unbelievable rate and I'll probably get stick for it which is not the end of the world but I'd rather get on well with people.

Forget the perm's opinions.. contractors are quietly despised by all the permies doing the same job anyway, regardless of rate.. even a sh"t contract rate is much better than PAYE perm rate.

For info I think my agency are making 22.5% and I'm getting 77.5%.. Yeah so they are getting money for nothing, but without them I wouldn't have the job.. and the rate is the best in the area by far anyway

[dern]

t1grm said:

22% is high. 15-18% is the norm in my field. As JonRB said, you have to be careful how you work it out though. Say the agent’s paying you 30 ph and charging the client 35 ph then you can either look at that as a 16.6% mark-up or 14.3% commission. i.e. £35 is 16.6% more than £30 or £5 is, 14.3% of £35.

Erm... If I was charging 30pph then they'd be charging the client 38pph so they are making 22% commision (or 28.6% markup).

t1grm said:

Do you want more money or are you just worried that the agent is overcharging the client and making you look expensive?

The situation is the latter.

Regards,

Mark

[nel]

Am in offshore engineering rather than IT, but 22% seems like daylight robbery to me.

In my industry "normal" rates are of the order of 5 to 10%, but we do also have enlightened clients that insist that the agent's fee is clearly stated and known to all parties to avoid them profiteering from a contractor who asks only for X when he can be sold for 1.5 times X.

I'd ring the agency and ask for more money - they'd still be quids in if they split it with you and only took 11%!

[dern]

M@H said:

Forget the perm's opinions.

If people give me crap about being a contractor I stick up for myself as I never gave them career advice so their position isn't my fault. However, I prefer to get on with the people I work with and like to be seen as fair.

Thanks for the input guys, I'll see what they say if they ever come back on me. Happily the market looks ok and I have nearly 8 years of Java/J2EE so am well skilled and I get on well in interviews. Fortunately after the last crash when I nearly lost everything I've managed to put a good buffer by so have plenty of time and am enjoying (for the most part) staying home and playing with the kids. I've only been off for a couple of weeks and I've pretty much finished revising all the stuff I didn't use in the last contract so am confident in my skills and will get back to car building in the next couple of days

All the best,

Mark

[M@H]

dern said:

M@H said: Forget the perm's opinions. If people give me crap about being a contractor I stick up for myself as I never gave them career advice so their position isn't my fault. However, I prefer to get on with the people I work with and like to be seen as fair.

True... and I get on just fine with the perms in my office, but we are NEVER going to see eye to eye on Salary are we so I'd rather not think about their opinions on the subject when choosing a contract. The only point I was making was that if I was on £300 a day or £500 a day they would all still all bear a grudge about it if I flaunted it... best just to not talk about it at all.

Matt.