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Contract Agency Fees

 
#1 Contract Agency Fees
24/04/2013 11:18

presidentbartlet

What's the going rate for a contract agency to take these days? If a contractor rate is 800ish a day what can they expect to lose to an agency as part of that?

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#2 RE: Contract Agency Fees
24/04/2013 11:40

Mr Cool to presidentbartlet (#1)

You don't lose any of it. The agency adds their margin on top. The margin depends but in general....

Most large firms do their contract recruiting through a Preferred Supplier List of agencies. These agencies will post the job advertising a rate of £800 a day. You get the £800 and submit your invoice to the agency (adding VAT if you are registered) who pays you. The agency then submits an invoice to the end client adding a PSL margin which is typically between 10% - 15%. Some junior jobs may have even smaller margins (e.g. 8%) but this is for real volume recruitment of commodity positions

If a client uses a non-PSL agency then they may have ot pay higher margins (PSL's trade off low margins for first refusal on large volumes of positions) - in which case 15% to 25% would be typical. Very occasionally an agency will place a niaive new contractor with niche skills into a hard-to-place job and make a 30% margin. The headhunter will then be referred to within the office as "legend", or (in the langauage of contact recruiters) "Leg" (soft G)

If you have arranged a post directly with a client you may avoid an agencyall together, but this means you will have to invoice directly and chase the client to pay you. Often many large firsm will not do this as its a pain to deal with multiple invoices. In this case they ask you to work through an agency, even though you have found the job yourself. This also provides the client with additional insurance cover (not just your one-man-band insurance). In this situation almost all large firms have a "payroll agency" - one of the main PSL lead agencies that has volunteered to take on "direct" contractors and take a small margin in return for running them. Typically the margin on this will be no more than 5% and can be as low as a fixed fee of £10 a day. Usually this is a service that a larger agency wil offer as a) a way to add soem volume to a service they already provide, b) a way to get the "lead" PSL position which gives them first refusal on jucier contract roles as well.

My typing is rubosh!

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#3 RE: Contract Agency Fees
24/04/2013 12:52

presidentbartlet to Mr Cool (#2)

Excellent summary, thanks!

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#4 RE: Contract Agency Fees
25/04/2013 08:24

Bushy Eyebrow Partner to Mr Cool (#2)

Just make sure you don't get suckered into dealing with any "umbrella companies" or agencies that are tardy with paying you. Some of those companies end up giving excuse after excuse and regularly pay their clients months after they themselves have collected the payment.

Also, remember that if you're earning £800 but the agency is charging you out at £1,000 then the client expects you to be a £1,000-a-day consultant. No big brand names to hide behind, no partners to do all the justifying fee rates for you, no fancy offices to help set the scene - it's just you, a laptop, your brains and a client. So watch out for acencies that might put you under undue pressure by putting too great a margin on your work.

But you can earn great money that way. £800 a day is more than some folk earn in a week.

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#5 RE: Contract Agency Fees
25/04/2013 09:36

Mr Cool to Bushy Eyebrow Partner (#4)

BEP make some very valuable and additional points here. 99% of contractors/interims work through either their own limited company or an umbrella company, either of which then has a contract with the agency who then have a contract with the client.

The value in an umbrella company is that you don’t have the (minimal) hassle and expense of running your own company (annual returns, VAT, compliance, etc) - in essence they let you borrow theirs. The problem is that there have been some spectacular implosions of umbrella companies, and a few of the smaller agencies, where they go bust owing the contractor money. Under such circumstances you will be reliant on the appointed liquidator to send you on about 10p in the £ owed, probably in about a years time! The end client has NO obligation or likelihood of paying you owed moneys as they have almost definitely already paid the umbrella/agency with whom they have a contract.

All reputable agencies will expect you to submit a client-authorised timesheet and invoice by around the 5th of every month (for the preceding month) and in return will pay you the full invoice amount by the15th -20th of the month. They then get the money back from the client. It is ILLEGAL for an employment agency to not pay their agency workers because the end-client has not yet paid them. Many, many contractors exempt (by signing an opt-out letter) themselves from that law in order to improve their IR35 position, but nonetheless, all reputable agencies voluntarily adhere to that principle as general market practice.

If you ever find yourself needing to nominate an agency (your client does not have an approved one) and you don’t know a reputable one, then let me know – I can happily recommend some of the larger agencies that have always paid me on time.

Also, if you DO get your contract direct, and then need to nominate an agency for invoice/payroll purposes, then make sure you get them to delete their standard terms relating to their "protection of interests" - this is the section that says that if you work through them at the client, you can then ONLY work through THEM at that client for a stated period time (often up to 6 months after the contract ends). This is only relevant if they have invested time in finding you the job in the first place.

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#6 RE: Contract Agency Fees
25/04/2013 10:10

Anon MCs to Mr Cool (#5)

Mr President,

Only one quick comment from me:

If you indeed are on £800 a day and have a plan to be a contractor long(ish) term, then I strongly suggest you set up your own Ltd company and become your own boss.

This will then encourage you to do more than just client work and invest the extra money coming in for other businesses. There is a huge number of opportunities out there and it would be a shame for you to just do work for one client. Treat it as a genuine business, use your first client and the money coming in from it to help you get into other things.

For example, looking at past threads it looks like Mr Coolio's energies outside his contract work has taken him into the realms of a pimp!?! (lets face it, there is an awuful lot of references to hos' and prozzies!)

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#7 RE: Contract Agency Fees
25/04/2013 10:21

presidentbartlet to Anon MCs (#6)

I'm not yet contracting although I've been advised many times that the Ltd company is the way to go if I do. We were pondering the rates some other people were on who were working via an agency and thinking they might be being overpaid...

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#8 RE: Contract Agency Fees
25/04/2013 11:17

Mr Cool to presidentbartlet (#7)

Tee hee! I love it when MC's start to worry that contractors might be on inflated day rates. Don't continue that discussion in the rain - the level or irony might cause you to rust.

As for Anon Mc's disgraceful insuations, well! If I had any personal interity left, I'd take that as a slight aginst it...

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