Agency contract renewal farce
There is something badly wrong here with this contract renewal farce. This was sent to us by DJE71.
Contract Renewal Farce
This contract renewal problem happened during my latest contract renewal:-
Client – “We’d like to renew your contract at the end of the month”
Me – “That’s good news. Can I have a rate increase please?”
Client – “No.”
Me – “In that case I decline your offer to extend and will be leaving at the end of the month”
Client – “If you leave then I won’t meet my completion deadline, upper managment will stop the project due to non-delivery and we will be throwing away a years’ work”
Me – “That is correct”
Client – “Ok, how much do you want?”
Me – “I would like a 25% increase please”
Client – “Let me ask my boss”
half an hour passes
Client – “We agree to a 25% increase”
The next day I get a call from the agent:
Agent – “Well done on the contract extension”
Me – “Thank you”
Agent – “One small matter: it appears that the client got his figures wrong when he asked his boss to authorise more budget expenditure. He agreed to increase your rate by 25% but apparently did not tell his boss that we, the agency, will also want a 25% increase.”
Me (bemused)- “I see.”
Agent – “Anyway, the client tells us that he cannot pay us more than he quoted to his boss. If we do not get a 25% commission increase then our margin as a percentage of the total billed to the client would be pushed down to an unacceptable level. So, unless the client agrees to an increase for us too then we will take some of your money to make up for it.”
UK Contractors Comment
One question that immediately springs to mind here, in this contract renewal farce, is What added value was the agency bringing here?
One can understand that the agency would take a cut of the original contract.
Less understandable, but its standard practice, is taking an increased amount of money after renewal, even if they have negotiated it.
However, in this case the agency did nothing. The contractor negotiated his own renewal and his own new rate.
So why should the agency get an extra 25% as well? What did they do to deserve it?
There appears to be something badly wrong here.
This contract renewal farce takes the biscuit.
I manage a team of IT contract recruiters. The reason we as an agency would look to increase our margin in line with the contractors margin increase is – We are bank rolling the contractor and factoring the debt in most cases. If the amount of money we are effectively lending the client increases and thus the risk increases then surely the amount of profit we make should also increase.
One thing that I do not agree with is taking money out of the contractors pocket. We would never jeopardise the project or the contractors work for the sake of a few pounds so in this case we would allow the rise without extra charge.
In my view this particular agency wants to ruin their relationship with a contractor and a client? It doesn’t make sense to me. I have personally always negotiated my own rate with the client and then had the recruiter take care of everything else, so I don’t know how they’ve approached rate increases in the past.