Contractors' Questions: How much is an agency's margin?
Contractor's Question : Do I have the right to go to the client for whom I am working for and ask how much they are paying my recruitment company for me? What is the agency margin on which recruiters normally operate? If, for example, I am on £20 per hour, will they charge £25p/hour and keep the rest, or is it pretty close to what I am actually getting through?
Expert's Answer : There is nothing in law to prevent you, or any other IT contractor, asking the question of the end client. Although agencies always have a "can't deal direct with the client" clause in their contract to prevent the client and contractor cutting out the agency and working directly together, this clause would usually not be strong enough to prevent the request of and disclosure of rates.
Contract rates vary from a very low agency margin, say 4%, to a 'rip-off' margin, say 50%, but are generally in the range of 10% to 20%. However, the agency margin will be influenced by various factors, including:
- Sole agency agreements with the client
- Duration of contract - same work by the agency goes into a 2-week contract as a 2-year one
- Financial stability of the client - risk of the agency not getting paid at all
- PSL agreements dictating margins
- 'Door-opening' deal
- Scarceness of the contractor's skillset
Contractors might feel that sometimes the agency margins and hence profit to the recruitment agency may seem large when looked at on an individual basis. But the agency will have fixed overheads that need to be paid, including staff salaries, business rent or rates, and insurance. Therefore the successfully placed contractors' profits help cover the agency's overheads, which also include the time and money spent on finding candidates and arranging interviews even, of course, when deals don't complete.
Answer based on edited comments by Bernie Potton, the founder and managing director of SQ Computer Personnel.