IT Contracting Rates & Agents

[Olivera]

After viewing the IT contracting thread from 9th October I decided to apply for several contracting roles.

Today I received a response from one of the agents, stating my skill set matches the requirements for the job. It is a Java programming position, so from what I have read the average hourly rate should be ~£40. However, I am inexperienced when it comes to contracting, so I thought the standard rate minus 10% or 20% would be fair (please correct me on this if I'm wrong).

I then explain my work history and qualifications in more detail to the agent. The agent then states that this role is a junior position so pays £15-£20 per hour .

Now, is this position really a junior role paying that amount or is it (which I suspect) bullshit spouted by the agent to shaft me so he makes more money?

How should I negotiate on this rate? What is a realistic rate for a Java programmer that has no contracting experience?

[plotloss]

Your rate theoretically shouldnt change whether you have been a contractor before or not.

Its about skill and what the customer will pay.

Typically an agent will take around 20% off per hour for hot technology.

So at £40's you'll be charged at £48

To compare and contrast against your permie salary you salary per annum, half it and knock off the zeros and roughly that what you earn an hour.

Then drop the holidays and training you are getting and add that to the hourly.

Then when you have your current price you can compare with the market.

£20ph is £40K and that should be achieveable easily with a pension and all sorts for a good Java guy as a permie.

[alanc5]

It's not really whether you have contracting experience, its more the application of your skills in Java.

Enterprise Java will always pay far more than things like Applet developers, so they might be considering the job as a "junior" position, i.e. anyone could do it, but not everyone is an enterprise architect with Java skills.

£40ph does seem a bit high to me. Lets be thankful they haven't decided to offshore it eh!

[stepej]

take a look at www.jobserve.co.uk

You should get a feel for rates from there, although a lot of agencies these days tend to put 'Market Rate' which basically means 'as little as we can get away with paying'

Never be afraid to ask their margin

[samn01]

£20 for a junior role is about right. If you are not a junior programmer (1-3 years programming) then this is not the role for you.
£40 is probably about market rate but that would be for someone with 6-10 years as a developer with 4 years+ Java.

Sam
(was an agent until today )

[hughesie2]

samn01 said:

Sam (was an agent until today )

New job as a Line up criminal then Sam ??

[samn01]

Ha ha....very funny....

Gone in-house in fact...

Sam

[iaint]

Olivera said:

I then explain my work history and qualifications in more detail to the agent. The agent then states that this role is a junior position so pays £15-£20 per hour .

Sounds like they're trying it on to be honest - they found out you're not an experienced contractor and decided to see if they could get you for a lower rate.

Not sure what the going rates in Java are at the mo (others who've posted probably have a better idea) but if you feel as though you're being shafted then don't take the role - it'll just sour it for you - unless you're in desparate need of taking it!

I've been lucky in that I managed to have both Java and .Net plus solid Oralce skills but, more crucially, a specialisation in a technology area that's in demand rather than a specific language. 2 1/2 years in the same company (different projects/dpeartments) at well over £55/hour and it's looking set to continue until next summer Keeps the car on the road.

Hope it works out well for you.

Iain

[JonRB]

Have they pulled the old chestnut of asking you to make them "sole agent" as well?

Check out this article:

article said:

Agencies are usually one step ahead of contractors. I have been asked to write a series of articles explaining how we do it. I worked as a recruitment consultant for many years in several roles (yes, we do have different roles). In fact, I actually placed the proprietor of this site twice (probably the only one ever to do so). We have remained in contact for a number of years and I have been asked to spill the beans on some of the ways we had of staying one step ahead of the contractor. A Kill Approaches You can almost hear a recruitment consultant salivate when an IT employee contacts him or her and says the magic words, i.e. that they want to become a contractor. This is like a hungry lion spotting a young zebra that has become separated from the herd. It is the answer to all their prayers! They have been given targets as far as fee income is concerned and that applies to the amount of fee income as well as the margins. There is going to be a veritable feast here that will keep any hungry rec cons sated for days and which will catapult him or her up the margin and fees table. It will also help deliver a nice juicy bonus at the end of the period. Touching Naivety First time contractors have a touching naivety about them. They see us as their agents who will represent them to our best abilities and who will not only get them a lucrative contract, but who will get them as much money as we can. That’s what an agent is for isn’t it? That’s what happens in the acting and football professions isn’t it? Yes, they know we will get a fee for doing it, which they expect is standard but they don’t want to look a gift horse in the mouth and to ask what that fee or percentage is. They don’t realise that our first concern is to get as high a fee for our services as we can. The next priority after that is to keep the client happy so that they put more lucrative business their way. The contractor’s needs and wishes are way down the priority list. I think it is because they refer to us as ‘agents’ that they think we will look after their needs. We refer to ourselves as recruitment consultants or salesmen and women. Our Duty It is the duty of the recruitment consultant to his or her company to get as much money as he or she can for them. It is also the duty of the contractor to get as much as he or she can for him or herself. It is not our duty to find out and tell contractors the market rate for their skills. It’s up to them to do that if they want to think of themselves as real small businessmen and women. What other small businessmen wouldn’t do any market research into the market price of the commodity that they are selling, i.e. their services? This is the real world and if they are not ready for it then that is not the fault of recruitment consultants. Fat Fees It is not only their naivety that make them such a juicy ‘kill’ for recruitment consultants, it is the fact that, unlike seasoned contractors, they will be earning probably double what they were getting before as a permanent employee. At companies where I have worked, I have seen recruitment consultants take up to 70% of what a contractor is charged out for. Unlike some naïve contractors we know their market worth. It is our duty to our companies and to ourselves to haggle with our suppliers, i.e. the contractors to get the supplied commodity, i.e. their labour, for the lowest price that we can get it for. That’s capitalism! Certainly that was the way we all looked upon it when I was part of major recruitment companies. I must say now that 70% would seem a bit over the top. That was exceptional though. However, it was not exceptional to be able to take anywhere between 30% and 50% for a first time contractor. Any recruitment consultant who couldn’t negotiate at least a 30% commission for a first time contractor should think about going and selling burgers at McDonalds. Fair Commission What is a fair commission? Contractors often ask me that. However, the question is irrelevant. As I’ve said before it is up to both contractor and recruitment consultant to know the market rate for their skills and to maximise their returns. Recruitment companies are not charities. They buy their raw materials, i.e. the contractor’s skills, add value to it, and then sell the added value item on to the highest bidder. I must say that in those days we used to joke that if we had our way that all contractors would be first timers and that they would only be allowed to contract once before having to take a full time job for 5 years before they could contract again. Sole Agent To show you how naïve some first time contractors are, I used to tell them that I was to be their sole agent, and if they signed up with another agency I would discontinue from representing them. I told them that I would definitely get them work – and I almost always did. I didn’t want to lose this juicy kill. Amazingly, the majority of first time contractors did exactly as I said and didn’t sign up with anybody else. Many of them shouldn’t have been allowed out alone. Advice for Contractors So, what should first time contractors do then? Well, firstly, they should keep an eye on the jobs on Jobserve, CWJobs, and other job boards. They should also get in touch with quite a few agencies. They’ll always be happy to hear from them. They should also not quit their permanent jobs until they have got a contract. I am ashamed to say that I talked many a contractor into resigning saying that it would be much easier for me to get them a contract if they were immediately available. I didn’t manage to get all of them contracts and I hope that the ones that I wasn’t able to help managed to see themselves all right. Ask the Question Then, they should have the ‘cheek’ to ask the agencies what their normal commission are. Of course they will not want to tell, but the contractor should say that he or she will want to know before signing any contract. That alone will bring the commission down from a lofty 50% to a more agreeable 30% (if it was that high). Of course, if the contractor is happy with the money he or she is being offered then perhaps they should just take the contract – even of the agency are taking a high commission. There will be plenty of opportunities later in their contracting career to make even more hay. What Now? So what do I think now that I am out of the business? Well, there was immense pressure on us to make targets and this forced us to cut a few corners to make those targets. Our jobs were very much on the line. Contractors should realise that salesmen are much more sackable than contractors, and there is a big churn rate in our profession. However, I do think that, except in exceptional circumstances, anything above 30% is too high. The normal is around 15% to 20%. If your agency is getting less than that for you then you are on the winning side. If they are getting more than that then you are on the losing side. However, this is the big world and it is up to you to look after yourself! Agent X

[Olivera]

Thanks for all of the replies.

I have since spoken to the agent again and asked how much commission they would be paid for this contract, but the agent stated that they do not normally release this information (is this true?) When I pressed the agent a little more he put me on hold before finally stating that the 'normal' rate is 15% to 30%.

Am I entitled to know exactly how much commission the agent makes on the contract? Is this fair behaviour or is the agent being evasive to maximise his side of the bargain?

[JonRB]

Olivera said:

Am I entitled to know exactly how much commission the agent makes on the contract?

Unfortunately, no.

It is up to you to negotiate the highest rate you can from the agent.
It is up to the client to negotiate the lowest rate they can from the agent.
It is up to the agent to make the difference between those two figures as great as possible.

So, in effect, it isn't really any of your business what the comission is, so long as you get the rate you want (or at least the highest you can get!)

I've long since given up asking an agent (or 'recruitment consultant', as that article suggests we should get used to calling them) what their comission is for precisely this reason.

Having said that, I have a good contractor friend / ex-colleague who is very hard-nosed about it and won't take a contract unless the agent tells him the comission, to the extent of walking away if his demands are not met.

[nickster]

The article posted by JohnRb is absolutely fantastic.

I love these guys.They'll shaft you as hard as they can,for as long as you let them.

But thats the story of life,isnt it?

Just remember though.You have a skill.
They could be selling dusters door to door.

[obiwonkeyblokey]

At the end of the day its about providing a service as well. There are plaenty of Agents I have worked with in the past who push for 30-35% margins. I believe 20% to be reasonable for a good agency who are polite, clear and pay you on time.

I used to work in placing contract Project Managers and was always clear with people as to what we charge clients, and providing the PM got what he/she was after, generally there was no bother.

at the end of the day the option is always there for you to call around relentlessly and place yourself and then run the risk of late payments etc.

This debate goes on and on and on, its always the same with anyone who works in the service industry, car salesmen, estate agenst, recruitment consultants etc.

If they are sh1t then dont work through them, there are plenty of good agencies out there.

Also dont think that they are taking money out of your pocket. You should tell them what you want and then as long as you are getting what you feel is fair, if they overcharge then the only person being ripped off is the client, not you, and trust me in time their buiness will dry up once the client finds out they are being ripped off.

Good luck in contracting and dont listen to all the doom and gloom mongers,also dont be fooled into the "No notice period" clause on your contract, agencies always try this on, but insist on equality.

[obiwonkeyblokey]

nickster said:

Just remember though.You have a skill. They could be selling dusters door to door.

This is not completely true, the best agents work bloody hard. 50-60 hour weeks, and yes their motivation is their own financial well being and not yours, although they are smart enough to know that they have to look after you for long term results.

I would agree as well that you ahve a skill, but its still; a very competitive market even though its getting busier, and having a good agent actively trying to place you can be worth its weight in gold, otherwise you just become another CV in someones in-box.

Its always worth trying to build relationships with the guys and girls you feel could be good at their job.

If you ahve the attitude expressed above and make them aware of it, then they are not really going to be keen to go out of their way to help you.

[nickster]

obiwonkeyblokey said:

"No notice period" clause on your contract, agencies always try this on, but insist on equality.

Interesting.I'd never come across this until recently.The contract I agreed to had it in -
I went ballistic and had it removed.Thought it was just another pimp getting ideas above his station.

I am no doom and gloom merchant by the way.
RC's do a job.Everyone will come across them when contracting in IT.

Just dont make me laugh they are professionals to be held in the same regard as a doctor or something.

[obiwonkeyblokey]

I have just re-read my original mail a couple of times to see where the insinuation was that they should be regarded in the same manner as doctors etc, it escapes me where you seem to have got that from.

No, I suppose you are right to label them all door to door duster salesmen.

I was trying to present a balanced view rather than a an old well used and frankly boring biased sweeping statment about the dustersalesmen / pimps.

Like I said before, they are prpviding a service, we are lucky enough to all work in an open market where you are welcome to bypass these guys and source your own contracts. Plenty of people do.

[samn01]

nickster said:

obiwonkeyblokey said: "No notice period" clause on your contract, agencies always try this on, but insist on equality. Interesting.I'd never come across this until recently.The contract I agreed to had it in - I went ballistic and had it removed.Thought it was just another pimp getting ideas above his station.

This is now fairly common within the city now and often blue chips will insist that contractors have no notice for the duration of the contract. As this contract put in place is a service contract between two limited companies (not an employment contract) this is perfectly legal and understandable. Client pay contractors and agents a lot of money to ensure projects are delivered on time and two budget.
You can not have a development project worth a couple of million go tits up because the contractor (company) you hired to do the development work has taken another job paying an extra £2 per hour closer to home.
If you paid a solicitor to draw up contracts, or an architect to draw up plans for your new home, you would not expect them to resign half way through the project would you? No.
IT Contractors are now expected to show the same professionalism. The contract is to complete a project and complete the project you must.

By the way there are many many very professional agents out there just as there are cowboys in every industry.

Good luck with the hunt for a contract.

Sam (Agent until 2 days ago )

[JonRB]

As I implied in my earlier post, I have no problem with agents taking their cut.
As both I and others have pointed out, so long as the contractor gets what they want, it is of no concern to them what the client is being made to pay.
However, where the contractor should care is if the client perceives them to be bad value for money and chooses not to renew when in fact it is the agent's margin that is making the contractor too expensive.
I've seen agents elect to lose a renewal rather than drop their percentage a bit. As far as I'm concerned, renewals are money for old rope, so there should be room for manoeuvre on margin. A majority of agents would disagree, I think.

Anyway, bottom line is that they're a necessary evil.

However, I'd like to see a shake-up in recruitment consultancy. The way I see it, agencies fulfil two roles for me.
1. Introduction / matchmaking - matching client to contractor.
2. Payroll - invoicing the client and settling the contractor's invoices and keeping the difference, obviously)

I would like to see a fixed sum for (1) above, either settled by the contractor (hopefully paid in installments over the life of the contract) or jointly by the client and contractor. I'd also like to see a monthly amount for (2).
Now most agencies would argue that this is exactly what their comission is, however it completely fails to address the fact that they charge a percentage, so the longer a contract goes on for, the more money they get. However, the amount of effort they expend in advertising, collating and filtering CVs, srranging interviews, etc. is the same whether it is a 3 week contract or a 3 year contract. So why should the contractor and client continue to pay for that service for the duration of the contract (including renewals)?

Sorry, I've had a bit of a "thinking out loud" type ramble here.

[samn01]

JonRB said:

I'd like to see a shake-up in recruitment consultancy. The way I see it, agencies fulfil two roles for me. 1. Introduction / matchmaking - matching client to contractor. 2. Payroll - invoicing the client and settling the contractor's invoices and keeping the difference, obviously) I would like to see a fixed sum for (1) above, either settled by the contractor (hopefully paid in installments over the life of the contract) or jointly by the client and contractor. I'd also like to see a monthly amount for (2). Now most agencies would argue that this is exactly what their comission is, however it completely fails to address the fact that they charge a percentage, so the longer a contract goes on for, the more money they get. However, the amount of effort they expend in advertising, collating and filtering CVs, srranging interviews, etc. is the same whether it is a 3 week contract or a 3 year contract. So why should the contractor and client continue to pay for that service for the duration of the contract (including renewals)? Sorry, I've had a bit of a "thinking out loud" type ramble here.

Jon, using your business model it would then be financial suicide for clients to hire contractors for anything less than 6 months.

If we use the 6 month contract as an example. Lets say the client pays £500 per day and the agent is taking 20% (probably a fairly average contract).
The contract is worth £13,000 to the agency, do you think charging all client 13k for a contractor would work? What if the role was 4 week holiday cover for a help desk analyst?

I agree in a way that there theoretically could be a better way to charge for contract services but nobody has thought of it yet.

[JonRB]

samn01 said:

The contract is worth £13,000 to the agency, do you think charging all client 13k for a contractor would work?

No, but with all due respect, £13k for the services rendered it a bit steep.
I'm in the process of selling an investment property at the moment, for which my estate agent hopes to get a comission of about £2000. Even if I sold my main residence, they'd still only stand to gain £6k.
If an estate agent can turn a profit on those figures for preparing the brochure, marketing it, showing people round the house, acting as go-between on offers etc. and closing the sale, then I can't see how a recruitment consultant can justify £13k for what is esentially the same job - ie. matching vendor to buyer and greasing the wheels to close the sale.

You're not honestly going to tell me that the recruitment consultant has to work harder for that money, are you? Especially in these days of JobServe, CWJobs, email, etc.

>> Edited by JonRB on Thursday 21st October 23:39