Agencies Love First Time Contractors
Have you ever wondered why agencies love first time contractors?
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 Permanent Employee Kill Approaches
You can almost hear a recruitment consultant salivate when an employee contacts him, or her, and says the magic words, i.e. that they want to become a contractor. They’re starting contracting and they need an agent.
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 Naivete as Regards Recruitment Consultants
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.
Duty of Recruitment Consultant
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.
Therefore, 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. If they are not ready for it then that is not the fault of recruitment consultants.
Seasoned Contractors and their Earnings
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 naive 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.
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. That’s why agencies love first time contractors.
Fair Agency Commission
What is a fair commission?
IT 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 for Contractors
To show you how naive 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 First Time Contractors
Agencies Love First time contractors. We know that.
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 as Regards Agency’s Normal Commission
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 IT 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 if the agency are taking a high commission.
There will be plenty of opportunities later in their contracting career to make even more hay.
Advising First Time Contractors
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.
That’s why agencies love first time contractors.
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!
More Advice for UK Contractors
Agencies love first time contractors.
For more advice see Dr McLaughlin’s Contractor Surgery.
See also more Confessions of An Agent.
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Sounds pretty close to my experience in the early days. also worth a note that agencies may charge clients at the full market rate, even if you pitch your self as being slightly junior and asking for commensurate rates.
This was true for me when joining a client along side some significantly experienced colleagues and I wanted to set the clients expectation that I was just slightly less experienced 2 years versus 4 in a given field and was happy to receive approx 85% of what my colleagues were going to charge. It turns out the agent just banked the difference and charged the same.