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Recruitment Agency Margin - what is acceptable?

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As a freelance contractor, whenever you start a new gig through a recruitment agency there's always that little internal voice that wonders exactly how much margin the agency is creaming off your daily or hourly rate.

The information is often hard to come by, and many agencies simply don't disclose it at all. This can be hugely frustrating, and often leads you to conclusion that the margin must be really high or certainly higher than you'd like it to be.

Now you may be surprised to hear that most recruitment agencies have a reasonably slim average margin - somewhere between fifteen and thirty percent - which is comparable to the retail markup of most durable goods. A bookseller for example will usually buy his books for fifteen to thirty percent less than the shelf price; likewise, an agency will "buy" a freelance contractor for the same fifteen to thirty percent below the price his client pays.

This degree of margin is generally acceptable to most people, since it feels fair. But many contractors will begrudge the agency that commands a margin in excess of thirty percent. Why? Because it's not the agency (or agent for that matter) that gets up at 6.30am, necks half a cup of coffee and drives for an hour in rush hour traffic to then put in another 9 hours at the office. Or at least that's how some see it anyway...

But the agency, contrary to what many contractors seem to think, provides an ongoing service throughout the duration of the assignment. That service, when it is of premium quality, is worth every penny. The agency does not simply look after the client's interests, but the contractor's as well - it can be easy to forget this.

Most of us have taken a gig now and again which pays just a little bit less than we would like, and it's easy to imagine that if the agency would simply take a lower margin, we could have that extra money in our own pockets.

The reality is that even with agencies, you largely pay for what you get. The margin, whatever it may be, tends to reflect the quality of service provided to both the client and the contractor... and when it is high, it's usually high for a reason. An agency that commands high margins does so because it can - it will almost certainly be providing a premium service and will tend only to work only with contractors of a similar high quality.

So don't get all up tight about margins - as long as you're happy with the terms of an assignment at the outset, you shouldn't be wasting your precious time worrying about what the agency is making. After all, if they really are taking the proverbial, you'll find out one way or another anyway and since you won't be signing that contract extension letter, their gravy train won't last forever.

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