New contractors are often upset to discover that an agency is billing them to a client at a much higher rate than they are paying the contractor. A contractor may wonder why an agent should make all that money when all he/she had to do was make a few phone calls. While a number of agencies make indecent profits, contractors can underestimate the costs that the agency must cover to stay in business.
Although the contractor is getting paid on a regular schedule (weekly, monthly etc), the client may only pay the agency months down the road. The agency has to cover the interest on the bank loans it must take out to cover payroll for the contractor and its recruiters.
Then there are the costs of maintaining an office, and the costs of local and national print and Internet advertising campaigns. And these must be paid for month in and month out whether or not the agency has contractors working.
Further downward pressure is exerted on rates because the recruitment business has become a highly competitive one that has attracted many companies from the IT industry, all eager to get a piece of pharmaceutical action. This makes it increasingly harder for smaller, pharmaceutical-specific agencies to compete with subsidiaries of large, well known IT resourcing companies.
So if you do work with an agency, accept that you will have to pay for their ability to place you.
If you are dealing with a full-service agency, one that markets you and pays you on a regular schedule, expect the agency to take 20-35% of the rate the client is paying. If you work as an employee expect them to take a cut towards the higher end of this spectrum to cover their expenses. However, avoid companies that take more than 40%! If the contractor works an employee of the agency, remember that the agent must pay the employer's share of National Insurance Contributions for the contractor, plus the costs of health insurance, unemployment insurance and pension contributions.
If you have landed yourself a contract yourself without ant agency involvement and are still forced by your client to work through an agency (which is very likely) then negotiate with the agency! Accept that the agency will need to earn something for its overhead, but you may be able to get the agency cut down to 15% or less. Refuse to work with agents who are not flexible about work you bring in.
Finally, rather than obsessing about the agent's cut, do your research and determine what you should be making for your skills, and negotiate for that figure. If £75/hr is the high end of what people with your skills get as consultants in your region, and if you negotiate £80/hr for a job you want to do, it should be irrelevant what the agent is getting! If you're happy with the rate you're getting then it can be argued why quibble!!
And if you do discover that the agent has
marked up your services by some ridiculous amount, accept that
you didn't do your homework and failed to find out what local
rates were before you began the negotiating process. Then do your
best to do a better job next time or re-negotiate when your contract
is up for renewal
