High Agency Margins
We found the ‘High Agency Margins and How They Disadvantage Contractors’ article on the Forums of the now defunct www.ComputerContractor.com.
Computer Contractor Post
The agencies that insist on working for high agency margins disadvantage contractors considerably.
First of all, contractors that are placed at unreasonable pay levels are likely to be the first to be axed when project budgets are squeezed.
Project accounting centres need to consider the overall cost of each contractor, not just their own fee.
If the overall client to agency rate is not that high, agencies will inevitably try and reduce contractors’ own daily fees. This is to to keep the high agency margin that they have from first time around.
No Ongoing Commission
Personally, I’m in favour of agencies not getting any ongoing commission fee.
They shouldn’t get Contract Renewal Rises.
As matchmaking services, they should only get a one off fee for sending across appropriate CVs and another one off fee if they manage to place a candidate.
Thereafter, the relationship between the client and the contractor should be a direct one.
All this ongoing sales commission nonsense needs to stop.
We’re not cars for lease out on a weekly or monthly basis. We’re people who run our own businesses.
Furthermore, we’re the service providers of contractor services not the agent. The client to agent payment arrangements should reflect what agents actually do in providing a service to their clients, not what we do.
Very High Agency Margins
So what are high agency margins?
I would say that 20% or less is fine. Maybe, in some circumstances, somewhere between 20% and 25% is acceptable. If it is above 25% then they would be considered high agency margins. I would say that those margins are unacceptable.
It is arguable that agencies shouldn’t get any margin when a contractor renews. They are doing little more than making a call to the client. However, they certainly shouldn’t increase their fee from the client at renewal time.
If they have high agency margins there could be major disadvantages when it comes to renewal time for a contractor and the client is cutting back contractors.
High agency margins could mean that the contractor is out on his ear.
In my 20 years as a recruiter – mainly in the contract market – I can say with all honesty – I have seen margins as high as 30% and as low as 2.5%.
If I get you the rate you ask for – and make 20% then I am future proofing your existence on site in some cases but not all (supplying through the MSP’s on-site at the likes of Lloyds, Barclays etc – is at a low fixed margin) if you are asked to take a hit of 10% on your day rate as a Barclays contractor through an MSP – I can’t do a thing about it and I take the hit with you.
For any other client – I can give you an increase without asking the client for more money or if the rate to the client needs to be reduced I can do that without impacting you – the contractor. I have some fat in the deal. A protective buffer zone.
When a client renews a contractor – quite often the work required to negotiate ya contractors rate increase is longer winded than just placing a new contractor. It’s also worth noting that the individual agent probably doesn’t see any commission for extending whilst the company he/she works for enjoys the fruits of that particular labour of love.
However, I would agree that the model for placing contractors is outdated, flawed and without merit and sadly – perpetuated by the agency regulations.
It would seem entirely sensible for the client to pay a price for the effort as opposed to the outcome from the agencies perspective BUT not the clients perspective – as they want as much as possble for as little as possible if not free of charge.